Extension to the Retail and Other Commercial Leases (COVID-19) Regulation 2020

On 23 September 2020, the NSW Treasurer announced that the Retail and Other Commercial Leases (COVID-19) Regulation (Regulation) 2020 will be extended to 31 December 2020. Previously, the Regulation was due to expire on 24 October 2020.

The extension is welcome relief for tenants. The Regulation incorporates the National Cabinet’s Code of Conduct which embodies several leasing principles. A lessee is properly characterised as an ‘‘impacted lessee’ if it is eligible for Jobkeeper. The Jobkeeper scheme was extended to 28 March 2021 if a business can satisfy certain criteria.

Impacted lessees may seek a rent reduction proportionate to their decline in turnover, and at least 50% of the rent reduction must be in the form of a rent waiver. A tenant must be able to demonstrate to the landlord that their revenue has declined by reference to comparable monthly or quarterly business activity statements.

In the absence of an extension, tenants would not have been eligible for rent relief beyond 24 October 2020 even if they continued to be an ‘impacted lessee’ beyond 24 October 2020.

There is still inconsistency in the ‘end dates’ of the various pieces of legislation, but the extension may enable some businesses to stay afloat into the next year.

As part of the extension, landlords will be able to receive up to a 25% land tax concession where they provide rent relief to commercial tenants in financial distress from October to December. If a landlord has already paid their land tax liability for the calendar year, they may be entitled to a rebate.

If a tenant and landlord are unable to agree on a temporary rent arrangement, then the parties may apply to the NSW Small Business Commission to participate in a mediation. The cost of the mediation is shared between the parties and if the parties can negotiate an agreement, then the terms of settlement are usually documented in writing and the agreement is legally enforceable.

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