COVID-19 LEASING UPDATE: THE RE-INTRODUCTION OF MANDATORY RELIEF IN NSW

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By Tim L’Orange, Partner, Emma De Leon, Partner, Catherine Hallgath, Partner and Hannah Marlton, Special Counsel

On 14 July 2021, the NSW Government introduced new COVID-19 regulations in the form of the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW) (July Regulations).  In their as-made form, the July Regulations:

  • applied to tenants (whether commercial or retail) whose turnover was less than $50 million in the 2020-2021 financial year provided they also qualified for at least one of the Micro-business COVID-19 Support Grant, the COVID-19 NSW Business Grant or the Job Saver Grant;
  • prohibited landlords from taking prescribed actions against impacted lessees without having attended mediation; and
  • were set to apply for just shy of 6 weeks, being the period from 13 July 2021 to 20 August 2021.

Importantly, the July Regulations did not mandate that landlords must provide rent relief to “impacted lessees”.

However, on 13 August 2021, the July Regulations were amended by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (NSW) (Amending Regulations).

The changes introduced by the Amending Regulations extend the protections afforded to “impacted lessees” under the July Regulations by (amongst other things):

  • lengthening the prescribed period so that it will now expire on 13 January 2022, not 20 August 2021;
  • re-introducing mandated relief – if a party to an impacted lease (being a lease with an “impacted lessee”) so requests, the parties must renegotiate rent and other terms of the lease in good faith having regard to:
    • the economic impacts of the COVID-19 pandemic experienced by the impacted lessee; and
    • the National Cabinet Mandatory Code of Conduct — SME Commercial Leasing Principles During COVID-19 (Leasing Principles), being the Code of Conduct introduced by the Federal Government in April 2020; and
  • imposing a freeze on rental increases under impacted leases during the “prescribed period”.

We set out in this article a detailed analysis of the changes implemented by the Amending Regulations, their effects on the July Regulations and the impacts for landlords and impacted lessees. Read the full article here.

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