In brief- new NSW legislation introduces potentially broad regulatory powers to benefit retail and residential tenants
The NSW Legislative Council and Legislative Assembly passed the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) (the Act) on 24 March 2020, which was assented to on 25 March 2020. The Act amends a suite of NSW legislation by greatly expanding regulation-making powers under those Acts for the purpose of responding to the public health emergency caused by COVID-19. Relevantly for the property industry, effected Acts include the Residential Tenancies Act 2010 (NSW) and Retail Leases Act 1994 (NSW). Any regulations made pursuant to these amendments must be reasonable to protect the health, safety and welfare of persons and will expire after six months, or an earlier date as determined by Parliament. Similar legislation is currently being considered in other states, which we are monitoring closely.
How might residential and retail tenancies be affected?
The Act provides for extremely broad regulation-making powers which are similar for both retail and residential premises. The Act enables regulations to be made:
- prohibiting repossession of premises in particular circumstances (the phrase "particular circumstances" is not defined in the Act and remains to be determined by the regulations);
- prohibiting termination of tenancy agreements by a landlord in particular circumstances;
- regulating or preventing the exercise or enforcement of another right of the landlord under an agreement relating to the premises or relevant tenancy legislation;
- exempting a tenant, resident or home owner, or a class of tenants, residents or home owners, from the operation of a provision of any agreement relating to the premises or relevant tenancy legislation (relevant legislation includes the Retail Leases Act 1994 (NSW), the Residential Tenancies Act 2010 (NSW), the Boarding Houses Act 2012 (NSW), the Residential (Land Lease) Communities Act 2013 (NSW), the Agricultural Tenancies Act 1990 (NSW), and any other Act relating to residential leasing; and
- the Act also introduces, to Part 11 of the Retail Leases Act 1994 (NSW), a power to make regulations to exempt tenants from the provisions of "the relevant Act", which is defined as including "any other Act relating to the leasing of premises or land for commercial purposes".
The broad reference to "any other Act relating to the leasing of premises or land for commercial purposes" has created some uncertainty in the market as to whether this is intended to apply to commercial leases (other than retail leases). Our view is that this amendment is geared towards retail leases (as it specifically amends the Retail Leases Act 1994 (NSW)), however we expect that at some stage, there will be further legislative amendments dealing with the broader commercial property market. Parties that are potentially affected should monitor this space closely.
What does this mean for landlords and tenants?
Until the regulations are made, it is unclear. These regulation-making powers are very wide; the power to exempt tenants from any provision in their agreements could, for example, enable a regulation exempting either residential or retail tenants (or both) from the rent-paying provisions in their agreements, and the power to prevent exercise of other rights could prohibit landlords from accessing bank guarantees or other security during the COVID-19 affected period. It is conceivable that the power to prohibit repossession could lead to a state-wide halt on evictions, which tenancy advocates have been calling for. It will be crucial to consider the flow-on effects that such changes could have on landlords. Whilst it is important that all parties work together during these unprecedented times to ensure the market endures as little damage as possible, both state and federal governments will need to consider the position of landlords, and the introduction of similar alleviating measures, such as mortgage holidays, reducing income and land taxes, and council rates dispensation.
What action is the Federal Government taking?
The Federal government is currently considering further measures to address the inevitable economic slowdown, such as reducing income tax on landlords in return for landlords waiving or reducing rents. State governments are also being lobbied to waive, reduce or defer rents on state-owned buildings which are leased to small businesses. We anticipate an announcement on these points in the coming days and will be watching this ever evolving area closely.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.