In brief - As anticipated, the NSW Government has now released the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (New Regulation), which extends the COVID-19 protections for lessees that were previously provided for in the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (Repealed Regulation).
The New Regulation also amends and clarifies some of the existing protections in the Repealed Regulation. This article considers some of the key changes between the New Regulation and the Repealed Regulation.
Key changes to the Repealed Regulation
Changes to definitions and application of the Regulation to Impacted Lessees
The New Regulation introduces a new definition of an "Impacted Lease", being a lease to which an Impacted Lessee is a party. The New Regulation is amended throughout to include this new term, rather than the existing descriptor of "commercial lease". This is a clarifying amendment only.
The New Regulation has extended the Prescribed Period to 31 December 2020.
To meet the definition of an Impacted Lessee under the New Regulation, a lessee must qualify for Job Keeper payments under the amended rules, in particular s 8B of the Job Keeper rules, which mandates an actual turnover test from 30 September 2020.
Lessees will need to meet the requirements under the new definition of an Impacted Lessee to maintain any entitlement to rent relief under the New Regulation. For lessees who do not meet the threshold under the new definition, the New Regulation provides the following:
a renegotiation of the rent before 23 October 2020 that was commenced but not concluded before 24 October 2020, may be continued and concluded under the New Regulation;
reference to an Impacted Lessee in the New Regulation extends to an Impacted Lessee under the Repealed Regulation in relation to a breach of the Impacted Lease that occurred at any time during 24 April 2020 to 23 October 2020; and
any Impacted Lessee under the Repealed Regulation at any time during 24 April 2020 to 23 October 2020 is taken to be an Impacted Lessee for the whole of that period.
The New Regulation also clarifies that it only applies to the exercise or enforcement of rights under an Impacted Lease (rather than commercial leases more broadly).
Prohibition on prescribed actions
A new sub-clause 6(1) is included, clarifying that the prohibitions (such as terminating a lease) only apply if a lessee is an Impacted Lessee during the Prescribed Period.
Further, the New Regulation clarifies that the prohibition on prescribed actions only applies in respect of a breach by an Impacted Lessee occurring during the prescribed period. This means that lessors may take the prescribed action if those actions relate to a breach of a lease by the lessee which occurred prior to 24 April 2020 (regardless of whether or not the lease is an Impacted Lease).
Obligation to renegotiate
A party to an Impacted Lease now may make a second or subsequent request for relief during the extended prescribed period, which does not relate to rent for a period for which relief has already been granted. This means that lessees who continue to be Impacted Lessees can make another request for extended relief under the New Regulations.
In addition to the obligation to negotiate in good faith, lessors must also now commence negotiations within 14 days of receiving a request, placing a time limit on lessors to respond to requests for relief.
As mentioned above, the New Regulation also expressly states that a negotiation that commenced prior to the expiry of the prescribed period, may be continued and concluded after that expiry.
No changes to dispute resolution provisions
The existing dispute resolution provisions have not been amended by the New Regulation.
Where a dispute arises in relation to a renegotiation, including a failure by a party to take part in a renegotiation:
parties to a commercial lease must submit to mediation conducted by the Small Business Commissioner prior to commencing proceedings in Court; and
parties to a retail lease must comply with Part 8 of the Retail Leases Act 1994.
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.