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More changes to NSW’s COVID-19 retail and commercial leasing laws

27 September 2021

#Property, Planning & Development, #COVID-19

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More changes to NSW’s COVID-19 retail and commercial leasing laws

Some small but important changes to NSW’s COVID-19 leasing laws, continuing the Government’s broadly ‘hands-off’ approach. 

Tenants receiving State or Commonwealth grants

Previously, tenants needed to qualify for specific NSW Government grants to be ‘impacted lessees’. Instead, some tenants received a ‘Commonwealth COVID-19 Disaster Payment’, excluding them from NSW Government grants, meaning the tenant was not an ‘impacted lessee’. This is now fixed – tenants can be impacted if they receive the Commonwealth grant.

Continual assessment of an impacted lessee’s status

As lockdowns ease, a tenant’s fortunes may change and they may cease qualifying as an impacted lessee. For instance, the tenant no longer qualifies for government grants. Landlords can monitor this – being relevant to other COVID-19 amendments – by requesting information showing if tenants remain impacted lessees. Requests are limited to fortnightly.

What if the tenant is no longer an impacted lessee?

If a tenant stops being an impacted lessee, the COVID-19 protections do not automatically lift. Instead, the amendments allow further lease renegotiation. This change, despite some awkward wording, permits the following:

  • a tenant can ask to renegotiate its lease, including reconsideration of previous agreed waivers and deferrals. It’s not clear why the tenant would do this. Perhaps if the tenant’s trade is improving, the tenant may wish to finalise any waivers or deferrals up to that time. Say the landlord previously granted a 25 per cent reduction, with half of the reduction deferred and half waived. If the tenant’s business is now growing, the tenant may see sense in a new agreement ­– say 30 per cent waiver from July to September, and then a 20 per cent deferral from October 2021
  • a landlord can also request renegotiation. This ability is not new (as landlords always could). However, as we explain below, landlords could potentially extract some benefit from the tenant’s improved trading position. Even though parties need to negotiate in good faith, ongoing rounds of renegotiation may not seem attractive for larger landlords.

The role of a tenant’s improved position

The new amendments make some specific matters relevant for renegotiations:

  • a tenant’s turnover includes its grants
  • landlords need not reduce rent for periods when a tenant ceases being an impacted lessee. This may be a reason to renegotiate if the landlord has previously agreed on ongoing waivers and reductions, but where the tenant’s position has improved
  • in renegotiated positions, landlords can include terms that reduced rent will not apply while a tenant is not an impacted lessee.  

These laws also show a shift – the amendments pre-empt better retail trade and commercial life, hopefully signalling an end to challenging times.

Author: Bede Haines

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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