Covid 19 and Leasing

Key points

1. Which leases are covered

• • It is a retail shop lease or a lease for the conduct of the tenant’s business
  • It was on foot when the regulation commenced in May 2020
  • It relates to premises from which the tenant carries on business, including a non-profit entity
  • The tenant’s turnover was less than $50 million in the 2019 financial year or is likely to be less than $50 million in the 2020 financial year
  • The tenant is eligible for the JobKeeper scheme, whether or not the tenant is enrolled

  2. Ability to contract out.

  Landlords and tenants may agree to arrangements that differ from the regulation. The regulation does not apply where both parties agree to alternative terms.

  3. Prohibition on enforcement action to 30 September 2020

  The regulation imposes a general restriction on landlords taking enforcement action for certain breaches between late March and 30 September 2020. This includes failure to pay rent or outgoings, or failure to operate the business. The restriction does not prevent a landlord from acting under a settlement agreement or lease variation made under the regulation, pursuant to a court or tribunal order, or where the tenant has not complied with the regulation. A tenant may apply to the tribunal to enforce this restriction, including orders preventing a landlord from exercising rights under the lease.

  4. Rental increases

  Any increase in rent under a lease is deferred until 1 October 2020.

  5. Negotiation procedure

  • • • 5.1 Initiation
  Either party to the lease may request, in writing, that the other party negotiate the rent and other terms of the lease. As soon as practicable after the request, each party must provide information that is accurate and sufficient to allow negotiations to proceed on a fair and transparent basis. For tenants, this includes:
  • • • Evidence that the tenant is affected by COVID-19
      • Financial information
      • Information relating to JobKeeper eligibility
      • Details of steps taken to mitigate the effects of COVID-19
  For landlords, this may include:
  • • • Information about any reduction in outgoings such as rates or land tax
      • Information about financial commitments affecting the property, where relevant
  Financial information disclosed under the regulation is protected.
  • • • 5.2 Negotiation
  Within 30 days of receiving the required information, the landlord must offer the tenant a reduction in rent and any proposed changes to lease terms. The offer must include: a. At least 50% of the rent reduction offered as a waiver, which cannot be recovered b. Consideration of the circumstances of the lease, including the reduction in the tenant’s turnover at the premises, the tenant’s ability to meet lease obligations, and the landlord’s financial position, including any benefits received such as land tax relief.