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COVID-19 – the NSW Government rapidly passes COVID-19 legislation impacting on leasing

Overview


  • The NSW Government has, in very prompt time appropriate for an emergency situation, drafted and passed through both houses of State Parliament the COVID-19 Legislation Amendment (Emergency Measures) Bill 2020 (NSW) (Bill).


  • The Bill inserted amendments into various Acts, including the Retail Leases Act 1994 (NSW).


  • The details of how this will impact on landlords and tenants are not yet clear (though the broad parameters have been set).


Timing


  • The Bill passed both houses of State Parliament on 24 March 2020.


  • The Bill received assent on 25 March 2020, with the effect that the various items of State legislation were formally amended as at 25 March 2020.


Retail Leases Act 1994 (NSW) (‘Act’)


  • A new Part 11 ‘Response to COVID-19 pandemic’ has been inserted into the Act.


  • The new provisions in the Act do not set out details. Rather, the new section 87 gives the relevant Minister a broad regulation-making power.


  • In the context of responding to the public health emergency caused by the COVID-19 pandemic, in certain circumstances the Minister may make regulations in respect of:


  1. prohibiting the recovery of possession of premises by a lessor or owner of premises or land from a lessee or tenant of the premises or land under the relevant Act in particular circumstances;

  2. prohibiting the termination of a lease or tenancy by a lessor or owner of premises or land under the relevant Act in particular circumstances;

  3. regulating or preventing the exercise or enforcement of another right of a lessor or owner of premises or land under the relevant Act or an agreement relating to the premises or land in particular circumstances; and

  4. exempting a lessee or tenant, or a class of lessees or tenants, from the operation of a provision of the relevant Act or any agreement relating to the leasing or licensing of premises or land.

(Section 87(1) of the Act).

  • The key principle is that any such regulations made would be in the Minister’s opinion “reasonable to protect the health, safety and welfare of lessees or tenants under the Act”: section 87(2)(b).


Non-retail commercial leases?


  • At this stage, regarding commercial leasing, it appears the scope of regulations pursuant to section 87 is limited to tenants that fall under the jurisdiction of the Retail Leases Act 1994 (NSW).


  • Section 87 does give power to make regulations to exempt tenants from provisions of "the relevant Act", which is defined broadly as meaning "any other Act relating to the leasing of premises or land for commercial purposes".


  • In our view, this is likely to be a reference to the provisions of, for example, the Conveyancing Act 1919 (NSW), which contains general provisions regarding lease termination. In the context of section 87, this would it appears be to the extent that such provisions relate to retail tenants.


  • However, we expect that with the intense and unprecedented pressures on businesses of all kinds (retail and non-retail), there may be further legislation to come that also expressly covers non-retail commercial leases in NSW.


For landlords


  • We are aware that some proactive landlords are already communicating with tenants (retail and commercial), in respect of cooperating and working together to get through the economic downturn arising from the pandemic. This may include rent relief of some description. The need to communicate and work together has been emphasised by the Commonwealth Government.


  • It is important for landlords that any agreed rent relief is clearly documented, to avoid ambiguity and possible misinterpretation. The scope and time frame should be clearly set out, in writing. Further, the landlord’s other rights under the lease should be expressly reserved.


  • Landlords should carefully monitor these fast-moving developments, to ensure compliance with any applicable laws. Further, the issues involved are complex, and if landlords are compelled to grant relief to tenants then in parallel there may be some concessions granted to landlords in lieu of receiving rent (from the Commonwealth, State and local governments, in any combination).


  • Legal advice should be sought before a landlord takes enforcement action of any kind against a tenant during the period of the COVID-19 pandemic.


For tenants


  • It would be prudent for tenants to first communicate with their landlord/landlord’s managing agent. In the first instance, if payment of rent becomes unfeasible due to a collapse in revenue for example, a commercial agreement with the landlord should be sought regarding some form of rent relief. As noted, this should be documented clearly, so both parties understand the intended scope and timing.


  • Tenants should carefully monitor the media regarding further updates as to protections that may apply to certain tenants.


  • In the event that a landlord takes enforcement action under a lease against a tenant during the period of the COVID-19 pandemic, a tenant should seek legal advice as to its possible rights.

John Douglas

Principal

Douglas Legal

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