The new Commercial Tenancies (COVID-19 Response) Regulations provide a framework for compulsory rent relief for commercial tenants who have been impacted by reduced turnover and business closures during the COVID-19 emergency.
Eligible tenants may be able to request and receive rent relief from their landlord, by following the procedures set out in the Regulations. It is important that both tenants and landlords know their rights and obligations under the Regulations, when negotiating any reduced rent under their lease.
Q: Who is eligible to request rent relief?
A: Eligible tenants under a small commercial lease can request rent relief from their landlord. A small commercial lease includes:
- a Retail Shop Lease (under the Commercial tenancy (Retails Shops) Agreements Act 1985);
- a lease under which the tenant owns or operates a small business (within the meaning given in the Small Business Development Corporation Act);
- a lease where the tenant is an incorporated association; and
- any other prescribed lease.
To be eligible, a tenant must:
- have had a turnover of less than $50 million in the Financial year ending 30 June 2019; and
- qualify for the national JobKeeper Scheme, or satisfy the JobKeeper turnover test at any time during the COVID-19 emergency period.
Q: What rent relief can be requested?
A: The Regulations apply to rent payable during the COVID-19 emergency period. The emergency period is the period starting on 30 March 2020 and ending to 29 September 2020 (unless extended for a further period).
Q: What does a tenant need to show to demonstrate an entitlement to rent relief?
A: A tenant needs to demonstrate that they have suffered a reduction in the turnover of their business operated from the leased premises. There are several tests prescribed for establishing the required reduction in turnover.
Q: How does a tenant request rent relief?
A: A request for rent relief must be in writing and must comply with the requirements of the Commercial Tenancies (COVID-19 Response) Regulations. For a rent relief request to be valid, the request must contain the information and evidence specified in the Regulations.
Q: What are a landlord’s obligations when considering a rent relief request?
A: If a compliant rent relief request has been made by a tenant, the landlord must make a written offer of rent relief to the tenant which complies with the principles and requirements of the Commercial Tenancies (COVID-19 Response) Regulations.
Q: What happens if a tenant disagrees with a rent relief offer?
A: Landlords and tenants are required by the Regulations to negotiate the rent relief to be provided to a tenant. Tenants and landlords are required to:
- act reasonably and negotiate rent relief in good faith, and in an open honest and transparent manner; and
- provide each other with sufficient, accurate information that is reasonable for them to provide in the circumstances for the purposes of the negotiations.
Q: Can a tenant request relief from Outgoings?
A: A request for relief from Outgoings is treated differently from a request for rent relief. A landlord is required to consider waiving Outgoings where a tenant has been unable to operate their business during any part of the emergency period, but is not obliged to grant Outgoings relief. However, a landlord can act to reduce the landlord’s Outgoings expenses by reducing services to the leased premises, where reasonable to do so in the circumstances or at the request of the tenant.
Q: What happens if a tenant and landlord can’t agree on rent relief offer?
A: Where a dispute arises in relation to a rent relief request, the Commercial Tenancies (COVID-19 Response) Act contains procedures for parties to make application to the State Administrative Tribunal for a resolution of the dispute.
Capital Legal can help
Capital Legal is able to advice both tenants, and landlords, on the rights and obligations under the new Commercial Tenancies (COVID-19 Response) Regulations.
If you require any assistance in making or responding to a rent relief request, please contact us to discuss your requirements.