What Should Impacted Lessees Know about their Protection?

The New South Wales government first enacted the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (the Regulation) on 14 July 2021 with the intention to provide protections for tenants impacted by the pandemic and any associated public health orders.

On 13 August 2021 amendments were passed further attempting to provide even greater protections for impacted tenants as the National Cabinet’s Commercial Leasing Code of Conduct were reinstated.

Amendments on 13 January 2022 extended rent negotiation rights to impacted tenants due to the pandemic for the period 1 December 2021 to 13 March 2022. This amendment clarified that the landlord of any tenant that has received protection from July 21, under the Regulation, was prohibited from taking prescribed actions without participating in mediation until 13 March 2022.

The practical effect of this regulation is however far less beneficial to a tenant than the legislation aims to provide.

The Regulation

The Regulations provides that a tenant impacted by the pandemic and associated restrictions, may request the renegotiation of their lease agreement by providing the lessor with a statement that they are an impacted tenant and evidence of meeting this criteria.

The regulation enforces that a commercial or retail property owner cannot take a prescribed action against an eligible tenant unless they have first renegotiated rent and attempted mediation. As per section 3 of the Regulation these prescribed actions means taking action under the provisions of a commercial lease or seeking orders or issuing proceedings in a court or tribunal for eviction of the lessee from premises, exercising a right of re-entry to premises, recovery of the premises or land, distraint of goods, forfeiture, interest payments on unpaid rent owed by the lessee, recovering all or part of a security bond, the lessee performing obligations pursuant to a guarantee under the commercial lease, possession, or termination of the lease.

The Regulation’s Shortcomings

Under the Regulation a property owner is only required to attempt mediation but has no obligation to come to an agreement. Furthermore, the requirement of the landlord to renegotiate rent allows a tenant protection in so far as the regulation is in place. In reality, once the Regulation’s prescribed period ends on 13 March 2022, a landlord may then seek all funds foregone while under the protection of the legislation and is no longer in breach of the Regulation for taking a prescribed action such as the termination of the lease or recovering the security bond.

As such, the Regulation appears to be another example of a piece of legislation which in theory attempts to achieve much, but in effect only shifts a problem so long as it is in effect.

If you are an eligible business seeking clarification on the Regulation and the protection it provides, or if you believe your landlord is in breach of the Regulation,  speak with one of our experienced business lawyers by calling us at (02) 4929 7002, emailing us or completing an enquiry form.