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Landlord COVID Support for Tenants – NSW

Below we have outlined some important information for Landlords to understand when dealing with Tenant requests for financial support during the NSW COVID Lockdown.

Please also see the Financial Support Grants blog that we posted to help tenants with Financial support from the government, which can be found here:

There are some important requirements for Landlords and the information below will give you a great starting point and framework before you have the necessary conversations with your Property Manager, Solicitor, Tenant and Accountant.

You can also access the FAQ’s from the Small Business Commissioner here:

We have summarised some important points below:


Overview of Commercial Lease Changes

Why is the NSW Government taking action?

On 14 July 2021, the NSW Government enacted the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (the Regulation). Amendments passed on 13 August 2021 provide even greater protections to impacted tenants by reinstating National Cabinet’s Commercial Leasing Code of Conduct.

The Regulation ensures that the economic impact of COVID-19 is shared by property owners and tenants. The protections in the Regulation, combined with the land tax concessions and the newly established Commercial Landlord Hardship Fund (see our next blog), will help limit the long-term economic damage of COVID-19 and maximise the number of businesses that can resume normal operation when public health orders are lifted.

What actions has the Government taken on commercial leases?

Under the Regulation, property owners must negotiate rent relief agreements with eligible tenants in financial distress due to the COVID-19 public health orders.

In negotiating these agreements, property owners and tenants must have regard to the leasing principles in the Code of Conduct, and the economic impacts of COVID-19.

Under those principles, property owners are required to offer tenants rent relief proportionate to the tenant’s decline in turnover. Waivers should make up at least 50 per cent of any rent relief provided. Rental deferrals make up the balance.

What are the legal protections for tenants?

For a six-month period (13 July 2021 to 13 January 2022), commercial and retail property owners cannot take certain actions against an eligible tenant (e.g. you cannot evict an eligible tenant) unless they have first renegotiated rent and attempted mediation.

Commercial property owners and eligible tenants must negotiate rent relief agreements by taking into consideration the following principles in National Cabinet’s Code of Conduct on commercial tenancies (unless otherwise agreed by both parties):

  1. Landlords must not terminate leases for non-payment of rent
  2. Tenants must remain committed to the terms of their lease, subject to any amendments negotiated, and material failure to do so will forfeit additional COVID-19 protections provided to tenants
  3. Landlords must offer tenants proportionate reductions in rent (in the form of deferrals and waivers) of up to 100 per cent of the amount ordinarily payable, in proportion to the decline in the tenant’s trade.
  4. Rent waivers, as opposed to deferrals, must constitute at least 50 per cent of the rent reduction provided by landlords (in negotiating this, regard must be had to the landlord’s financial ability to provide such a waiver)
  5. Any rent deferral must be amortised over the balance of the lease term and for a period no less than 24 months, whichever is greater, unless otherwise agreed by the parties
  6. Landlords must pass any reduction in statutory charges (e.g. land tax, council rates) to the tenant
  7. Landlords should seek to share any benefit received due to deferral of loan payments by a bank or otherwise with the tenant in a proportionate manner
  8. Landlords should, where appropriate, seek to waive recovery of any other expense (or outgoing payable) by a tenant under the lease terms during the period the tenant is unable to trade
  9. Repayment of other (non-rent) expenses should not commence until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government), or the existing lease expiring
  10. Landlords must not charge fees or interest on rent or fees that are waived or deferred
  11. Landlords must not draw on a tenant’s security for the non-payment of rent (be this a cash bond, bank guarantee or personal security) unless agreed by the tenant and landlord
  12. Tenants should be allowed to extend their lease for an equivalent period of any rent waiver/deferral period.
  13. Landlords must freeze rent increases (except for retail leases based on turnover)
  14. Landlords may not apply any prohibition or levy any penalties on tenants that reduce operating hours or cease to trade during the COVID-19 pandemic.

What rent reductions must property owners provide?

Under the Regulation, property owners must renegotiate rent with eligible tenants in good faith having regard to the leasing principles in the Code of Conduct and the economic impact of the COVID-19 pandemic.

Under the leasing principles, property owners are required to reduce rent in proportion to the tenant’s decline in turnover. This means if a tenant has experienced a 40 per cent decline in turnover due to COVID-19, then the property owner must provide a 40 per cent reduction in rent.

As a default position, at least 50 per cent of any rent relief must be in the form of a rent waiver with the remainder a rent deferral. Any deferred rent must be paid back over the balance of the lease term or for a period of no less than 24 months, whichever is greater.

What is the “COVID-19 pandemic period” as referred to in the Code of Conduct?

The COVID-19 pandemic period for the purposes of the Regulation is the prescribed period from 13 July 2021 to 13 January 2022.

What period should be used to calculate decline in turnover for the purposes of rent reduction?

The Regulation does not prescribe a specific period that parties should use to calculate decline in turnover. As such, parties are free to determine an appropriate period that works for them.

Tenants should provide evidence of their decline in turnover to their property owner to help them calculate the appropriate rent reduction. Evidence could include a Business Activity Statement (BAS) or an Accountant’s Letter.

If a tenant’s circumstances change, they can make a subsequent request to negotiate future rent.

How should deferred rent obligations from last year be treated?

As part of their rent relief negotiations, property owners and eligible tenants should consider how to treat any rent deferred under the 2020 Regulation that is yet to be re-paid. Parties should come to an agreement that works for their individual circumstances.

I am now selling goods from a warehouse and not the shopfront I lease, should my online sales be considered when calculating my decline in turnover?

Yes, the tenant’s turnover from online sales should be considered when calculating the level of decline in turnover.

When does my landlord need to respond to my request for rent relief?

The Regulation requires a party to a lease that is asked to negotiate to respond within 14 days of receiving the request or another period if agreed to by both parties.

When do these rules apply from? How long will they last, and when will they be reviewed?

The new rules apply from 13 August 2021. Tenants in financial distress and their property owners should start the process of negotiating rent relief agreements as soon as possible.

Support measures will be reviewed regularly as the COVID-19 pandemic has created a rapidly changing environment, and we must ensure the rules continue to be appropriate.

Can a property owner evict a tenant if they have been in arrears prior to this announcement?

If your tenant can demonstrate that they are in arrears since 13 July 2021 because they are financially distressed due to the COVID-19 public health orders you must seek to negotiate a rental abatement agreement—consistent with the principles of the Code of Conduct—and engage in mediation.

All other situations will need to be considered based on individual circumstances.

Can I take action for a breach that occurred prior to 13 July?

There is nothing in the Regulation preventing lessors from taking action at any time for breaches that occurred prior to the 13 July 2021.

Which leaseholders are eligible for the rent relief protections provided in this package?

A commercial or retail tenant will be eligible for the rent relief protections provided in this package if their business has annual turnover of less than $50 million and is eligible for any of the following supports: the 2021 COVID-19 Micro-business Grant, 2021 COVID-19 Business Grant or the 2021 JobSaver Payment.

Generally, businesses that have experienced a decline in turnover of at least 30 per cent due to the public health orders will be eligible.

Charities will also be eligible for the protections in the package provided they meet the same eligibility criteria.

How do I demonstrate to my property owner that I am eligible for the commercial leases protections?

You need to provide documents showing that you:

  • Had an annual turnover of less than $50 million in 2020-21 (ATO documents e.g. tax return, or BAS Statements); and
  • Are eligible for at least one of the following:
    • 2021 Micro-business Grant
    • 2021 Business Grant, or
    • 2021 Job Saver Payment.


Property Owner Questions

Isn’t this policy unfair on property owners?

The Regulation promotes collaboration and negotiation between property owners and tenants to ensure business continuity and a return to normal trading after public health orders are lifted.

We understand the package could place additional pressure on property owners, however, we are trying to share the load more evenly during these challenging times. We encourage businesses with loans to contact their banks for additional relief arrangements.

What support is available to property owners?

Commercial property owners that provide rent relief to eligible tenants will be entitled to land tax relief of equivalent value, up to a maximum of 100 per cent of their land tax liability for 2021 on the relevant property. Property owners will receive a waiver on land tax if they are yet to pay, or a rebate of previously paid land tax.

Property owners that receive this tax concession will also be able to defer their remaining land tax payments for three months.

The recently announced Commercial Landlord Hardship Fund will provide additional support to smaller property owners whose main source of income is impacted because they have provided rent relief to their tenant.

Small commercial or retail property owners may be eligible for a monthly grant of up to $3,000 if they provide rental waivers of at least the value of the grant and any land tax relief they are eligible for.

How does the hardship fund for commercial property owners work? (See our next blog for further detail)

The Commercial Landlord Hardship Fund will provide additional support to smaller landlords whose main source of income is impacted because of providing rent relief to tenants.

The Fund will provide a monthly grant of up to $3,000 for small commercial or retail landlords per property who provide rental waivers of at least the value of the hardship grant and any land tax relief they are eligible for.

For example, if a landlord provides a $3,000 rent waiver, but has received a $500 land tax relief payment from the Government, they will be eligible for a $2,500 grant for the property.

The Fund will be based on the Victorian Commercial Landlord Hardship Fund and tailored to the specific needs of NSW.


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