Australia: COVID-19 Retail and commercial leasing regulations extended for New South Wales

In brief

The operation of the interim Retail and Other Commercial Leases (COVID-19) Regulation 2021 for NSW (NSW Regulation) has been extended as of 13 August 2021, with the rights for tenants broadened.  

What are the key amendments to the NSW Regulation?

The NSW Regulation was amended on 13 August 2021, to extend the prescribed period the regulation applies to, and to increase the rights and protections available to tenants.

Key elements of the amended NSW Regulation are that it:

  • applies to leases entered into before 26 June 2021
  • has extended the "prescribed period", which now runs from 13 July 2021 to 13 January 2022
  • maintains the threshold requirement that a tenant demonstrate they are an "impacted lessee"
  • prohibits any increase in rent (aside from turnover rent) for the prescribed period
  • mandates good faith renegotiation of rent, or other terms of the lease, where requested by one party
  • incorporates the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles (National Code of Conduct), and requires parties to take into consideration the leasing principles set out in the National Code of Conduct in renegotiations, in addition to the economic impacts of the COVID-19 pandemic
  • mandates that renegotiations must commence with 14 days of a request (unless another time period is agreed by the parties)
  • retains the requirement for a mediation to be attempted before any "prescribed action" may be taken against a tenant for a failure to pay rent, a failure to pay outgoings or for the business operating under the lease not being open for business during the hours specified in the lease.

What must we consider in renegotiations?

The main principles that must be taken into account by parties to a renegotiation mandated under the NSW Regulation are:

  • the economic impacts of the COVID-19 pandemic
  • landlords must offer tenants reductions in rent proportionate to the tenant's decline in turnover, to up to 100% of rent payable
  • rental waivers must constitute no less than 50% of the total reduction of rent payable, with rent deferral to make up the balance
  • keep in mind that a land tax rebate is available to landlords for the 2021 land tax period, to the value of 100% of rent rebate provided to tenants in the period from 1 July 2021 to 31 December 2021 (or the total of the land tax liability, whichever is lower).

How will the NSW Regulation be interpreted by the Courts?

We have carried out a comprehensive review of all of the real estate cases around the country that have been decided since COVID-19 became a part of our lives. The terms of the NSW Regulation are sufficiently similar to the previous regulations that were in force in NSW from March 2020 to March 2021, that the existing cases provided an excellent source of guidance on the way these new regulations may be interpreted by the courts. We would be happy to discuss how these new regulations will affect your business, in light of the current case law.

Further resources

To view the NSW Updated Regulation on the NSW Government website, click here. To view the National Code of Conduct click here.  

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