Australia: COVID-19 - NSW amends commercial leasing code regulations

In brief

In our previous alert we discussed the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW Code Regulations) which was passed by the NSW Parliament on 24 April 2020 with the object of giving effect to the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles (National Code).

The NSW Parliament has now passed the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020 (Amendment) effective as of 3 July 2020.  The Amendment clarifies some of the uncertainties in the NSW Code Regulations, particularly whether certain clauses are limited in application to "impacted lessees" or apply to commercial and retail leases in general.


Who is an "impacted lessee"?

Under the NSW Code Regulations, to meet the criteria of an "impacted lessee" a lessee must:

  • qualify for the National JobKeeper scheme1; and
  • demonstrate a turnover2 in the 2018-2019 financial year of less than $50 million.

Key changes made by the Amendment

The Amendment introduces changes to the NSW Code Regulations which:

  1. clarify that the obligation to renegotiate rent and other lease terms in good faith before taking "prescribed action" applies to impacted lessees only;
  2. require a lessee to establish that they are an impacted lessee by giving the lessor:
    1. a statement to the effect that the lessee is an impacted lessee; and
    2. evidence that the lessee is an impacted lessee;
  1. clarify that the regulation which deems there to be no breach of a lease due to an act or omission of a lessee required by law in response to the COVID-19 pandemic applies to impacted lessees only.

The changes mentioned in (a) and (b) above apply to renegotiations that have commenced but not been completed prior to commencement of the Amendment but do not extend to a matter for which proceedings have been commenced. 

Other observations

The regulation that restricts a lessor of a commercial (non-retail) lease from recovering possession of premises, terminating a lease or exercising its rights under a lease unless a mediation by the Small Business Commissioner has failed to resolve the relevant dispute has not been amended to apply only to leases to impacted lessees, though this regulation continues to presuppose the existence of a 'dispute' and referral to mediation.

The Amendment has also not addressed the regulations which require a Court or Tribunal to have regard to the leasing principles set out in the National Code when considering whether to make a decision or order regarding the termination of a lease or the exercise or enforcement of any other right of a lessor.  Accordingly, there still remains a level of uncertainty as to how a Court or Tribunal will take the principles of the National Code into account in enforcement proceedings concerning non-impacted lessees.

Comparison of the adoption of the National Code between states

We have also updated our summary table circulated in our previous alert which shows a "side by side" comparison of the NSW, VIC and QLD legislation giving effect to the National Code in those states, so you can clearly see the material differences. To view the comparative summary table click here.

Additional Details

To view the Amendment or the NSW Code Regulations on the NSW Government website, click here or here. To view the National Code click here.

1 A lessee is eligible for the JobKeeper scheme if: (a) on 1 March 2020, the lessee carried on a business in Australia or was a non-profit body that pursued its objectives principally in Australia; and (b) the lessee satisfies the "decline in turnover" test - i.e. the lessee's GST turnover has fallen by the relevant amount during its relevant comparison period. There are specific turnover decline test thresholds that apply to tenants of varying turnover sizes and the period in which the test can be applied. The decline test thresholds are as follows:

• 30% fall in turnover for a business with an aggregated turnover of $1 billion or less;

• 50% fall in turnover for a business with an aggregated turnover of more than $1 billion; or

• 15% fall in turnover for ACNC-registered charities (other than universities and schools).

2 Turnover is:

• calculated based on the business conducted at the premises concerned if the lessee is a franchisee;

• assessed at group level for related bodies corporate as defined under the Corporations Act 2001 (Cth).


Copyright © 2022 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.