COVID-19 relief for commercial tenants – important update

The Government extended the operation of the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (“Regulations”) until 31 December, 2020 and has amended some of the Regulations for the current extended period. There are key differences between the initial response period to 30 September 2020 and the period 1 October 2020 onwards. An updated version of the Regulations, can be found here

 In summary, from 1 October 2020 the following applies: 

  •  Agreed deferred rents for the initial response period to 30 September 2020 can start to be collected from 1 October 2020, however the terms of repayment must be amortised for a period not lesser than 24 months. 
  • Tenant’s entitlement to claim relief for 1 October 2020 to 31 December 2020 (“Extension Period”) is now also dependent on them being able to qualify for the current Job Keeper scheme in addition to previous requirements. 
  • If the Tenant obtained relief for the period pre 1 October 2020, the relief arrangements are not automatically extended for the Extension Period. 
  • Owners do not need to provide any form of rent waivers for the Extension Period and only need to grant rent relief in the form of deferrals proportionate to the reduction in turnover. 
  • Owners are unable to take ‘prescribed action’ (such as termination of the lease, recovery of  possession, eviction of the lessee, claiming on a bank guarantee for unpaid rent/outgoings, etc) until 1 January 2021 for a tenants failure to pay rent or outgoings or failing to have the business open for the hours prescribed in the lease during the initial response period or Extension Period. 
  • If the lease is caught by the Regulations, owners and tenants can still negotiate on various terms, however cannot agree to implement rent increases until 1 January 2021. 

We are still finding that tenants in certain industries are unable to commence repayments of the deferred rents for the initial response period, and are also claiming rent relief for the Extension Period. With the Christmas trade period rapidly approaching, many tenants in the retail and restaurant sector (and their eager landlords) are relying on the upcoming Christmas period trade to improve their situation. 

The good news for Landlords from the extension provisions of the Regulations is that they are not mandated to give a waiver of rent for the Extension Period, meaning that there is potential to recover the full rent down the track for the Extension Period, albeit amortised over a period of not less than 24 months. 

It will be vital that landlords and tenants adequately document any arrangements reached for both the initial response period and the Extension Period. We recommend that landlords consult their financial adviser, accountant and lawyer prior to negotiating and documenting any agreements with tenants. 

This article is for the purposes of summarising general information only and is not legal advice. You must not rely on this article as legal advice and you should obtain specific legal, accounting and financial advices for your individual circumstances. If there are any legal issues you would like us to advise on arising from the above, please contact our office. 

Photo by Heidi Fin on Unsplash

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