NSW Rent Relief for COVID-19 impacted lessees - ShineWing ...
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NSW Rent Relief for COVID-19
impacted lessees
The NSW Government has now made rent relief assistance available to help
minimise the impact of lockdown on NSW businesses with lease agreements.
3 September 2021
The relief comes following amendments to the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021
(NSW) (‘the Regulation’) earlier this month.
The amendments were passed on 13 August 2021 and provide greater protections to impacted lessees by reinstating National
Cabinet’s Commercial Leasing Code of Conduct. The Regulation seeks to ensure that the economic impact of COVID-19 is shared
by both property owners and tenants.
Combined with the land tax concessions and the newly established Commercial Landlord Hardship Fund available to property
owners, the Regulation seeks to limit the economic damage of COVID-19 and maximise the number of businesses able to resume
normal operation when public health orders are lifted.
What do the Regulations provide for? Decline in Turnover Test
Under the Regulation, property owners must negotiate rent The Regulation does not prescribe a specific period that parties
relief agreements with eligible impacted lessees in accordance should use to calculate decline in turnover. As such, parties are
with the leasing principles in the National Code of Conduct. free to determine an appropriate period that works for them.
Under those principles, property owners are required to offer Impacted lessees should provide evidence of their decline in
tenants rent relief proportionate to the tenant's decline in turnover to their property owner to help them calculate the
turnover. Waivers should make up at least 50 per cent of any appropriate rent reduction. Evidence could include a Business
rent relief provided (unless the impacted lessee agrees Activity Statement (BAS) or an Accountant’s Letter.
otherwise). Rental deferrals make up the balance.
If an impacted lessee’s circumstances change, they can make
Eligibility a subsequent request to negotiate future rent adjustments.
In order to be eligible an ‘impacted lessee’ must: For the purposes of calculating an appropriate rent reduction,
payments from Government COVID-19 grants should be
• first qualify for the 2021 COVID-19 Microbusiness Grant, included as part of an impacted lessee’s turnover.
the 2021 COVID-19 Business Grant or the 2021 JobSaver
Payment Process for agreeing rent relief
• have a turnover of less than $50 million for the 2020/2021 The period during which the rules apply is 13 July 2021 to 13
financial year. If the lessee is a member of a group, the January 2022. Impacted lessees in financial distress and their
turnover of the group is the relevant turnover. If the lessee property owners should start the process of negotiating rent
is a franchisee, the turnover of the business conducted at relief agreements as soon as possible. Support measures will
the premises of the franchisee is the relevant turnover. In be reviewed regularly as required due to the changing
all other cases, the turnover of the business conducted by environment brought about by the pandemic.
the lessee is the relevant turnover. Turnover includes any
For the six-month period (July 2021 - January 2022),
turnover of the business and would therefore include
commercial and retail property owners cannot take certain
amounts earnt from internet sales (notwithstanding the
actions against an impacted lessee (e.g. evict an impacted
business may ordinarily operate from a shopfront), and
lessee, increase rent level) unless they have first renegotiated
• have entered into their lease before 26 June 2021. rent and attempted mediation.
If a lessee is asked to negotiate rent reduction, they must
respond within 14 days of receiving the request, or another
period if agreed by both parties.
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Process for agreeing rent relief 13. Landlords must freeze rent increases (except for retail
leases based on turnover)
Commercial property owners and impacted lessees must
negotiate rent relief agreements by taking into consideration 14. Landlords may not apply any prohibition or levy any
the following principles in National Cabinet’s Code of penalties on impacted lessees that reduce operating
Conduct on commercial tenancies (unless otherwise agreed hours or cease to trade during the COVID-19 pandemic.
by both parties):
1. Landlords must not terminate leases for non-payment of Requirements for both parties
rent
Commercial property owners and impacted lessees should
2. Impacted lessees must remain committed to the terms of work together to negotiate a rent relief agreement. Where
their lease, subject to any amendments negotiated, and parties are unable to do this, they must attend mediation
material failure to do so will forfeit additional COVID-19 through the Small Business Commission.
protections provided to impacted lessees
Interim arrangements for urgent matters involving a
3. As noted above, landlords must offer impacted lessees threatened or actual eviction, can be sought through the
proportionate reductions in rent (in the form of deferrals NSW Civil and Administrative Tribunal or the courts.
and waivers) of up to 100 per cent of the amount
For standard matters, the Small Business Commission aims
ordinarily payable, in proportion to the decline in the
to offer a date within five weeks of application.
impacted lessee’s trade.
For urgent matters, mediation can be arranged within days.
4. Rent waivers, as opposed to deferrals, must constitute at
The mediator cannot impose any outcome but, if a mediation
least 50 per cent of the rent reduction provided by
is successful, parties can enter a binding deed.
landlords (in negotiating this, regard must be had to the
landlord’s financial ability to provide such a waiver) Where mediation is unsuccessful, parties can pursue action
through the NSW Civil and Administrative Tribunal or the
5. Any rent deferral must be amortised over the balance of
NSW civil courts.
the lease term and for a period no less than 24 months,
whichever is greater, unless otherwise agreed by the As a result of the Regulation a landlord may not:
parties • try to regain possession of premises with respect to a
6. Landlords must pass any reduction in statutory charges relevant lease,
(e.g. land tax, council rates) to the impacted lessee • try to terminate such a lease, or
7. Landlords should seek to share any benefit received due • exercise or enforce any other right of the landlord with
to deferral of loan payments by a bank or otherwise with respect to such a lease
the impacted lessee in a proportionate manner
unless the Small Business Commissioner has first
8. Landlords should, where appropriate, seek to waive certified that mediation has failed to resolve the dispute,
recovery of any other expense (or outgoing payable) by whilst also enunciating the reasons for the mediation being
an impacted lessee under the lease terms during the unsuccessful.
period the impacted lessee is unable to trade
It is important that impacted parties obtain advice from their
9. Repayment of other (non-rent) expenses should not legal advisers with respect to the matters noted above to
commence until the earlier of the COVID-19 pandemic ensure their obligations and rights are appropriately dealt
ending (as defined by the Australian Government), or the with as provided by the Regulation.
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 impacted lessee’s security
for the non-payment of rent (be this a cash bond, bank
guarantee or personal security) unless agreed by the
impacted lessee and landlord
12. Impacted lessees should be allowed to extend their
lease for an equivalent period of any rent waiver/deferral
period.
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Landlord’s assistance/relief
Where landlords have provided rent relief to ‘impacted lessees’, they are entitled to land tax relief of an
equivalent amount of their land tax liability for 2021, with the relief limited to the actual land tax liability. The
relief will be a rebate for those landlords who have already paid land tax and a waiver for those landlords that
have not paid their land tax. Please refer to our previous update on land tax relief for further information.
The New South Wales government is also in the process of establishing a new $40 million Hardship Fund.
This Fund will provide a monthly grant of up to $3,000 for qualifying landlords who provide a rent waiver of at
least the same value of the Hardship Fund grant, as well as any land tax relief that the landlord is granted.
How SW can assist
Whether you are a commercial landlord or business tenant, our experts are highly experienced in assisting
with calculations of decline in turnover, eligibility assessment, the application and negotiation process.
Reach out to one of our tax and property experts below for a conversation about your circumstances.
Contacts
Tony Principe Helen Wicker
Associate Director, Tax Director, Tax
T +61 2 8059 6832 T +61 2 8059 6830
E tprincipe@sw-au.com E hwicker@sw-au.com
Blake Rodgers Tim Hogan-Doran
Associate Director, Business and Director, Tax
Private Client Advisory
T +61 2 8059 6838
T +61 3 8635 1876 E thogan-doran@sw-au.com
E brodgers@sw-au.com
The material contained in this publication is in the nature of general comment and information only and is not advice. The
material should not be relied upon. ShineWing Australia, and related entity, or any of its offices, employees or representatives,
will not be liable for any loss or damage arising out of or in connection with the material contained in the publication. sw-au.com
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