COVID-19 | Regulation extended, but reduced rent relief regime, for impacted lessees in NSW

In response to the continued impact of restrictions on businesses in New South Wales, the New South Wales Government has introduced the Retail and Other Commercial Leases (COVID-19) Regulation 2022 (NSW) (Updated Regulations), commencing 13 January 2022.

What has changed?

The Updated Regulation extends the protections, but reduces the entitlement to rent relief, granted to impacted lessees under the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW) and Schedule 5 of the Conveyancing (General) Regulation 2018 (Earlier Regulations) to 13 March 2022.

The amendments are summarised below:

• Prescribed period: The Prescribed Period is now 13 July 2021 to 13 March 2022 (inclusive). The previously extended Earlier Regulations were due to expire on 13 January 2022.
• Impacted lessee: The criteria for a lessee to be considered an ‘Impacted Lessee’ to receive the broader benefit of the Updated Regulations remains the same as in the Earlier Regulations – see the definition of SME below.
• Rent relief: The Earlier Regulations provided that a landlord is only required to renegotiate rent for periods when a lessee meets the criteria to be considered an ‘Impacted Lessee’ for that period. However, as of 1 December 2021, the Updated Regulations amend the criteria in the Earlier Regulations to only apply to ‘micro’ businesses from 1 December 2021. Accordingly, landlords are only required to renegotiate rent provided a lessee satisfies the following requirements in that period:

• Relevant Period:	Lessee must be eligible for:	Lessee must have annual turnover less than:
  13 July 2021 – 30 November 2021	2021 COVID-19 Microbusiness Grant; or 2021 COVID-19 Business Grant; or 2021 JobSaver Payment.	$50 million (SME)
  1 December 2021 – 13 March 2022	2021 COVID-19 Microbusiness Grant; or 2021 JobSaver Payment (if those grants were still available).	$5 million (Micro)

This amendment significantly reduces the number of tenants eligible for rental renegotiation from 1 December 2021 until 13 March 2022. As per the Earlier Regulations, turnover includes internet sales and will continue to be calculated in respect of franchises at the franchisee level and in respect of retail corporate groups at the group level (rather than at the individual retail outlet level). These calculation methods and the reduced turnover limit will rule out numerous major tenant groups from receiving rent reductions moving forward.

• No increase in rent: The Updated Regulations extend the obligation in the Earlier Regulations for a landlord not to charge an increase in rent during the Prescribed Period. This applies to SMEs for the whole of the Prescribed Period – the reduction in turnover for rent renegotiation purposes is irrelevant here.
• Prescribed action prohibited: The Updated Regulations extend the obligation in the Earlier Regulations for a landlord not to take enforcement action in relation to an impacted lease if a tenant fails to pay rent or outgoings for, or to trade during, the prescribed period, unless the parties have first renegotiated rent and attempted mediation, or the parties agree otherwise. This applies to SMEs for the whole of the Prescribed Period – the reduction in turnover for rent renegotiation purposes is irrelevant here.
• Parties must attempt mediation before landlord can enforce: The Updated Regulations extend the mediation obligations in the Earlier Regulations. This applies to SMEs for the whole of the Prescribed Period – the reduction in turnover for rent renegotiation purposes is irrelevant here.

Please refer to our previous update for a detailed summary of the Earlier Regulations.

Assistance for landlords providing rent relief?

The New South Wales Government is yet to announce whether the 2021 entitlement for a landlord to claim land tax relief will be extended in the 2022 land tax year.

How can we help?

At Gadens, our Real Estate and Construction Team is well equipped to advise and assist clients that are dealing with any current rent relief negotiations including attendance at mediation. We are here to help and invite you to contact our office should you require any assistance.

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For details of all our COVID-19 tips and updates, visit the Gadens COVID-19 Hub.

Authored by:

John Nicolas, Partner
Alexandra Walker, Partner
Lui Scipioni, Partner
Archie Smith, Partner