If you are a landlord or tenant of retail or commercial premises during the current COVID-19 pandemic, you should be aware that following on from the introduction of the National Cabinet Commercial Leasing Mandatory Code and its adoption in NSW by the Retail and Other Commercial Leases (COVID-19) Regulation 2020 landlords and tenants have been busy renegotiating their rent and lease terms in accordance with the principles set out in the Mandatory Code.
A recent case in the NSW Supreme Court, Sneakerboy v Georges Properties Pty Limited (No.2) [2020] NSWSC 1141, is the first one to provide guidance on the Code and the Regulation by determining certain important principles including:
1. The Code requires a landlord to offer a tenant proportionate reductions in in the form of waivers (rent is forgone) and deferrals (rent is payable by instalments over time) of up
to100% based on the reduction in thetenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period;
to100% based on the reduction in thetenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period;
2. Generally, a tenant’s trade refers to turnover from all locations not just sales from the leased premises in question;
3. The Code applies for the COVID-19 pandemic period defined to mean the period during which the JobKeeper scheme is operational i.e. from 1 April 2020 and lasts until the
Regulation expires on 24 October 2020;
4. A reasonable recovery period is at least six months meaning a tenant is entitled to negotiate rent relief and the terms of the lease for the period from 1 April 2020 until 24 April
2021; and
2021; and
5. If the parties do not conclude their negotiations by 24 October 2020 then the right of the tenant to relief under the Code and Regulation may be lost unless the Regulation is
extended.
extended.
October 2020