Australian Capital Territory – COVID-19 – Leases (Commercial and Retail) – COVID-19 Emergency Response Declaration
Written by Michelle Mon on May 14, 2020
The Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 came into effect on 11 May 2020 by way of declaration under the COVID-19 Emergency Response Act 2020 where the latter had provided the Minister powers to make declarations in relation to a number of matters in respect of the Leases (Commercial and Retail) Act 2001. The ACT Government has also issued a Guide, which landlords and tenants might find helpful, but it doesn’t have the force of law.
The ACT legislation is slightly different to some of the other States in that neither party has a right to “trigger” a good faith negotiation – but it achieves this in practical terms by preventing a landlord taking action against a tenant unless such negotiations have actually occurred.
Application to certain leases
The declaration applies:
- to a lease entered into before 7 April 2020;
- to impacted tenants, being a tenant who:
- qualifies for the JobKeeper scheme; and
- has less than $50 million annual turnover for FY18/19; and
- a lease set out in sections 12(1)-(2)(a)-(b) of the Leases (Commercial and Retail) Act 2001 which relevantly includes:
- retail premises (except those exceeding 1000 sqm leased to a listed public company or a subsidiary of a listed public company); and
- small commercial premises (ie less than 300 sqm),
The ACT rent relief legislation excludes premises like warehouse premises and office premises (unless they are for areas less than 300 sqm).
Restrictions
Unless “good faith negotiations” (ie. having regard to the overarching principles of the National Code of Conduct) have taken place, the landlord is restricted from taking certain actions, including:
- evicting or re-entering;
- claiming damages;
- charging penalty interest; and
- claiming on any lease security (for example, a bond, bank guarantee or director’s guarantees)
in relation to a failure by the tenant during the “prescribed period”:
- to pay rent, outgoings or other payments; or
- trade during the required trading hours.
Currently, the prescribed period means from 1 April 2020 to 7 July 2020 (noting that the government guide indicates that this will probably be extended to 30 September 2020).
The legislation is retrospective and applies to termination notices given to tenants on or after 1 April 2020, where these may be able to be contested by the tenant, and a Magistrates Court must not confirm certain terminations unless it is satisfied good faith negotiations have taken place.
However, the restrictions do not apply where:
- the tenant has agree to the termination notice or action; or
- good faith negotiations have taken place and the tenant surrenders the lease.
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