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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.

 

Insights

Changes to the Corporations Act 2001 (Cth) in response to COVID-19: section 127 execution

The Federal Government has introduced welcome changes to the Corporations Act 2001 (Cth) by way of the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 to amongst other things permit companies to execute documents pursuant to section 127 electronically (for example, by Docusign).

At this stage, the changes apply from 6 May 2020 and will be in force for 6 months.

Companies will still need to ensure the electronic execution method complies with the Determination and the relevant electronic transaction legislation in each State (for example, using an appropriate electronic execution method and obtaining consent from parties to the transaction).  We suggest it may be appropriate to include additional drafting in contracts to ensure the electronic execution arrangements are compliant.

May 6, 2020

ACCC Interim authorisation for collective negotiations by retail tenants

On 22 April 2020, the ACCC granted interim authorisation for tenants who are members of the Australian Retailers Association to collectively negotiate with landlords regarding the support to be provided to retail tenants who are adversely impacted by COVID-19 – including information sharing for the purposes of those negotiations.

This interim authorisation protects retail tenants from legal action for certain conduct which might otherwise breach the Competition and Consumer Act 2010 (Cth) and remains in place until it is revoked or the date that the ACCC has made its final determination.  The public consultation process is currently open and the final determination is anticipated in September 2020.

This interim authorisation will be especially helpful for tenants in retail shopping centres and will impact how retail landlords approach rent relief negotiations with their tenants.

April 24, 2020

New South Wales - COVID-19 New regulation - Witnessing documents via audio visual link

New regulation introduced in NSW (applicable to documents governed by state laws) allows for documents to be witnessed by audio visual link for an anticipated period of 6 months commencing from 22 April 2020. Find full copy of regulation here:

Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020

April 24, 2020

Victoria - COVID-19 Omnibus legislation - What it means for commercial/retail tenancies now

The COVID-19 Omnibus (Emergency Measures) Bill 2020 was passed by the Victorian Government yesterday and came into effect today. The Act gives the Governor powers to enact Regulations to prohibit termination rights and limit/modify rights under an ‘eligible lease’.

What we do know now

  • The Regulations (which we have not yet seen) may be retrospective, but they wont apply before 29 March 2020 (so consider whether any April arrangement should remain subject to future rights that you may have under the regulations).
  • For now, the Regulations will only have effect for a maximum 6 months (ie. until 24 October 2020).
  • The Victorian Small Business Commission can make recommendations on the Regulations (so keep an eye out on the VSBC website).
  • The criteria for the Regulations to apply to your lease (ie to be an ‘eligible lease’) includes:
    • the tenant must have less than $50 million annual turnover (current or previous year)
    • the tenant must qualify for and participate in the JobKeeper scheme (eg. at least 30% fall in turnover)
    • the lease must be in effect on the date the first regulation operates (ie. a future date – so consider the impact on leases being/about to be entered into now)

What we don’t know yet

  • We still have to wait for Regulations from the Governor to know the details on how this may impact your rights under a lease.
  • No update on Victoria’s version of the commercial/retail tenancy rent relief framework (the Commonwealth’s Mandatory Code of Conduct is still not law yet in Victoria…).
  • The Regulations may apply to other occupancy arrangements like licences, but we won’t know exactly what that will mean in practice until we see the Regulations.

April 24, 2020

Western Australia - COVID-19 Legislation - Commercial tenancies

Covid-19 legislation for commercial tenancies appears one step closer in WA, with proposed legislation successfully passing both houses of Parliament this week.  Enactment of legislation should be imminent. Interesting to see that WA has also taken the further step of introducing proposed additional legislation (which hasn’t passed Parliament yet) giving certain tenants in ‘severe financial distress’ a regime for early termination of their lease.  This is in contrast to some other States’ views against providing tenants with early termination measures.  Stay tuned for further updates.

Eviction moratorium and code of conduct to protect WA businesses

April 23, 2020

NSW - Strata management during COVID-19 crisis

Many strata schemes in NSW are presently stuck between a rock (face to face meeting obligations) and a hard place (Covid-19 meeting restrictions). NSW Fair Trading acknowledges that whilst meetings for smaller schemes may be able to comply with social distancing orders, meeting requirements are likely to be problematic for larger schemes and so it is “reviewing the situation”. There has been some talk of relying on the “no quorum” default provisions in the legislation to push through approval for alternative/electronic meeting arrangements at a 2-person meeting. Whilst this might seem a little cheeky, query whether this might just meet the dual objectives of staying safe whilst complying with face to face meeting requirements. Guidance notes from NSW Fair Trading Trading can be found here:

Fair Trading – Guidance notes

April 17, 2020

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