Written by Ben Malone on June 2, 2020
The Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (QLD) (QLD Regulations) came into effect on 28 May 2020.
The QLD Regulations largely mirror similar laws introduced by other States and Territories to implement the National Cabinet’s Code of Conduct for commercial tenancies, however there are a number of important differences that QLD landlords and tenants will need to be aware of.
The QLD Regulations apply to “affected lessees”, being a tenant under a commercial or retail lease where the tenant has a turnover of less than $50M and is eligible for JobKeeper. For the purposes of the turnover test, if the tenant is an entity connected with (or an affiliate of) another entity it will be the aggregate annual turnover of those entities.
If an affected lessee breaches the lease by ceasing trade or not paying rent/outgoings (wholly or partly) during the period 29 March 2020 to 30 September 2020, a landlord is prevented from (amongst other things) doing or continuing the following actions:
unless the landlord has made a genuine attempt to negotiate and the tenant has substantially failed to comply with the negotiation process. Rent also cannot be increased during this period (except turnover rent).
The QLD Regulations impose obligations on landlords and tenants to cooperate and act in good faith in all discussions and actions associated with mitigating the effect of the COVID-19 pandemic on each other.
Either party can trigger the renegotiation process and, once triggered, the parties must both give each other information relating to the request that is true, accurate and sufficient to enable the parties to negotiate in a fair and transparent way.
The QLD Regulations helpfully give examples of the information required, namely turnover information, evidence of JobKeeper eligibility and details of steps the tenant has taken to mitigate the effects of the pandemic. A tenant may also apply for further rent reduction if circumstances materially worsen after an initial agreement is reached – but notably, they do not deal with the alternate scenario of circumstances improving for the particular tenant. Landlords should consider this issue in reaching and documenting any agreement with tenants.
One of the most critical changes the QLD Regulations impose is that landlords must offer tenants an extension to the term of the lease on the same conditions as those contained in the lease equivalent to the period for which rent is waived or deferred. The only exception to this absolute obligation is where the landlord would be in breach of another legal obligation in doing so, or if the landlord demonstrates that the lease cannot be extended because it intends to use the premises for a ‘commercial purpose of the landlord’.
Some other interesting differences about the QLD Regulations when compared to other jurisdictions:
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
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 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:
April 24, 2020
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’.
April 24, 2020
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.
April 23, 2020
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:
April 17, 2020