South Australia has passed legislation in relation to commercial and retail leases to put a “stop” on the landlord taking certain actions under a commercial lease, however at the time of publishing this article, it has not yet legislated the new national Mandatory Code of Conduct (National Code).

The new legislation which has been introduced is the Covid-19 Emergency Response Act (SA) 2020 (the Act). A copy of the legislation can be found here.

The section dealing with commercial leases (section 7) has retrospective application from 30 March 2020.  The Act will cease to apply on a day determined by the Minister, or 6 months after its commencement, whichever is earlier.

The provisions of every commercial lease are taken to be modified to the extent necessary to give effect to the operation of the Act.

We summarise the position below:

Financial hardship

The provisions of the Act only apply if the tenant is facing “financial hardship” as a result of COVID-19. A tenant is taken to be in “financial hardship” if the tenant is eligible for, or receiving, a JobKeeper payment in respect of the business.

This usually means, amongst other things, in order for the Act to apply turnover will need to have reduced by as follows:

• 30% fall in turnover (for an aggregated turnover of $1 billion or less)
• 50% fall in turnover (for an aggregated turnover of more than $1 billion)
• 15% fall in turnover (for ACNC-registered charities other than universities and schools).

It appears that the SA Government has chosen to be less restrictive than what was envisaged in the National Code (which limits eligibility for protection to those tenants with turnover of up to $50 million only). This of course means that more tenants in SA will be eligible for protections afforded by the Act as set out below. However,  the SA government is yet to legislate the National Code’s rent waiver and rent deferral requirements, and it is possible that when they do, the eligibility requirements may be further limited to more closely align with the National Code.

Prescribed action

If a tenant is suffering financial hardship as a result of COVID-19, the landlord cannot take any ‘prescribed action’ against the tenant if the breach consists of:

• a failure to pay rent
• a failure to pay outgoings
• the business not being open for business during the hours specified in the lease
• any other act or omission prescribed by the regulations

If the tenant is required to do something under the laws of the State as a result of COVID-19 (eg is required to close as a result of a public health order), then this is not a breach of the lease (eg an obligation to keep the shop open and trade) and the landlord cannot do any of the following:

• terminate, evict, re-enter etc
• claim damages
• charge interest on unpaid rent
• use the security bond
• enforce a personal guarantee
• any other remedy otherwise available to a landlord against a tenant at common law or under the laws of South Australia

If the landlord had started any of the above actions but they hadn’t been finalised by 30 March 2020, then that action is suspended until the Act no longer applies.

Rent freeze

Rent must not be increased during the prescribed period (excluding turnover rent) unless agreed between the parties.

Land tax

A tenant is not required to pay land tax or reimburse the landlord for the payment of land tax (where the lease requires a tenant to pay) during the prescribed period.

Dispute resolution

The parties can apply for mediation in relation to any disputes that have arisen as a result of COVID-19.