Written by Ole Mitrevski on May 21, 2020
By way of update, South Australia has repealed the sections relating to commercial leases in the COVID Act and Regulations that we advised on earlier and have replaced them.
Please see the new COVID Emergency Response Act 2020 (the Act) and COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020 (the Regulations).
The Act and Regulations have retrospective application and apply from 30 March 2020 and end on 30 September 2020.
The Act now provides for the Governor to make regulations regarding commercial leases and all the operative provisions regarding commercial leases are in the Regulations.
The main difference seems to be a limitation on which leases the regulations apply to and the imposition of a turnover threshold in relation to who is an ‘affected tenant’, which wasn’t included previously. There are also some additional dispute resolution clauses.
For ease of reference, we have set out below the updated position in South Australia.
The Regulations do not apply to a lease entered into after the commencement of the prescribed period (ie after 30 March 2020), unless that lease was entered into as a result of an option or an extension / renewal on similar terms.
The provisions of every commercial lease is taken to be modified to the extent necessary to give effect to the operation of the Act.
The parties to a commercial lease must make a genuine attempt to negotiate in good faith the rent payable and any other terms of the lease. This seems to apply to all leases (whether or not the tenant is an affected tenant – see below).
An ‘affected tenant’ is defined to be a tenant that is suffering financial hardship as a result of COVID-19 (ie is eligible for JobKeeper) and has a turnover of less and $50 million (there are some additional provisions regarding how to calculate turnover).
If a tenant is an affected tenant, the landlord cannot take any ‘prescribed action’ against the tenant if the breach consists of:
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 and the landlord cannot do any of the following:
If the landlord had started any of the above actions during the period 30 March 2020 and 9 April 2020 but they had not been finalised, then that action is suspended until the Act no longer applies.
Interestingly, this seems to apply even if the tenant is not an affected lessee, so long as the ‘lessee is suffering financial hardship as a result of the COVID-19 pandemic’ (ie eligible for JobKeeper).
If a tenant is an affected tenant, the rent must not be increased during the prescribed period (excluding turnover rent) unless agreed between the parties.
If a tenant is an affected tenant, 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.
The parties can apply for mediation and the Court (if mediation is unsuccessful) in relation to any disputes that have arisen as a result of COVID-19. However a tenant cannot apply for mediation unless it is an affected tenant.
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