October 2, 2020
On 29 September 2020, the Queensland Government extended the operational period of the Retail Shop Leases and Other Commercial Leases (Covid-19 Emergency Response) Regulation 2020 (Regulation) made under the COVID-19 Emergency Response Act 2020 Qld.
Our previous article setting out the key terms of the Regulation when it came into force earlier this year can be found here.
The Regulation (as recently amended) extends the period during which landlords may be required to grant eligible tenants rent and other relief from 30 September 2020 to 31 December 2020.
WHAT IS THE EXTENSION PERIOD?
The extension period means the period starting on 1 October 2020 and ending on 31 December 2020.
WHO DOES THE REGULATION APPLY TO DURING THE EXTENSION PERIOD?
The Regulation applies to affected leases during the extension period, which are defined to include:
- a retail shop lease or a lease wholly or predominantly for carrying on the business of the tenant; and
- leases that were current and binding on the tenant as at 28 May 2020; and
- leases where the tenant is an SME entity, being a tenant entity (not its group) that carries on business or is a non-profit body, with an anticipated turnover for the current financial year of less than $50m, or an actual turnover for the previous financial year of less than $50m; and
- leases where the tenant is eligible for the Commonwealth Jobkeeper scheme for the period starting on 28 September 2020 and ending on 4 January 2021.
RESTRICTIONS ON LANDLORD’S CONDUCT DURING EXTENSION PERIOD
The Regulation prohibits the landlord taking a prescribed action against a tenant under an affected lease during the extension period, for:
- the tenant’s failure to pay rent or outgoings for a period wholly or partly during the extension period; or
- the business not being open during the hours required under the lease.
A prescribed action includes:
- Recovery of possession;
- Termination of the lease;
- Eviction of the tenant;
- Exercising a right of re-entry to premises;
- Requiring the payment of interest on unpaid rent or outgoings;
- Making a claim on a bank guarantee or security deposit for unpaid rent and/or outgoings;
- Requiring the performance of an obligation by the tenant or another person under a guarantee; and
- Exercising or enforcing any other right under the lease.
However, the landlord may take a prescribed action:
- Where a variation to the lease or settlement agreement made pursuant to the Regulation permits an action to be taken; or
- Where the tenant, despite a genuine attempt from the landlord to renegotiate the rent, fails to renegotiate the rent and act in accordance with the Regulation (such as failing to act reasonably and in good faith or failing to provide sufficient information under the Regulation); or
- On non COVID-19 pandemic related grounds.
IS THE RENT FREEZE PERIOD EXTENDED?
The landlord may not increase the rent (excluding turnover rent) under an affected lease during the extension period.
However, if the lease provides for a rent review during the extension period, the landlord may review the rent under the lease but must not pass on any increase from that review until the end of the extension period.
NO RENT WAIVER DURING EXTENSION PERIOD
Nothing in the amended Regulation requires the landlord to offer a rent reduction in relation to the extension period in the form of a waiver of rent. On that basis, any rent reduction during the extension period is required to be in the form of a deferral only.
WHAT IF THE PARTIES CANNOT AGREE?
If the parties cannot reach agreement, either of them can refer the matter to the Small Business Commissioner for mediation and (in certain circumstances) to QCAT.
HOW CAN WE HELP?
Any agreement reached between landlords and tenants under the Regulation (whether by mediation or negotiation) will need to be documented in writing by a variation to the lease. It is also important that any financier of the landlord or the tenant be included in the negotiation process so that an outcome can be achieved that is acceptable to all parties.
We have been assisting numerous landlords and tenants during COVID-19 and we are well placed to assist in negotiating the terms of these lease variations in compliance with the Regulation and to prepare the required documentation to ensure the parties’ rights are protected.
Please contact us to discuss starting the process.