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Commercial lease support

If your business was unable to meet lease commitments from 24 April 2020 to 31 March 2021, due to the COVID-19 pandemic, you may still be eligible to request a renegotiation of rent (and other terms of your lease) with your commercial property owner. 

For more information visit the Small Business Commissioner or call 1300 795 534.

Land tax relief to support commercial leasing

The NSW government is continuing to support commercial tenants who are experiencing financial distress as a result of COVID-19 with a new land tax relief package.

Eligible commercial landlords will be able to apply for a land tax concession of up to 25%, if they provide rent reductions to eligible tenants under the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020, from 1 January 2021 to 28 March 2021.

Applications will be open from 1 Feb 2021 to 31 May 2021.

Applications for land tax concessions of up to 50% for 2020 are also still available for eligible landlords. Applications for 2020 will close on 31 May 2021.

Examples of commercial lease negotiations under the previous Regulation

1. Landlord and tenant negotiate in good faith and agree on a temporary rent relief arrangement

Brian owns a small clothing store inside a major regional shopping centre. He has 4 casual employees. The store is still operating but customer foot traffic has dropped significantly since the COVID-19 social distancing rules were introduced. He can no longer pay his landlord his usual rent of $8000 a month.

Brian checks if he is eligible for support under the NSW commercial lease package. He does not receive JobKeeper payments because his 4 casual employees have been employed for less than 12 months. He determines he's eligible for rent relief because his store had an annual turnover of less than $50 million in the 2018–2019 financial year, and his turnover has declined more than 30% in comparison to the same time last year.

Brian contacts his landlord to explain the situation. He provides his landlord with bank statements and management accounts that show sales turnover for the past month has fallen 70% in comparison to the same period in 2019. He also provides a Business Activity Statement (BAS) showing the store’s annual turnover was less than $50 million in 2018–2019.

Brian’s landlord recognises it is better to have someone in the premises than no-one at all, and it is in both of their interests that Brian’s store survives the COVID-19 downturn. The landlord and Brian agree to rent relief of 70%, corresponding to the 70% decline in the store’s turnover. Of the total $5600 in monthly rent relief, they agree that half ($2800) will be a waiver and half ($2800) will be a deferral. At the end of the 6 months, Brian will return to paying his regular $8000 a month in rent and will also begin to pay off the $16,800 of deferred rent over a period of 24 months.

As Brian and his landlord were able to reach a rent relief agreement, Brian’s landlord is entitled to tax relief of up to a maximum of 50% of the land tax liability for 2020 on the relevant property. The landlord advises Service NSW of the agreement reached with Brian and receives a waiver on the land tax that was to be paid.

2. Landlord and tenant negotiate in good faith but cannot agree on a temporary rent relief arrangement

Rita runs a hairdressing salon that sits on a main road in a Sydney suburb. It is usually very popular but has been significantly impacted by COVID-19 and the corresponding health restrictions. She has suffered an 80% decline in turnover and is receiving JobKeeper payments for her employees.

Rita approaches her landlord for support as she can no longer pay the rent. Despite providing the landlord with evidence that she has suffered an 80% decline in turnover and had a turnover less than $50 million in 2018–2019, the landlord does not agree to a rent reduction.

Rita contacts Service NSW for help and is referred to the NSW Small Business Commission. The NSW Small Business Commission arranges a mediation for Rita and her landlord. When Rita, the landlord and an experienced mediator get in the same room they are able to negotiate an agreement that all parties agree to, guided by the leasing principles in the National Code of Conduct for commercial tenancies.

Rita’s landlord advises Service NSW of the agreement reached with Rita. Because the landlord has already paid land tax for 2020, they receive a rebate of an equivalent value to the relief offered to Rita, up to a maximum of 50% of their 2020 land tax liability.

3. Tenant is still eligible under the extended Regulation and asks to negotiate rent again

James owns a newsagency in a NSW shopping centre. In early 2020 he was unable to pay his usual rent of $10,000 a month due to the impacts of COVID-19.

When the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (‘the Regulation’) was announced in April 2020, James worked out that he was eligible to ask his landlord to renegotiate his rent. On 11 May 2020, they finished negotiating and agreed on rent relief.

They agreed James would receive rent relief of 80% a month for 6 months in line with his store’s 80% decline in turnover. Half ($4000) of the $8000 a month would be a waiver, and half ($4000) would be paid back later.

When James’s rent relief ended on 11 November 2020, they agreed he’d return to paying $10,000 a month in rent. He’d also start to pay off the $24,000 of deferred rent over a 24-month period.

James is eligible again under the Regulation’s extension from 24 October 2020 until 31 December 2020. He’s still eligible for JobKeeper from 28 September 2020 and unable to pay his usual rent due to COVID-19.

On 28 October 2020, James asks his landlord to negotiate further rent relief. He provides evidence of a 40% decline in turnover, compared to the 2019 September quarter. The landlord gets back to him and starts negotiating within 14 days.

They agree to 40% rent relief for 2 more months, from 12 November 2020 until 11 January 2021. Half ($2000) is a waiver and half ($2000) is to be paid back later. They also agree that the previously deferred rent won’t need to be repaid until the rent relief ends.

When the rent relief ends on 12 January 2021, James will return to paying his usual $10,000 a month rent and will start to pay off the $28,000 of deferred rent over a 24-month period.

James’s landlord has already received a land tax waiver of up to 25% of the rent relief value offered to James. He notifies Service NSW of the rental relief offered between October 2020 and December 2020 and is eligible for another 25% land tax concession.

4. Tenant is no longer eligible under the Regulation’s extension but has not finished negotiating yet

Hannah owns a cafe in a Sydney suburb. By mid-2020, her store is significantly impacted by COVID-19 and the health restrictions in place. There’s a 70% decline in turnover and several of her staff receive JobKeeper payments.

Hannah is unable to pay her usual $6000 a month in rent and asks her landlord to negotiate rent relief. Hannah and her landlord take their time emailing each other and are still negotiating by 24 October 2020.

With her landlord’s agreement, Hannah has not paid rent since 1 July 2020. But she’s willing to back pay the rent she owes when they finish negotiating and have reached an agreement.

Since they started negotiating, Hannah’s business has significantly improved as health restrictions eased. Her decline in turnover is now only 25% compared to the 2019 September quarter.

Hannah’s no longer eligible for JobKeeper from 28 September 2020, or eligible under the Regulation’s extension from 24 October 2020 until 31 December 2020.

The Regulation’s extension does not stop their negotiation from continuing. Hannah and her landlord reach an agreement on 30 October 2020.

They agree to rent relief of 70% a month for 3 months, from 1 July 2020 to 30 October 2020. Half ($2100) is a waiver and half ($2100) is to be paid back later.

Hannah pays her landlord the $6300 she owes for the period that she was not paying rent and returns to paying her usual rent of $6000 a month. She’ll also start to pay off the $6300 deferred rent over a 24-month period.

Hannah’s landlord advises Service NSW of their agreement. As Hannah’s landlord has already paid land tax for 2020, they receive a rebate of equal value to the relief offered to Hannah, up to 50% of their 2020 land tax liability.

5. Tenant was eligible under the original Regulation, but is not anymore

Cameron owns a motel on the NSW South Coast. He was unable to pay his usual rent of $8000 per month from April 2020 to September 2020, as his turnover was down 60% due to travel restrictions.

Cameron was receiving JobKeeper up until September 2020. He was eligible to negotiate rent relief with his landlord under the first Regulation that ended on 23 October 2020.

They had both agreed on rent relief of 60% a month, from April to September. Of the monthly rent’s balance, half ($2400) was a waiver and half ($2400) was to be paid back later.

When Cameron’s rent relief ended on 1 October 2020, he refused to return to paying his usual rent of $8000 a month. Cameron is not complying with the terms of their renegotiated agreement.

Cameron’s revenue has returned to pre-COVID-19 levels and he is not an eligible tenant under the extended Regulation from 24 October 2020.

Cameron’s landlord advises Cameron that if he does not start paying his usual rent, he’ll be in rent arrears and he may terminate his lease. Cameron’s landlord has the right to do so under their lease agreement.

As Cameron does not want to be evicted, he complies with the breach notice issued by his landlord. He follows their agreed payment plan, paying back the rent he owes and the deferred rent.