If you're a retail or other commercial property owner or you represent one, you may have one or more tenants who are unable to pay rent as normal due to the impacts of COVID-19 on their business operations and income.
From 24 April 2020, under the Retail and Other Commercial Leases (COVID-19) Regulation 2020 ('the Regulation'), you cannot terminate a lease of an eligible tenant if that tenant is unable to pay the rent due to COVID-19, unless agreed otherwise by both you and the tenant.
If requested, you must offer eligible tenants rental relief for up to 6 months.
Each individual case is different, and it's up to you and your tenant to negotiate an appropriate rent reduction.
If you do offer, or have offered rental reduction due to COVID-19 to a tenant or tenants, you may be eligible to apply for COVID-19 Land Tax relief.
Leasing principles during COVID-19
The Regulation enacts the National Cabinet Mandatory Code of Conduct – PDF ('the Code') which has been drawn up with the aim of:
- sharing the financial risk and cashflow impact during the COVID-19 period
- balancing the interests of tenants and landlords.
The Code includes 14 leasing principles, and these principles apply to negotiating amendments in good faith to existing leasing arrangements.
Principles 3, 4 and 5 refer to rent reduction and apply on a case by case basis:
- Principle 3: Landlords must offer reductions in rent (in the form of deferrals and waivers) proportionate to the tenant’s decline in turnover.
- Principle 4: Rent waivers (as opposed to deferrals) must constitute at least 50 per cent of the rent reduction.
- Principle 5: Any deferred rent must be paid back over the balance of the lease term or for a period of no less than 24 months, whichever is greater.
Landlords and tenants may opt out of any, or all, of the leasing principles as long as both parties agree to this.
The Regulation applies only to commercial (retail, office and industrial) tenants that:
- had an annual turnover of less than $50 million in 2018/2019 ,
- have experienced at least a 30% decline in turnover due to COVID-19 (or 15% in the case of not for profits), compared with a corresponding month or quarter in 2019.
If a tenant does not meet this eligibility criteria but is still negatively impacted by COVID-19, you should consider any other short-term variations to the lease that would ensure the best longer-term outcomes for both parties.
Negotiating the lease
- Review the lease to understand your key rights and obligations as the landlord.
- Read the 14 leasing principles in the Code of Conduct – PDF to familiarise yourself with your legal obligations and those of your tenant during a rental negotiation.
- Contact your tenant via phone or email and invite a negotiation of the lease.
- Negotiate the new lease arrangements and come to an agreement.
- Write down the agreement.
- Send the agreement to your tenant to sign and return to you, and keep a copy for yourself.
Mediation and general help
- For a comprehensive breakdown of the Code, visit NSW implementation of the National Code of Conduct for Commercial Leases.
- Visit Guidance on negotiating a commercial lease if you'd like help from a Business Concierge in negotiating your tenancy agreement.
- If you're unable to come to a negotiated agreement, call 13 77 88.
- For enquiries about your legal rights and obligations visit Legal Aid.
- Retail and Other Commercial Leases (COVID-19) Regulation 2020 – PDF
- National Cabinet Mandatory Code of Conduct – PDF