23 August 2021
by David Prichard and Heather Hilton
- Related topics
- Regulatory Bodies
In light of the Delta outbreak in NSW, the NSW Government announced the reintroduction of national cabinet’s Mandatory Code of Conduct for Commercial Leasing on August 13, 2021. The Code of Conduct mandates rent relief for eligible tenants impacted by Covid-19 until at least 13 January 2022. The Regulation aims to ensure the economic impact of Covid-19 is shared by property owners and tenants.
Under the extension of the Retail and Other Commercial Leases Regulation (Covid-19) 2021, landlords will be required by law to renegotiate rent with their tenants inline with the Code of Conduct.
The regulations previously only required NSW’s commercial landlords to attempt mediation before moving to evict or lock out tenants. Under the changes, commercial landlords with tenants with turnover up to $50 million that are eligible for one of the Covid-19 grants cannot evict their tenant unless they have renegotiated rent and attempted mediation.
Under the revised regulations, the bar is set higher for landlords than under the former regulations. Property owners are required to reduce rent in proportion to the tenant’s decline in turnover. This means if a tenant has experienced a 40 per cent decline in turnover due to Covid-19, then the property owner must provide a 40 per cent reduction in rent.
As a default position, at least 50 per cent of any rent relief must be in the form of a rent waiver with the remainder a rent deferral. Any deferred rent must be paid back over the balance of the lease or for a period of no less than 24 months, whichever is greater.
To help landlords, the mandated rent relief will be accompanied by a new $40 million Hardship Fund. Monthly grants of up to $3,000 are available for small commercial or retail landlords who have waived rent of at least the same value. This is in addition to any land tax relief they’re eligible for.
If you have any further questions, please contact your ESV Engagement Partner – we are here to help.