Brief Overview

•    Regulation was passed on 28 May 2020 to enact National Cabinet ‘Mandatory Code of Conduct SME Commercial Leasing Principles during COVID-19 '. 
•    The Regulation will apply to lease arrangements between 29 March 2020 to 30 Sept 2020 “response period”.
•    A Small Business Commissioner role has been established to oversee the dispute resolution process. 
•    Must be eligible for the Jobkeeper scheme (not necessarily receiving it). 
•    Puts a process and timeframe for negotiations in place.
•    Does not enforce ‘proportional’ rent relief as referred to in the Mandatory Code issued by the National Cabinet on 7 April 2020. This could hardly be described as a win for tenants!

Key Highlights

The regulation, made under the ‘COVID-19 Emergency Response Act 2020’, gives effect to lessee eligibility, lessor and lessee responsibilities for negotiating rental relief and the dispute resolution mechanisms.
 
A party to an affected lease may request the other party to negotiate the rent payable and other stated conditions of the lease. Within 30 days after sufficient information has been provided for the purpose of the negotiation, a lessor must offer the lessee a reduction in the amount of rent payable under the lease and any proposed changes to other stated conditions. No less than 50% of a rent reduction must be in the form of a waiver of rent.
 
The Regulation does not mandate rental relief be directly proportionate to turnover reduction. As stated above, LPC considers this could hardly be described as a win for tenants !
 
The Regulation preserves the rights of lessors and lessees to negotiate an agreement that is inconsistent with the Regulation and seeks to preserve the validity of agreements entered into prior to commencement. The Regulation also preserves lessors rights in respect to grounds that are unrelated to the COVID-19 emergency or where the lessee has substantially failed to comply with their obligations as set out within the Regulation.   
 
It applies to an “affected lease”, being a retail shop leases and leases under which the premises are to be wholly or predominantly used for carrying on a business and the lessee under which is an SME entity (an entity with annual turnover of less than $50m) and is eligible for the Jobkeeper scheme.
 
A lessor is prohibited from taking a “prescribed action” (for example terminating a lease, re-entering premises or claiming on security) on the grounds of a lessee under an affected lease failing to pay rent or outgoings or to open for business during the response period.
 
A lessor must not increase the rent payable by a lessee under an affected lease during the response period.
 
There are some provisions adding detail around the above highlights and these should also be considered in each instance so the applicability of the Regulation or how it is to apply can be considered.
 
The Queensland Government has confirmed that Maree Adshead has been appointed as the Small Business Commissioner until the end of 2020 to oversee the dispute resolution process.
 

This article has been prepared with the kind assistance of the Makinson d’Apice and Property Council of Australia and was arranged by Geoffrey Learmonth, Founder and a Director of LPC.