COVID-19 rent relief update
The recent court decision of Sneakerboy confirmed that COVID rent relief and other protections would continue until at least 28 March 2021.
What this means is that landlords cannot increase rents or terminate leases for a “reasonable subsequent recovery period” of six months. This will allow more certainty to trade through the Christmas period.
Further, the court confirmed that the legislation has retrospective effect from 1 April 2020. The rent relief package was announced on 3 April 2020, but there was a 20 day gap before the regulations were implemented in NSW. As a result, many landlords demanded April rent and issued termination notices on the basis that the protections did not cover the failure to pay rent under the COVID-19 Regime. This is prohibited, as clarified in the Sneakerboy case.
The key principles of the COVID-19 Regime include:
• Landlords must not terminate leases for non-payment of rent during the COVID-19 pandemic (or reasonable recovery period).
• Tenants must stay committed to their lease terms (subject to amendments).
• Landlords must offer reductions in rent (as waivers or deferrals) based on the tenant’s reduction in trade during COVID-19 eg If the qualifying tenant’s revenue has fallen by 30%, then at least 15% of total cash flow relief is rent free/rent waiver and the remainder is rent deferral.
• Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties.
• Benefits that owners get for their properties (e.g. reduced charges, land tax, deferred loan payments) should be passed on to the tenant (in the appropriate proportion).
• No fees, interest, or other charges should be applied to rent.
• Landlords must not draw on a tenant’s security for the non-payment of rent. If the tenant breaches the subsequent agreement, then the Code will not protect them, and the landlord can claim the security.
• The tenant should be provided with an opportunity to extend its lease for an equivalent period of the rent waiver and/or deferral period.
The case highlighted that landlords and tenants must come to the table and negotiate a sensible rental agreement.
The judgment indicates if you don’t negotiate before the regulations are due to be repealed in October, you may not gain the benefit of an additional six months of protection.
It’s incredibly important for both landlords and tenants to try and resolve the matter. If negotiations fail, then mediation is the next step.
It is advisable to obtain specialist legal advice from a leasing lawyer to assist with the negotiation and document the agreement. If the agreement is not documented correctly, it may not be enforceable.