Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020

Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020

The Retail and Other Commercial Leases (COVID19) Amendment Regulation 2020 (Amendment Regulation) came into effect on 3 July 2020 

The legislation amends the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (Regulation).

The main change to the Regulation is that the obligation of lessors to renegotiate rent and other terms before they may take a ‘prescribed action’ only applies in the case of an ‘impacted lease’ (which is a commercial lease to which an ‘impacted lessee’* is a party).

New clauses 7(3A) and 7(3B) have been added which provide that an impacted lessee must give a statement to the lessor and provide supporting evidence that they are, in fact, an ‘impacted lessee’. If the ‘impacted lessee’ fails to do so, the lessor is taken to have complied with clause 7 of the Regulation, which relevantly states that a lessor must not take any prescribed action against an ‘impacted lessee’ due to a failure to pay rent during the prescribed period UNLESS the lessor has complied with the clause.

Prescribed actions include:

• exercising a right of re-entry;
• recovery under any security bond; and
• terminating the lease.

The Amendment Regulation makes it clear that if a lessee has failed to provide sufficient proof that they are an ‘impacted lessee’ as required by clause 7(3A), the lessor is taken to have complied with clause 7 (in particular, the requirement to renegotiate rent and other terms of the impacted lease) and is permitted to take prescribed actions against that lessee during the prescribed period on the grounds of a breach of lease.

The Amendment Regulation fails to offer guidance on the type of supporting evidence required to prove that the lessee is an ‘impacted lessee’.

The types of documents ‘impacted lessees’ have been using to establish eligibility include notices from the Australian Tax Office, confirming JobKeeper enrolment, and accounting records signed by an accountant.

A lessee may not necessarily have Australian Tax Office correspondence and will need to find an alternative document to prove eligibility for the JobKeeper scheme (e.g. a letter from their accountant).

Please note that nothing prevents a lessor taking a prescribed action against a lessee on grounds unrelated to the economic impacts of the COVID-19 pandemic.

The changes apply only to re-negotiations still to be completed, and do not extend to matters for which court or Tribunal proceedings are already underway.

*An ‘impacted lessee’ is a lessee that qualifies for the JobKeeper scheme with a turnover under $50 million during the 2018-19 financial year; note that the lessee does not necessarily need to be enrolled for the JobKeeper payment.