By Adam Smith
In response to the Federal Government’s release of a Code of Conduct regulating commercial leases, the Queensland Government has introduced regulations under the COVID-19 Emergency Response Act 2020 to mitigate the effects of COVID-19 on affected lessors and lessees. To be eligible for protection under the act, your lease must be deemed an affected lease under the act.
What is an affected lease?
- Under the regulation, a lease is considered an affected lease if it meets all the following criteria:
- It is a retail shop lease or a lease for carrying on the business of the tenant;
- It was current when the regulations commenced (28 May 2020);
- It is a lease of a premises where the tenant carries on business or is a non-profit body in the current financial year;
- The tenant’s turnover was less than $50 million for the 2018-19 financial year or is likely to be under $50 million for the 2019-20 financial year;
- The tenant is eligible for, but not necessarily enrolled in, the JobKeeper Payment scheme.
Relief for affected Lessee:
- During the response period defined under the regulation (29 March to 30 September 2020), if your lease is an affected lease:
- You may not be evicted or have your lease terminated for non-payment of rent or outgoings;
- Your rent must be reduced in proportion to your lost turnover (at least 50% of the rent reduction offered must be in the form of a waiver leaving the rest to be deferred);
- Your rent may not be increased;
- You may not be penalised for reducing trading hours or not opening;
- Your landlord may not make a claim on a bank guarantee or security deposit for unpaid rent or outgoings.
All Prohibited Prescribed Actions of the Lessors:
- The full list of prescribed actions that a landlord is prohibited from taking includes:
- Recovery of possession;
- Termination of the lease;
- Eviction of the lessee
- Exercising a right of re-entry to premises;
- Seizure of any property, including for the purpose of securing payment of rent.
- The payment of interest on, or a fee or charge relating to, unpaid rent or outgoings;
- The performance of an obligation by the lessee or another person under a guarantee under the lease;
- Exercising or enforcing another right by the lessor under the lease or other agreement relating to the leased premises.
It is important to inform your landlord that your turnover has been affected by COVID-19 so they can apply for support. If your landlord is not aware of this, they will be unable to assist you. In order to commence negotiations with your landlord you may want to seek independent advice from either a business advisor or a legal professional (Being well established in the area of Leasing, Robbins Watson Solicitors are available to provide such advice).
Relief for Landlords:
- Landlords on the other hand, may also be eligible for relief:
- Land Tax relief for landlords – if received, must be passed on to lessee in the form of rent relief;
- Banking relief for landlords – may be eligible to have their loan repayments deferred by their bank. A condition of the deferral is that they cannot terminate the lease or evict the tenant for rent arrears as a result of COVID-19.
The aim of this new legislation is to work side by side with the Federal Government’s Code of Conduct for commercial leases and ensure that landlords and tenants are provided with appropriate assistance during these difficult times.
If you have any queries or concerns regarding a commercial lease, feel free to book a consultation with one of our lawyers.
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