Extended Commercial and Retail Tenants Protection under the 2022 NSW COVID-19 New Leasing Regulations

In July 2021, the New South Wales government enacted the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW) and Schedule 5 of the Conveyancing (General) Regulation 2018 (Former Regulations) to grant rent relief to retail and commercial lessees impacted by COVID-19 downturn.  This rent relief period was only available during the period between 13 July 2021 and 20 August 2021, which was later extended to 13 January 2022, being the Prescribed Period under the Former Regulations. 

However, in response to the continued COVID-19 impact, the New South Wales government announced the Retail and Other Commercial Leases (COVID-19) Regulation 2022 (NSW) (2022 Regulation).   The 2022 Regulation introduced provisions to further extend the Prescribed Period from 13 January 2022 to 31 March 2022. 

What has changed?

• Prescribed period: the Prescribed Period now operates from 13 July 2021 to 13 March 2022.

• Rent Relief Eligibility: 

• 13 July 2021 to 30 November 2021:

• Eligible impacted lessees:

  Any lessee who has previously received:

1. 2021 COVID-19 Micro-business Grant

2. 2021 COVID-19 Business Grant

3. 2021 JobSaver Payment

• Annual turnover:

  The above impacted lessees turnover in the 2020–2021 financial year was less than $50 million.

• 1 December 2021 to 31 March 2022:

• Eligible impacted lessees:

  Any lessee who has previously received:

1. 2021 COVID-19 Micro-business Grant

2. 2021 JobSaver Payment

• Annual turnover:

  The above impacted lessees turnover in the 2020–2021 financial year was less than $5 million.

• Turnover calculation

  The current scheme of the turnover calculation remains unchanged. For franchises, it is the turnover of the business conducted at the premises or land concerned, while at the retail corporate groups, it is calculated at the group level. For other type of eligible micro business such as individuals, the turnover is the total turnover for the business conducted by the lessee.

The protections for the tenants

• Rights to renegotiate the rent/rent relief

  Following a request by the tenant, together with the provision of supporting documentation, the landlord is required to renegotiate the rent when a lessee meets the rent relief criteria.

• No increase in rent

  The landlord must not increase the rent during the Prescribed Period. This applies to all impacted lessees defined in the 2022 Regulation, i.e. those who have received 2021 COVID-19 Micro-business Grant, 2021 COVID-19 Business Grant, or 2021 JobSaver Payment during the Prescribed Period under the Former Regulations. 

• Prescribed action prohibited without compulsory mediation or renegotiation

  During the Prescribed Period, the landlord cannot take any Prescribed Action as defined in the 2022 Regulation, such as terminating the lease, evicting a lessee, or taking possession or recovery of the premises, following a failure by the lessee to pay rent or outgoings, unless all parties have participated in a mediation and the mediation has failed to resolve the dispute, and if the lessee has requested a renegotiation and the landlord has complied with that request. 

The support for the landlords

The landlord providing rent relief to eligible tenants may be eligible for either the Commercial Landlord Hardship Fund or Land Tax Relief.

• Commercial Landlord Hardship Fund (the ‘Fund’) 

  The Fund provides grants of up to $3,000 per month per property to eligible small landlords. 

• Eligibility:

  The applicant must: 

1. be the landlord of the property in NSW that is affected by a current impacted lease, 

2. have entered into an agreement to provide rent relief during the Prescribed Period;

3. have or will not claim land tax relief 

4. have total land holdings the value of which is equal to or less than $5 million (excluding the value of any principal place of residence) (as at 31 December 2020, under the Land Tax Management Act 1956);

5. have gross rental income as its primary source of income (more than 50% of total gross income) for the 2019–20 or 2020–21 financial year;

6. prove financial hardship due to providing rent relief:

1. if the landlord is an employing business:

1. is at imminent risk of closure; or

2. is unable to pay for operating expenses such as rent or employee-related expenses; or

3. may be forced to reduce employee headcount; and

4. has not incurred excessive and non-essential business expenses; and

5. has experienced a decline in revenue due to the impact of NSW public health orders, rather than the result of normal business operations; and

6. cannot practically rearrange finances or draw upon non-essential assets to continue to operate.

2. If the landlord is a non-employing business

1. is at imminent risk of closure; or

2. is unable to pay for operating expenses; and

3. has not incurred excessive and non-essential business expenses; and

4. has experienced a decline in revenue due to the impact of NSW public health orders, rather than the result of normal business operations; and

5. cannot practically rearrange finances or draw upon non-essential assets to continue to operate.

3. If the landlord is an individual or holding property on trust:

1. If the landlord is an individual or holding property on trust:

2. is unable to maintain for itself or its immediate families’ current standard of living;

3. beneficiary is an employing business, the above 6 (a) applies to the beneficiary;

4. beneficiary is a non-employing business, the above 6 (b) applies to the beneficiary.

• Land Tax Relief

If the landlord is a commercial or residential landowner and has provided rent relief between 1 July 2021 and 31 December 2021, the landlord will be entitled to land tax relief of a value up to 100% of their land tax liability for 2021 year on the relevant property. 

To be eligible for this relief, a landlord must submit its application by 28 February 2022.  There are currently no proposed extensions for this application deadline. 

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice beforetaking any course of action.*