In response to the COVID-19 pandemic, Parliament on 24 March 2020 passed the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) (‘the New Act’). The New Act was assented to on 25 March 2020. The object of the New Act is to implement emergency measures as a result of the COVID-19 pandemic.
The New Act will have a significant impact on the operation of the Retail Leases Act 1994 (NSW) and the Residential Tenancies Act 2010 (NSW) (collectively ‘the Acts’). The New Act grants powers to the Minister to recommend to the Governor that regulations be made under the Acts which may regulate or prevent the exercise or enforcement and/or impose restrictions on landlords in exercising certain statutory and contractual rights.
Implications for landlords and tenants
The New Act permits the creation of regulations under the Acts for the purposes of responding to the public health emergency caused by the COVID-19 pandemic which may preclude landlords from:
Terminating a lease in particular circumstances. Landlords may not be entitled to terminate a lease for particular breaches identified by the regulations, which may include non-payment of rent for a specified time period;
Recovering possession of premises. Landlords may not be entitled to enter and repossess leased premises for certain breaches, notwithstanding any express lease provision to the contrary; and
Exercising or enforcing other rights. The regulations may stipulate that a landlord may not exercise certain rights it may have under a lease or the Acts, including the right to call on bank guarantees or security bonds for non-payment of rent.
The New Act also permits creation of regulations which purport to exempt tenants (or classes of tenants) from the operation of a provision of the Acts or lease agreement. This could mean that a regulation may exempt tenants from their obligation under a lease to pay rent and outgoings for a period of time.
How long will the regulations operate for?
Any regulations created under the Acts will cease to operate on the day which is 6 months after the day on which the regulation commenced, or such earlier day decided by Parliament. Effectively, any regulation exempting tenants from the requirement to pay rent would operate as a 6-month rent abatement, providing these tenants with the ability to manage their expenses and for businesses to continue employing people.
Do the changes apply to commercial leases?
The changes are also said to apply to ‘any other Act relating to the leasing of premises or land for commercial purposes’. It is unclear whether the changes will apply to non-retail commercial leases. In this regard, we suggest that much will depend on the extent to which businesses operating under commercial leases are able to continue operating from their premises.
We will keep you updated in relation to any further government announcements or changes concerning the New Act.
If you require any assistance relating to retail and commercial leasing transactions, commercial acquisitions and disposals and other real estate transactions, contact partner John Frangi (email@example.com) on 0417 252 203 , or partner Marcus Cutchey (firstname.lastname@example.org) on 0488 304 819.