In April 2020, the Federal and State Governments in the National Cabinet produced a Mandatory Code of Conduct relating to Commercial Leasing. The Code was adopted by the NSW Government in the Retail and Other Commercial Leases (COVID-19) Regulation 2020. The Regulation provided commercial tenants and landlords negatively affected by the COVID19 pandemic with a framework for resolving tenancy disputes.

The Regulation provided for rental reductions through a waivers or deferral based on the tenant's reduction in trade as a result of the COVID-19 pandemic. The Regulation also provided a freeze on evictions, drawing on bonds or securities and the application of interest and other charges on waived or deferred rent.

Many tenants took the opportunity to negotiate rental waivers and deferrals with their landlord to help them weather the impacts of COVID-19 related lockdowns and closures. Landlords and tenants were required under the Regulations to negotiate in good faith.

On 31 December 2020, the National Cabinet Mandatory Code of Conduct for New South Wales comes to an end. In its budget, the NSW Government has announced the intention to extend the application of the Code in NSW to 31 March 2021 but, only in relation to retail businesses with a turnover of less than $5 million. Other non-retail commercial tenants will no longer have the benefit of the Code or Regulations.

When the Code expires on 31 December, commercial and some retail tenants will no longer be protected. Landlords will no longer be required to negotiate rent relief with their tenants. Further, the restraint on the termination of leases for unpaid rent will be gone. It is expected with the termination of the Code that tenants and landlords who have been affected by COVIC-19 had negotiated and come to an agreement on the operation of the lease during the period of the pandemic. However, in some specific but limited circumstances, a tenant may still have some right to resist lease termination.

If you have any concerns or questions about your commercial lease in light of the above, it is wise to seek legal advice as soon as possible by calling our team on 1800 656 656.

David Killen | Solicitor 

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