Changes to COVID Leasing Regulations in 2022

On 13 January 2022 the NSW Government introduced the Retail and Other Commercial Leases (COVID-19) Regulation 2022 (New Regulations). Simultaneously, the NSW Government repealed the Retail and Other Commercial Leases (COVID-19) Regulation 2021 and its amending regulations (2021 Regulations).

So what has changed? The only substantial difference between the New Regulations and the 2021 Regulations is that the Prescribed Period has been extended by 2 months. The Prescribed Period under the New Regulations ends on 13 March 2022. Previously, the Prescribed Period was to operate from 13 July 2021 to 13 January 2022.

What this means is that retail and commercial tenants of Impacted Leases (a lease entered into before 26 June 2021) who continue to satisfy the eligibility criteria of an Impacted Lessee are entitled to seek relief in the form of rent waivers and/or rent deferrals for an additional 2 months. As with the 2021 Regulations, such negotiations must be in accordance with the leasing principles set out in the National Code of Conduct.

It is worth noting however that any previous rent relief arrangements between landlord and tenant are not automatically extended as a result of the extension to the Prescribed Period. Unless the parties have already struck an agreement for relief up to or beyond 13 March 2022, the parties will need to re-request relief that covers them under the extension of the Prescribed Period. Any new request for rent relief must cover a different time period than any previous rent relief. For requests under a different time period, tenants will be required to re-establish their eligibility under the New Regulations.

As well as the continued relief, the extension of the Prescribed Period means Impacted Lessees receive the protection that their landlord cannot take a Prescribed Action (e.g. terminating a lease) for a Prescribed Breach (e.g. not paying rent) for a further 2 months. That is, unless the parties have firstly followed the prescribed re-negotiation and mediation process. Landlords who may have been avoiding negotiations and waiting for the expiry of the regulations before exercising their rights may have to wait a little longer.

Impacted Lessee

To recap, on 1 December 2021 under the Amendment of Retail and Other Commercial Leases (COVID-19) the 2021 Regulations amended the eligibility criteria of Impacted Lessee.

These amendments are reflected in the New Regulations.

From 13 July 2021 until 30 November 2021, an impacted lessee is a tenant who:

1. qualifies for either the 2021 COVID-19 Micro-business Grant, 2021 COVID-19 Business Grant or 2021 Jobsaver Payment; and

2. had a turnover of less than $50 million in the 2020-2021 financial year.

From 1 December 2021 until 13 March 2022, the 'impacted lessee' criteria changes with the turnover threshold significantly lowering so as to apply to smaller tenants only. From 1 December 2021, an impacted lessee is:

1. a tenant who would have qualified for either the 2021 COVID-19 Micro-business Grant or the 2021 Jobsaver Payment if still available; and

2. had a turnover of less than $5 million in the 2020-2021 financial year.

Putting together the extension of the Prescribed Period and introduction of a new eligibility criteria of Impacted Lessee, tenants who wish to take advantage of the extension of the Prescribed Period and claim 2 months additional rent relief will need to re-establish their eligibility under the new threshold. Meaning, a large number of previously negotiated rent reductions may cease to apply as a result of the threshold change.

If you have any questions about these changes or how they may affect you, Henry William Lawyers can assist. Feel free to contact our people:

Ron Zucker 0410 590 111

Vincent Tripodina 0408 228 108

Chelsea Woodward 0404 065 899