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Commercial leases and Covid 19

14th May 2020

Commercial leases and covid-19 

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Good morning,
 
“Commercial leases and Covid 19”
 
Covid 19 and the subsequent lockdown imposed by the government has resulted in many businesses either severely restricted or unable to trade. I have had many readers ask me to outline what measures have been put in place.
 
The Commonwealth Government set up the Mandatory Code of Conduct Small and Medium Enterprises Commercial Leasing Principles on 7 April 2020. In response the New South Wales Government enacted the Retail and other Commercial Leases (Covid 19) Regulation on 24 April 2020. This regulation will be applicable until 23 October 2020. This legislation sets out how a landlord of a commercial property is to treat their tenant during this period. 
 
Although the terms of the lease remain, a commercial tenant whose lease commenced before 24 April 2020 who is eligible for the Jobsaver scheme and with a turnover of less than $50 million per annum, must be treated in the following manner until the regulation expires:
 
1. If a lessee who fails to pay rent or any other payments in accordance with the terms of the lease then the landlord is unable to take any action.
2. If the tenant has to do anything to comply with any Covid 19 restrictions imposed by the government then such action is not to be taken as a breach of the lease.
3. A party to a commercial lease must if requested renegotiate the terms of the lease such that a landlord must offer rent reductions by either waving, reducing or providing a deferral of the payment of rent, in proportion to the reduction of income of the tenant.
4. Of any reduction in rent at least 50% of that reduction must be by way of waiver but is dependent upon the ability of the landlord to be able to fund such a waiver. 
5. Any deferral must be paid over the term of the lease or 24 months, whichever is the greater.
If the parties cannot agree they should contact the Small Business Commission’s mediation service. This is only an outline and each case must be considered on its own merits and legal advice must be obtained prior to taking any action.   
If I can assist you with any of these services please do not hesitate in ringing me on 0419 233 670. Have a wonderful day,

Kind Regards,

 
Jeffrey 
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