Rent relief for commercial tenants under COVID

There is now significant, legislated relief for commercial tenants who have been affected by COVID-19.

In summary:

  • Mandatory rent relief in proportion to degree affected ; half waived, half deferred
  • No adverse action can be taken against tenants
  • Landlords to pass on benefits – eg land tax, council rates)
  • No penalty – no fees or interest on rent or payments being deferred
  • No draw on security –  (bonds, bank guarantees or personal guarantee)
  • Term extensions – extend the lease for the period the subject of the rent deferral
  • Rent freeze – no rent increases (other than turnover rent) during COVID-19 pandemic period
  • Binding mediation with the SA Small Business Commissioner

 Please contact Kruse Legal on 8278 1779 if you want advice, including talking to your landlord on your behalf, applying these new laws to your lease and your particular factual circumstances.

Details
As part of the response to the COVID-19 pandemic, and as part of a package that includes the Federal Government’s Mandatory Code of Conduct for commercial tenancies during the COVID-19 pandemic (Code of Conduct), the South Australian Government passed the COVID-19 Emergency Response Bill 2020 on 8 April 2020.
Following assent, the COVID-19 Emergency Response Act 2020 (the Act) has made various temporary modifications to South Australian law in response to the COVID-19 pandemic.
The SA Small Business Commissioner has published Essential Information for Lessees and Lessors dealing with COVID-19
Mandatory Code of Conduct for Rent Relief
When teants negotiate with their landlord on the mix of waiver and deferral, they should refer to the 14 principle points in the new Federal mandatory code of conduct for commercial leases.   The new code of conduct was released by the PM on 7 April  2020
Prescribed actions – no adverse actions can be taken

 The measures in the Act include preventing a landlord from taking any “prescribed action” against a tenant suffering financial hardship as a result of the COVID-19 pandemic.

– the distraint of goods,
– eviction or termination of the lease,
– seeking damages,
– enforcing guarantees,
– requiring the payment of interest on unpaid rent)
on the grounds of a breach of the lease due to:
– The failure to pay rent or outgoings
– The business under the lease not being open for business in accordance with the trading hours set out in the lease
– Any other act or omission prescribed by regulations made for the purposes of the Act
COVID Legislation 
The SA legislation is passed and gazetted

 (section 7 applies to Commercial Leases and is deemed to have commenced on  30.3.2020 as per the Legislative history)

and the Commercial Lease Regulations under the Act.
which really only says that for the purposes of section 7 , financial hardship is that the lessee must be eligible for JobKeeper and that the Small Business Commissioner has the power to intervene if parties can’t work it out.
Reg 4 (2)
  (b) any reduction in turnover of the business of the lessee (as verified by financial records or statements provided by the lessee) during a specified period as compared with another specified period determined by the Commissioner as being relevant to the circumstances of whether or not the lessee is suffering financial hardship as a result of COVID-19.
Next steps
Tenants who are COVID affected should share these facts with their landlord as a first step towards mediating a lawful adjustment of their rent and ensuring that no landlord takes any unlawful, adverse, prescribed actions during this difficult time for all.
Please contact Kruse Legal on 8278 1779 if you want advice, including talking to your landlord on your behalf, applying these new laws to your lease and your particular factual circumstances.
This is advice of a general nature and does not constitute legal advice regarding your specific circumstances.