Regulation change:
NSW landlords & tenants

Update on retail and commercial leasing

In light of the 13 August 2021 Public Health Orders for New South Wales, critical changes were made to the regulations passed by the NSW Government on 14 July. The changes to the regulations have been made as a result of the challenges posed by the increasing impact of the pandemic.

As with the recent changes to regulations, landlords are still restrained from taking action – including eviction - if an impacted lessee (tenant) breaches a retail or commercial lease for reasons related to the impacts of COVID-19. This most recent change allows for renegotiations on the terms of the lease, including rent.  Be aware that only impacted lessees are covered and the definition of an impacted lessee is below. Watch our on-demand webinar to understand the changes in more detail. 

Let’s explore the matters you should consider in relation to the new regulation on renegotiation.

Matters to consider

Firstly: it is important to note that not all breaches are protected, only breaches that

  • occur in the “prescribed period”. A fundamental change made is the extension of the prescribed period. Initially, this period was from 13 July 2021 to 20 August 2021. However, the end date has been extended to 13 January 2022. The prescribed period, therefore, is now 13 July 2021 to 13 January 2022.
  • Relate to the economic impacts resulting from the pandemic. Things like failing to pay rent and outgoings, or failing to open for business. A landlord may still take action for breaches that aren't related to the economic impacts of the pandemic or breaches before the prescribed period.  

Secondly: a landlord can't increase the rent of an impacted lessee (tenant) during the prescribed period.  

Thirdly: to prevent a landlord from taking action, the tenant must initiate the process by giving the landlord notice that they will be breaching the lease (or within a 'reasonable time' after breaching the lease) and provide the landlord with documentation that proves they qualify as an impacted lessee.  

Fourthly: once the notice and documentation are given, the landlord can't take action unless and until:

  • a formal mediation has taken place. A formal mediation must be before the Small Business Commissioner. If mediation doesn't result in a solution and the Registrar issues the right certificate confirming the failure to find a solution; and
  • if the impacted lessee (tenant) requests renegotiations on rent and other terms under the lease, then the landlord must comply with the obligations to renegotiate. This requires that the tenant makes the request first, it is not up to the landlord. Once requested, both parties must negotiate in good faith and commence renegotiations within 14 days and in doing so, must take into account the impacts of the pandemic and the leasing principles in the National Code of Conduct. These principles include granting an impacted lessee rent relief based on proportional reduction in turnover.  A tenant may make a second or subsequent request to renegotiate unless the tenant agreed to waive that right to make a further request.

Fifthly: landlords can seek separate relief if they provide rent relief to an impacted lessee including land tax relief and NSW Government grants. 

Impacted lessee criteria 

The new regulation only applies to lessees (tenants) who meet the criteria of an ‘impacted lessee’ where:

(a) The lessee qualifies for one or more of the following grants:

  • Micro-business COVID-19 Support Grant
  • COVID-19 NSW Business Grant
  • JobSaver Grant. 

(b) The following turnover in the 2020 - 2021 financial year was less than $50 million:

  • if the lessee is a franchisee, the turnover of the business conducted at the premises or land concerned,
  • if the lessee is a corporation that is a member of a group, the turnover of the group,
  • in any other case, the turnover of the business conducted by the lessee.

It is important to note this information does not represent legal advice and  you  should seek specific legal advice for  your  circumstances.  We recommend   Australian Business Lawyers & Advisors  to help find solutions and minimise risks to your business. 


On-demand webinar

Updates to NSW retail and commercial leasing

Warwick La Hood discusses the recent updates including 'obligations to renegotiate' and how your business could be impacted.