NSW Rent Relief for Retail and Commercial Tenants

In covid rent relief by LibertyLeasing

Once again commercial Landlords are now mandated by law to provide rent relief to Tenants that meet the eligibility criteria. Unlike the measures implemented in 2020, Landlords will also garner more targeted relief through several NSW government schemes.

What do the Regulations say?

On 13 August 2021 the NSW Government amended the Retail and Other Commercial Leases Regulation (COVID-19) 2021 (‘the Regulations’) to reintroduce the obligation for the Landlords to enter into rent relief negotiations with eligible Tenants. Those negotiations must:

  • commence within 14 days of receiving the request; and
  • be in a manner consistent with the leasing principles set out in the National Code of Conduct.

At a minimum, those negotiations must result in the Landlord providing an eligible Tenant with rent relief equal to its decline in turnover. Half of the rent relief amount must be provided by way of a waiver, and the balance offered as a deferral.

Unless extended, the Regulations will expire on 13 January 2022.

What is the eligibility criteria for rent relief?

For a Tenant to be eligible for a rent reduction under the Regulations they must:

  1. occupy a retail or commercial premises under a lease;

2. have entered into that lease before 26 June 2021 (exceptions apply);

3. be eligible to recieve at least one of the following:

4. had a 2020/2021 turnover of $50 million or less.

Under the Regulations, Tenants are required to provide to the Landlord evidence that it meets the eligibility criteria. The Regulations do not expand upon the evidence that would be satisfactory. In practice, at a minimum we would expect satisfactory evidence to be the receipt of the relevant NSW Grants or JobSaver. However, if applying the proportionality principles then Tenants would also need to evidence the percentage of their decline in turnover. This could be achieved by providing a certification from a qualified Accountant or though Business Activity Statements.

Last year we saw instances of Landlords attempting to withhold rent relief until the BAS was lodged for each respective quarter. This practice was administratively burdensome and did not otherwise meet the intention of the Regulations, which was to provide economic relief, in real time, to struggling businesses. Given the direct nexus between rent relief and land tax relief, we are hopeful that this will encourage the parties to come to a rent reduction arrangement, calculated on the current decline, that will be applied until the expiry of the Regulations.

Calculating Turnover

There are a few key guidelines for calculating turnover for the purpose of eligibility under the Regulations. Namely:

  1. For franchises, the turnover will be determined at the franchisee level rather than the franchisor level.

2. Where there is a corporate retail group that operate a number of brands but are related bodies corporate for the purpose of the Corporations Act 2001 (Cth), the turnover will be determined by the group.

3. Internet sales must be included in the calculation of turnover.

Relief for Landlords

The NSW Government is balancing the economic interests of Landlords and Tenants through a variety of schemes. In consideration for the rent relief being provided to Tenants, Landlords will be relieved of some of its financial burden related to the property.

Landlords will be provided with land tax relief equal to the amount of rent reductions given to Tenants from 1 July 2021 – 31 December 2021. Landlords can potentially be relieved of up to 100% of its land tax obligations for 2021. Landlord’s can apply for that relief here.

Small retail and commercial Landlords can receive monthly payments of up to $3,000 through a NSW Government Hardship Fund. These monthly payments are, of course, subject to those Landlords providing rent relief to the Tenants.

Next Steps

Once you’ve confirmed you meet the eligibility criteria, you need to approach your Landlord to commence the necessary negotiations. Note that the Regulations do not simply limit those negotiations to rent relief. The parties are free to negotiate additional amendments to the lease terms.

If you require assistance in determining your eligibility, you should contact one of our Tenant Representatives.

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