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Distressed commercial leases in the Covid era

NATIONAL CODE OF CONDUCT FOR NSW RETAIL AND COMMERCIAL LEASES IS BACK!



In August 2021, the Retail and Commercial Leases COVID-19 Amendment Regulation 2021 (NSW) (Amended COVID Regulation) came into effect. The Amended COVID Regulation is the second reiteration in NSW this year, and the fifth overall since the start of the Pandemic.


The Amended COVID Regulation extends the prescribed period, which commenced on 13 July 2021, through to 13 January 2022 (Prescribed Period) (it previously ended 20 August 2021 under the original Retail and Commercial Leases COVID-19 Regulation 2021 (NSW)). It also expands the rights and obligations of parties to a Lease during impacted by COVID-19 during the Prescribed Period.


The Amended COVID Regulation applies to any Lessee/Tennant that qualifies for:

· 2021 COVID-19 Micro-Business Grant;

· 2021 COVID-19 Business Grant; and/or

· 2021 JobSaver Payment.

(Grants)


An Impacted Lessee/Tennant should contact their Lessor/Landlord or managing agent as soon as possible and provide:

· A statement to the effect that the Lessee/Tenant is an ‘Impacted Lessee’; and

· Supporting evidence (e.g. confirmation the Lessee/Tennant is receiving of one or more of the Grants).

Rent may not be increased during the Prescribed Period. This restriction does not apply to turnover-rent.


The parties are required to renegotiate the rent payable and other terms. The economic impacts of the Pandemic on the Lessee/Tennant and the leasing principles contained in the National Code of Conduct must be considered by the parties in any renegotiation.


If parties cannot renegotiate a suitable arrangement, mediation must be attempted before any enforcement or legal action can be taken. Mediation is facilitated by the Office of the Small Business Commissioner. Mediation is a process where the parties negotiate a suitable arrangement with the assistance of an independent neutral mediator.


Should the parties litigate their dispute, the Court will consider the National Code of Conduct when making its determination.


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Article written by Ruth Tzouras | Licenced conveyancer and Paralegal

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