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Coronavirus Business Disruption – Rent Relief Negotiations

Queensland Legislation Relating to Rent Relief

We have previously written about how the National Cabinet’s mandatory Code of Conduct for landlords and SME tenants (Code) applies to commercial tenancies. Since we wrote that article the Queensland Government introduced legislation relating to commercial leases, being The Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Regulations) (Qld Regulations).

When the Minimum Requirements Under the Qld Regulations are not Enough

However, often businesses will need further rent relief from their landlord in addition to that which is mandatorily prescribed. In these cases, if further relief is not provided by landlords then affected businesses will not ultimately survive. And this is where Pearce & Heers is here to help. So, if your business needs further rent relief than that which is provided for, please give us a call.

Businesses Which Queensland Legislation Applies To

The Qld Regulations apply to most commercial tenancy arrangements where the tenant:

  • Is an SME, being a business with turnover of less than $50 million; and
  • Is eligible for the Federal Government’s JobKeeper scheme.

Time Period For Rent Relief

This is the major area where the Queensland legislation differs from proposed relief provided for under the Code.

The Code provided that landlords had to provide rent relief for the COVID-19 pandemic period and a subsequent reasonable recovery period. What a reasonable recovery period was, was open to interpretation, but it provided for relief for businesses which will experience ongoing financial difficulties, such as those in the tourism, hospitality and accommodation industries.

However, the period where landlords must provide rent relief under the Qld Regulations only runs from 29 March 2020 to 30 September 2020. The application of the Qld Regulations then expires on 31 December 2020, with the purpose of this being to allow landlords and tenants to resolve any disputes using dispute resolution provisions under the Qld Regulations up to that date.

What Must a Business Do to Obtain Rent Relief?

In general, an SME can ask for rent relief if they are eligible for JobKeeper. There is an obligation on a business seeking rent relief to provide accurate information to a landlord to enable the parties to negotiate in a fair way. The information to be provided may include:

  • Evidence of acceptance for the JobKeeper program; and
  • Evidence about the business’ drop in turnover, which demonstrates a reduction in turnover from the comparative period last year.

What a Landlord Must Do and What They Cannot Do

Within 30 days of a landlord receiving sufficient information from a tenant regarding their eligibility for JobKeeper and loss in turnover, the landlord must offer a tenant at a minimum reduction in rent payable in the form of waivers and deferrals based on the percentage reduction in the tenant’s turnover, with no less than 50% of the total reduction in rent payable being by way of a waiver.

For example, a tenant who is paying $10,000 a month rent and who has a 50% drop in turnover must be offered at a minimum a rent waiver of $2,500 per month and a further rent deferral of $2,500 per month.

Where rent payments are deferred:

  • They must be deferred until at least after 30 September 2020.
  • Repayment must be over an agreed period of between two and three years.
  • Interest or fees cannot be charged on outstanding payments if they are made in accordance with the agreement entered into.
  • Notwithstanding the terms of the lease, a landlord may continue to hold any security under the lease until the deferred rent is repaid.

A landlord who has received notice that a tenant seeks to claim rent relief cannot (among other matters):

  • Terminate the lease or evict the tenant.
  • Seize property of the tenant.
  • Claim damages.
  • Make a claim on a bank guarantee, indemnity or security deposit.

Mediation and Dispute Resolution

If the parties cannot agree on rent relief measures, the Qld Regulations require the parties to mediate the dispute with a mediator appointed by the small business commissioner. If mediation fails, the parties have an eligible lease dispute which is heard in QCAT.

What You Should Do and How We Can Help

Many SME businesses do not have significant financial resources and their profits effectively pay wages to their owners. These businesses will struggle to survive if there is a lingering adverse impact on profitability and they have significant deferred rent and other debts.

Business owners need to assess the potential impacts of coronavirus disruption on future trading and the financial position of their business. This is essential in order to plan and implement measures necessary for business survival, including negotiations with landlords and other creditors to obtain relief to the extent required.

We are here to help you with this including negotiating arrangements with landlords that are more favourable than those set out above and with advice, assistance and solutions to overcome financial difficulties. Our office phone number is 07 3221 0055 and contact details are here. So, please give us a call and we can help you.

GET IN TOUCH

We’re happy to answer any questions you may have, so please don’t hesitate to call us and schedule a consultation.

BRISBANE OFFICE

Address

Level 12
127 Creek Street
Brisbane Qld 4000

Phone

Phone: 07 3221 0055
Fax: 07 3221 8885

Postal Address

GPO Box 691
Brisbane Qld 4001

Email

mail@pearceheers.com
GOLD COAST OFFICE

Address

Level 15, Corporate Centre One
2 Corporate Court
Bundall Qld 4217

Phone

Phone: 07 5630 1179
Fax: 07 3221 8885

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PO Box 4973
Gold Coast MC Qld 9726

Email

gcmail@pearceheers.com
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