The Queensland Government has extended rent relief negotiation provisions introduced under the Retail Shop Leases and Other Commercial Leases (Covid-19 Emergency Response) Regulation 2020 (Regulations).
The extended period runs from 30 September 2020 to 31 December 2020. However, whilst the application of the Regulations has been extended, the Regulations have also been amended and now apply as follows:
What leases will the amended Regulations apply to?
The Regulations will apply to retail shop leases and leases for SME entity tenants who have a turnover of less than $50 million. However, for a tenant to be eligible they must also qualify for JobKeeper for the period from 28 September 2020 to 4 January 2021, which essentially means they must have a reduction in revenue of at least 30% for the September 2020 Quarter.
What are a Landlord’s obligations to reduce or waive rent?
Under the Regulations, the parties to a lease are required to cooperate and act reasonably and in good faith in negotiating a resolution to mitigate the effect of Covid-19. A landlord is required to consider both their circumstances and the tenant’s circumstances, as well as rent reductions previously given and make a good faith offer of rent reduction.
However, nothing in the amended Regulations requires a landlord to offer a rent waiver in relation to the extended period of operation of the Regulations. On that basis, any rent reduction during the extension period is required to be in the form of a deferral only. The amended Regulations are also less prescriptive as to what percentage of rent reduction or deferral should be offered and this is now a matter for the parties to negotiate on, having regard to their circumstances, as set out above.
What are the restrictions on landlords’ conduct during the extended period?
The Regulations generally prohibit a landlord from taking the following types of actions if a tenant is failing to pay rent or if their business is closed:
- Recovering possession of the premises or evicting the tenant;
- Terminating the lease;
- Exercising a right of re-entry to the premises;
- Requiring the payment of interest on unpaid rent or outgoings;
- Making a claim on a bank guarantee or security bond for unpaid rent and/or outgoings;
- Enforcing a personal guarantee; and
- Enforcing any other right under the lease.
However, the landlord may take action as set out above if the tenant, despite a genuine attempt from the landlord to renegotiate the rent, fails to renegotiate the rent and act in accordance with the Regulations (such as failing to act reasonably and in good faith or failing to provide sufficient information under the Regulation).
A landlord is also able to take action as set out above if the Regulations do not apply to a tenant for the extended period.
The freeze on rent increases has been extended
A landlord cannot increase the rent for a tenant which the Regulations apply to until after 31 December 2020.
What if the parties cannot agree on rent relief?
If the parties cannot reach agreement, either of them can refer the matter to the Small Business Commissioner for mediation and in some cases to QCAT.
How we can help
We can assist you to negotiate a rent reduction with your landlord and can help you until your business circumstances improve. We have found that, when we assist with negotiations, landlords have generally been receptive to tenants during the Covid-19 pandemic period.
If Covid-19 has affected your business, the best time to seek assistance is now, so please contact Pearce & Heers at our Brisbane or Gold Coast offices for an initial obligation-free consultation. We will discuss all options with you to assist with saving your business, including through negotiations with your landlord.
