ACT extends relief for commercial and retail tenancies, and rates exemption period

The ACT Legislative Assembly has extended two COVID-19 related instruments affording relief to commercial and retail tenants, and providing a rates exemption for eligible owners:

• Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 (No. 2)
• Rates (Commercial Land) Exemption 2020 (No. 3)

These instruments interact with each other, and are designed to support commercial and retail businesses affected by COVID-19.

Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 (No. 2)

On 10 September 2020, the Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 (No. 2) was declared. The Declaration comes into effect on 28 September 2020 and will expire on 31 January 2021 (unless further extended).

The Declaration is the second declaration of COVID-19 relief for non-residential landlords and tenants, revoking the current Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 (No. 1) (First Declaration) which will continue to provide relief until 27 September 2020.

The provisions of the First Declaration are extended by the Declaration, including:

• placing an obligation on a landlord to negotiate in good faith with an impacted tenant that has committed a breach under a lease;
• placing an obligation on landlords and tenants to have regard to the leasing principles contained in the National Cabinet Mandatory Code of Conduct; and
• preventing a landlord from issuing a termination notice or taking action (such as eviction of the tenant, exercising a right of re-entry or seeking damages) unless the landlord has first engaged in good faith negotiations with the impacted tenant.

The Declaration amends the definition of "impacted tenant" to reflect the change in the Commonwealth JobKeeper scheme from projected GST turnover to actual GST turnover (from 28 September 2020). Accordingly, the Declaration only applies to tenants who qualify for and receive payment under the JobKeeper scheme from 28 September 2020.

The Declaration is limited to breaches committed during the Declaration period. However, the provisions of the First Declaration continue to apply where tenants have committed a prescribed breach between 1 April 2020 and 27 September 2020. The Declaration does not apply to lease agreements entered into from 7 April 2020.

Rates (Commercial Land) Exemption 2020 (No. 3)

On 9 September 2020, the Rates (Commercial Land) Exemption 2020 (No. 3) was notified. The Exemption commenced on 10 September 2020 and replaces the previous Rates (Commercial Land) Exemption 2020 (No. 2).

The Exemption continues to provide a rates exemption for eligible owners of commercial land with an average unimproved value (AUV) of $2 million or less, and to owners of units on commercial land, where the AUV of the units (AUVU) is $2 million or less. The rates exemption was previously provided for Q4 of 2019-2020 and Q1 of 2020-21. The Exemption extends this, and also applies for Q2 of 2020-2021. To be eligible for the extended rates exemption, eligible owners must apply by 31 December 2020.

This exemption continues to be available if the owner, or a business tenant, operating a business on the land has suffered a turnover reduction of at least 30% due to COVID-19. The affected owner operating a business on their land is eligible for a rates exemption of up to 80% per quarter (maximum $8,000). The owner with affected business tenants operating on their land is eligible for a rates exemption of up to 50% of the total value of the reduction in rent for that quarter ($8,000). An eligible owner is entitled to more than one exemption per property, up to the applicable cap.

The Exemption interacts with the Declaration. As part of the rates exemption application, commercial and retail owners will be required to demonstrate that they have negotiated in good faith with their tenants, and have abided by the Declaration and the Code of Conduct. The ACT Government has indicated that this administrative requirement must be met to progress an application for rates exemption.

Related Insights

• ACT extends COVID-19 relief for residential tenancies