Temporary protections for NSW tenants following release of new regulations for COVID-19 financial support package

The NSW Government has introduced regulations to enact the new economic support package announced last week aimed at helping NSW businesses and individuals during the current COVID-19 lockdown. Here are the latest details landlords and tenants need to know to start their negotiations.

Retail and commercial tenancies

A temporary protection from eviction is now available for retail and commercial tenants impacted by COVID-19 or the State Government’s response to it.

If, between 13 July 2021 and 20 August 2021, an “impacted lessee” breaches the lease by failing to pay rent or outgoings or by failing to be open for business during the hours specified in the lease, the landlord can’t take enforcement action against the tenant for the breach without first engaging in mediation with the tenant.

An "impacted lessee" is a retail or commercial tenant who:

• qualifies for a “Micro-business COVID-19 Support Grant”, a “COVID-19 NSW Business Grant” or a “Job Saver Grant”; and
• had a turnover in the 2020–21 financial year of less than $50 million.

An impacted lessee must give the landlord a statement to the effect that they are an impacted lessee and evidence to prove this. The impacted lessee may give this information before, or as soon as practicable after, the breach occurs. The impacted lessee must give the information within a reasonable time after the landlord requests it.

A landlord can only take enforcement action in the event that mediation fails to resolve the dispute. Landlords will also have to obtain a written certificate from the Registrar of Retail Tenancy Disputes confirming that mediation has failed to resolve the dispute before any enforcement action can be taken.

The new rules apply to retail shop leases and non-retail commercial leases. The new rules do not apply to:

• agricultural leases (entered into under the Agricultural Tenancies Act 1990); and
• leases entered into after 26 June 2021, unless that lease was pursuant to an option to extend or any renewal of an existing lease on the same terms as the existing lease.

A landlord's right to take enforcement action on other grounds not related to the economic impact of the COVID-19 pandemic are still preserved.

Comment: While the regulations aim at providing protection to tenants by restricting the landlord's ability to take enforcement action, unlike the mandatory code of conduct introduced in March 2020, the regulations do not impose on landlords mandatory rent reductions and deferrals. It appears that any agreement for a concession and the amount of any rent reduction, waiver, or deferral will be left to the parties to decide between them.

Although this latest support package's scope is not as wide-ranging as the mandatory national code of conduct introduced in the early part of 2020 for commercial tenancies, it does appear to encourage landlords and tenants to engage in discussions over rent reductions or deferrals to avoid mediation.

Residential tenancies

A substantial rent reduction and protection from eviction is now available to NSW residential tenants impacted directly by COVID-19 or the State Government’s response to it.

Between 14 July 2021 and 11 September 2021, if a tenant is an “impacted tenant” and gives a notice to the landlord to that effect, they will be able to pay as little as 25% of their rent without being evicted from their home.

In broad terms, an impacted tenant is a tenant who is a member of a household in which the weekly household income for the household has been reduced by at least 25% because one or more of the rent-paying members of the household:

• has lost employment or income due to “the impact of the COVID-19 pandemic; or
• had a reduction in work hours or income as a result of the COVID-19 pandemic; or
• has had to stop working, or materially reduce their work hours, because:
  • they, themselves, are ill with COVID-19; or
  • another member of the household is ill or they have to take care of a family member who is ill with COVID-19.

Provided an impacted tenant continues to pay at least 25% of the rent usually payable, the tenant is protected by a 60 day moratorium on eviction for failure to pay rent or any other breach of their tenancy agreement under section 87 of the Residential Tenancies Act 2010 (NSW).

Land tax concession

The NSW State Government has also announced a land tax concession to residential landlords equal to the value of rent reductions granted to their tenants up to 100% of their 2021 land tax year liability or a grant of up to $1,500 for residential landlords not subject to land tax.

Details of how these can be claimed are expected to follow.

Comment: Residential landlords and tenants are recommended to have open and honest discussions as to the actual financial impact on the tenant of the current public health restrictions in order to agree a suitable amount of rent to be paid for the duration of the current lockdown. Residential landlords who agree to reduce the rent should then consider applying for a grant of up to $1,500 or land tax reductions, depending on their circumstances.