Retail and Other Commercial Leases (COVID-19) Regulation 2021

In response to the latest COVID-19 outbreak, the New South Wales government has released a new Regulation in respect of commercial leases.

The Retail and Other Commercial Leases (COVID-19) Regulation 2021 came into effect on July 14, 2021.

Similar to the Retail and Other Commercial Leases (COVID-19) Regulations 2020 (Nos 1, 2 & 3), the Regulation limits the exercise of certain rights by landlords (“prescribed actions”) under certain commercial leases (“impacted leases”) for certain breach of the lease (“prescribed breaches”) during a certain period (“prescribed period”).

However, a significant difference is that it does not provide for any rent relief.

The new Regulation applies if:

1. The lease is a retail or other commercial lease entered into prior to June 26, 2021, or an option lease or other lease renewal on same terms entered into after that date;
2. The tenant qualifies for certain government grants available due to the impact of COVID-19, being the Micro-business COVID-19 Support Grant, the COVID-19 NSW Business Grant, or the Job Saver Grant;
3. The tenant’s turnover in the 2020-2021 financial year was less than AU$50 million; and
4. The breach is failure to pay rent or outgoings or failure to open for business.

The prescribed period commenced July 13, 2021 and expires August 20, 2021.

The Landlord cannot take action against the tenant in respect of the breach, (e.g. drawing on any security provided by the tenant or terminating the lease) unless the landlord has attempted to resolve the breach by mediation and that has failed.

To read the Regulation, click here.

Land tax rebate

As noted above, the Regulation does not provide for any rent relief.

Similar to 2020, the New South Wales government has introduced a land tax rebate for landlords who reduce the rent for eligible commercial tenants experiencing financial distress due to COVID-19.

The land tax rebate is available if the following criteria are met:

1. the landlord waives rent during the period July 1, 2021 - December 31, 2021; and
2. the tenant has annual turnover less than AU$50m and qualifies for the Micro- business COVID-19 Support Grant, the COVID-19 NSW Business Grant, or the Job Saver Grant.
   Landlords can recoup waived rent by way of reduction in land tax. Landlords can claim up to 100% reduction in land tax. Under the 2020 programme, the reduction was capped at 25%.

The reduction is applied as a refund of land tax paid or a reduction in unpaid land tax.

Further information can be obtained from Revenue NSW website: click here

Please do not hesitate to contact Dentons if you have any questions or to discuss.