Commercial tenancies - COVID-19 response

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Commercial tenancy

COVID-19 commercial tenancy laws come to an end

The emergency period under the Commercial Tenancies (COVID-19) legislation ended on 28 March 2021. This means that the moratorium on evictions, freeze on rent increases and obligation to give rent relief no longer apply. However, some requirements continue even though the emergency period has ended.

The period during which an eligible tenant may make a request for rent relief or commence dispute resolution under the Commercial Tenancies (COVID-19) legislation has been extended until 60 days after the end of the emergency period, or 27 May 2021. This will allow more time for parties to resolve disputes about matters that arose during the emergency period from 30 March 2020 to 28 March 2021.

See the Small Business Development Corporation (SBDC) fact sheet for an explanation about the different requirements that applied for landlords and tenants during the emergency period and that apply after 28 March 2021.

Information for landlords and tenants

The protections in the Commercial Tenancies (COVID-19) legislation have helped to provide stability in the commercial tenancy market over the past year.  With the end of the emergency period, landlords and tenants are encouraged to continue to work together.

Read on for further information about the Commercial Tenancies (COVID-19) legislation and what the end of the emergency period means for landlords and tenants.

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Terms we use on this page

Commercial Tenancies (COVID-19) legislation is the Commercial Tenancies (COVID-19 Response) Act 2020 (WA) and the Commercial Tenancies (COVID-19 Response) Regulations 2020 (WA).

Emergency period (for the purpose of the Commercial Tenancies COVID-19 legislation) is 30 March 2020 to 28 March 2021.

WA Code is the mandatory code of conduct set out in the Commercial Tenancies (COVID-19 Response) Regulations 2020 (WA).

Small commercial lease is a:

  • retail shop lease as defined in the Commercial Tenancy (Retail Shops) Agreements Act 1985 (CTA Act); or
  • a lease where the tenant is a small business as defined in the Small Business Development Corporation Act 1983 (SBDC Act);
  • a lease where the tenant is an incorporated association as defined in the Associations Incorporation Act 2015 (AI Act); or
  • another type of lease prescribed by regulation.

Eligible tenant is a tenant under a small commercial lease:

  • with an annual turnover of less than $50 million; and 
  • that qualify for the JobKeeper scheme or have experienced a decline in turnover of 30 per cent or more. Charities only need to show a 15 per cent reduction in turnover.

About COVID-19 rent laws

How do I know if the Commercial Tenancies (COVID-19) legislation applies to me?

The Commercial Tenancies (COVID-19) legislation applies to small commercial leases, however, some parts of the legislation, such as the WA Code, only apply to an "eligible tenant".

See the COVID-19 commercial tenancies fact sheet and negotiations flowchart for details about how the laws applied during the emergency period.

What protections does the legislation contain?

Protections in the Commercial Tenancies (COVID-19 Response) Act 2020 (WA) include a:

  • moratorium on evictions due to non-payment of rent;
  • freeze on rent increases;
  • restriction on penalties for tenants who do not trade or reduce their trading hours; and
  • prohibition on landlords making a claim on any form of security (e.g. a bank guarantee or security deposit) for the performance of the tenant’s obligations under the lease.

For the period from 30 March 2020 to 29 September 2020 these protections applied to all small commercial leases.  From 30 September 2020 to 28 March 2021 these protections applied only to eligible tenants.

What does WA’s Code require?

Under the WA Code, landlords and tenants are required to negotiate in good faith to reach temporary arrangements about rent relief to be provided by landlords for rent due during the emergency period. 

The WA Code only applies to "eligible tenants".

The WA Code requires landlords and tenants to act reasonably and in good faith with openness, honesty and transparency.

Commercial tenants and landlords must provide each other with sufficient and accurate information for the purposes of negotiations and not make onerous demands of one another.

The WA Code outlines a process for tenants to request rent relief. Landlords are required to:

  • offer relief at least proportionate to the reduction in turnover that the business has suffered; and
  • provide at least half of that rent relief as a waiver, with the rest to be either deferred or waived.

The WA Code also requires the parties to agree on how deferred rent is to be paid. This could commence at the end of the emergency period or at the end of the lease term (whichever is earlier). The minimum period for payment is 24 months or the length of the lease term (whichever is greater).

If rent is deferred, the WA Code requires a landlord to offer the tenant an extension of the lease that is equivalent to the period for which rent is deferred. Some exceptions apply.

Rent relief can be adjusted from time to time (but not more than once a month), to take into account variations in loss in turnover. For example, as a tenant’s business recovers and turnover increases, then rent relief should decrease by the same proportion.

The WA Code also deals with recovery of outgoings and expenses and confidentiality obligations. 

What if the landlord and tenant cannot reach an agreement under the WA Code?

If an agreement cannot be reached under the WA Code, the Small Business Commissioner can assist to resolve the dispute. Disputes can be taken to the State Administrative Tribunal if they cannot be resolved by the Commissioner.

See the COVID-19 commercial tenancies fact sheet and negotiations flowchart for details about how the new laws and WA Code apply.

If you are experiencing difficulties negotiating with your landlord or tenant please contact the Small Business Development Corporation for advice and assistance.

Now that the emergency period has ended

What happens to rent at the end of the emergency period?

The requirements of the Commercial Tenancies (COVID-19) legislation do not apply in relation to rent and other amounts payable under the lease after 28 March 2021. This means:

  • there is no further requirement for the landlord to provide rent relief to a tenant – the tenant will be required to pay the rent payable under their lease before any rent relief arrangements were put in place;
  • deferred rent may become payable; and
  • rent may be increased - but only under the terms of the lease.

A request for rent relief relating to the emergency period must made by a tenant by 27 May 2021. If negotiations about rent relief are not finalised the parties should seek assistance to resolve the matter by 27 May 2021 from the Small Business Commissioner or the State Administrative Tribunal. The SBDC website provides information on how to do this.

When and how can a landlord increase rent?

Landlords can increase rent in relation to all small commercial leases, but only in accordance with the terms of the lease. 

This means a landlord cannot ask for more rent than the amount set out in the lease agreement. Any rent reviews must also be conducted in line with the terms of the existing lease. This means that rent can only be reviewed at the time (on the rent review date) and on the basis (e.g. consumer price index, fixed percentage increase, etc.) set out in the lease. 

If the tenant was not an eligible tenant, rent could be increased in accordance with the lease from 29 September 2020.

The SBDC website provides general information on rent and rent reviews.

When is deferred rent payable?

The WA Code requires the parties to agree on how and when deferred rent is to be paid. Payment of deferred rent can commence now the emergency period has ended.

The landlord cannot require the tenant to pay the deferred rent as a lump sum. Payment of deferred rent is to be spread out over a minimum period of 24 months or over the remaining length of the lease - whichever is longer.

What happens with deferred rent and the extension of a lease?

In most circumstances, the landlord must offer the tenant an extension of the lease on the same terms and conditions and for the same period of time for which the rent was deferred during the emergency period. 

For example, if the landlord has agreed to defer the rent for a six month period, then the landlord must offer to extend the lease by six months.

The tenant doesn’t have to agree to this extension. In addition, the requirement to offer an extension of the term does not apply if it is inconsistent with a head lease, or other agreement or contract already entered into by the landlord with another person (for example, if the landlord has already entered into an agreement to lease the premises to a new tenant).

When can a landlord take action in relation to a breach?

The Commercial Tenancies (COVID-19) legislation prevented landlords from exercising certain rights under the lease during the emergency period. For example, terminating a lease for default, charging interest on arrears and enforcing a guarantee or bond.

After 28 March 2021:

  • the landlord can take action for a breach that occurs after the end of the emergency period; and
  • the landlord can take action for a breach that occurred during the emergency period provided the breach is not the subject of an unresolved dispute being dealt with by the Small Business Commissioner or the State Administrative Tribunal.

What happens on an assignment of lease?

Landlords and tenants should obtain legal advice regarding whether the obligation to repay the deferred rent will pass on to any assignee of the lease. This may depend on the wording of the rent relief arrangements and legal advice should be sought.

Disputes

What happens if there is an unresolved dispute or matter at the end of the emergency period?

If you have a dispute about something that arose during the emergency period that is not resolved and you wish to seek assistance, you will need to do this by 27 May 2021, either by applying to the Small Business Commissioner or State Administrative Tribunal (SAT). Either the landlord or the tenant can do this. 

This could include circumstances where a landlord or tenant might have started negotiations or discussions, but have been unable to reach a final agreement about rent relief to be provided for the emergency period. If you are a tenant and have requested rent relief from your landlord and have not received a response, it is important that you make a request for assistance from the Small Business Commissioner or SAT by 27 May 2021.

SBDC offers a free dispute resolution service.

The State Administrative Tribunal is able to determine disputes under the Commercial Tenancies (COVID-19) legislation, including disputes under the WA Code. Applications to SAT must be made by 27 May 2021 (unless the matter is being dealt with by the Small Business Commissioner and the Commissioner has issued a certificate in relation to the dispute). 

The Commercial Tenancies (COVID-19) legislation continues to apply until 28 March 2022, to allow time for disputes that occurred during the emergency period to be resolved.

Parties to a lease should make sure preparations to make a request to the Small Business Commissioner or application to SAT are well underway and lodged by the 27 May 2021 deadline. If an application is not made within the timeframe the right to do so will be lost.

Planning

What should landlords and tenants do to plan for the end of the emergency period?

Landlords and tenants are encouraged to continue to work together during the recovery period. They should start talking to each other as early as possible to avoid any future problems.

Tenants need to make sure they can meet any increase in their financial obligations. This will include the requirement to pay the rent under their lease agreement (i.e. the pre-emergency period rent) plus any deferred rent.

Information for landlords

What evidence can I ask the tenant to provide to prove their turnover was impacted during the emergency period?

The tenant must provide sufficient and accurate information to show the reduction of turnover during the emergency period (or a relevant part).

This could include:

  • sales reports from an accounting system;
  • copies of business activity statements (BAS).

The parties are not permitted to make onerous demands for information, for example:

  • future cash flow projections;
  • balance sheets, or profit and loss, or year to date financials;
  • bank balance details or statements; and
  • for financial information to be verified, audited or provided by a third party such as an accountant.

When does a tenant need to show that they are an eligible tenant?

A tenant will need to show that they were an eligible tenant for any time during the emergency period for which they wish to seek rent relief or other protections.

Eligibility for JobKeeper and the Commercial Tenancies (COVID-19) legislation are assessed periodically. The relevant periods are:

  • 30 March 2020 to 27 September 2020;
  • 28 September 2020 to 3 January 2021; and
  • 4 January 2021 to 28 March 2021.

For each period a tenant must show a relevant decline in turnover. The details of the turnover tests are set out in the WA Code. 

Visit the Australian Tax Office COVID-19 information for more details. 

Assessment of loss in turnover may be carried out more often (but not more frequently than monthly) in order to determine the amount of rent relief. This will allow for adjustment of that relief as a tenant’s financial circumstances change. Landlords and tenants should work together to agree on an appropriate timeframe that suits their circumstances. 

If the tenant’s circumstances changed and they became eligible at a point during the emergency period, they can make a written request to the landlord for rent relief. The landlord and tenant need to negotiate in accordance with the WA Code. 

A request for rent relief relating to the emergency period must made by a tenant by 27 May 2021. If negotiations about rent relief are not finalised the parties should seek assistance to resolve the matter by 27 May 2021 (from the Small Business Commissioner or the State Administrative Tribunal). The SBDC website provides information on how to do this.

Do I need to provide rent relief to a tenant who was not eligible for JobKeeper, but whose turnover had decreased by 30 per cent or more compared to same period last year?

Yes, the tenant was an eligible tenant because they have suffered the same loss of turnover applicable to qualify for JobKeeper. The code of conduct will apply (including the requirement to provide rent relief).

What can I do about terminating the lease if the tenant has become insolvent?

From 29 September 2020, a landlord has been allowed to take action to enforce their rights if a tenant is insolvent or bankrupt. 

Information for tenants

I was an eligible tenant during the emergency period, how do I use the WA Code to negotiate with my landlord?

Get your financial records ready to prove that you were an eligible tenant and show your loss in turnover and write to, or email, your landlord. Your landlord must respond within 14 days.

You must make this request by 27 May 2021 and it can only relate to loss of turnover your business suffered during the emergency period.

For practical advice on the best way to reach an agreement on rent relief under the WA code, visit the Small Business Development Corporation website.

My landlord has given me a long checklist of the documentation I must provide for them to consider my rent relief request. Under the WA Code, what proof do I need?

A tenant must provide sufficient and accurate information to demonstrate the reduction of turnover of a business during the emergency period (or a relevant part).

This could include:

  • sales reports from an accounting system;
  • copies of business activity statements (BAS).

The parties cannot make onerous demands for information, for example:

  • future cash flow projections;
  • balance sheets, or profit and loss, or year to date financials;
  • bank balance details or statements; and
  • for financial information to be verified, audited or provided by a third party such as an accountant.

The clearer the information provided, the easier it is for the landlord and tenant to reach a rent relief agreement.  If the landlord makes a reasonable request for further information or clarification, the tenant should provide this extra information as soon as possible.

I don’t qualify for JobKeeper, but I am struggling due to reduced turnover during the emergency period. Can I ask the landlord to consider offering rent relief?

If you have suffered the same level of loss used for the JobKeeper tests (30 per cent for businesses and 15 per cent for not-for-profits) then you are an eligible tenant, and can request rent relief under the WA Code in relation to the emergency period.

SBDC advice and assistance

The Small Business Development Corporation's website has useful information for small businesses including: 

Financial assistance

Additional information (external links)

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