As hotels, pubs and clubs across Queensland start to re-open following the government’s announcement to lift certain restrictions, Queenslanders are flocking to enjoy ‘a parmy and a pint’ at their local after more than two months in lockdown. But as more and more publicans welcome happy patrons back to their venues, there is no doubt the hospitality industry will take several months to recover from the effects of the pandemic.
In addition to staffing and employment issues, another major concern for hospitality businesses has been the question of rent relief and resolving lease disputes. An ABS study conducted in March 2020 reported that one in ten Australian hospitality businesses were forced to stop trading altogether during this crisis, leaving many businesses unable to pay rent.
And while several landlords and tenants have already been in discussion regarding deferring or discounting rent across the State, there has been some inconsistency in the processes for raising, investigating and resolving commercial leasing disputes. However, at the end of May, this changed. Here’s what you need to know.
On 28 May 2020, the Queensland Government released the long awaited Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Regulation). The purpose of the Regulation is to give effect to the Commonwealth Government’s National Cabinet Mandatory Code of Conduct and to establish a process for resolving rent relief disputes between parties during the COVID-19 emergency.
The Regulation applies to an “Affected Lease”, which is basically a lease where:
The Regulation applies for a limited “Response Period” between 29 March 2020 and 30 September 2020.
A tenant under an Affected Lease can request that its landlord re-negotiate the rent and certain other conditions of its lease for the duration of the Response Period.
Once the tenant makes a request to re-negotiate rent, the parties must exchange the following information:
According to Government guidelines:
Information that could be shared by a tenant:
Information that should not be requested:
Within 30 days after the parties have exchanged sufficient information, the landlord must make an offer to reduce the rent under the lease and proposed changes to any other lease terms.
The Landlord’s offer must:
Once the offer is received, the parties must cooperate and act reasonably and in good faith in negotiating a reduction in the amount of rent payable for the Response Period.
If the parties are in dispute and cannot reach agreement on the rent reduction, then either party may apply to the Small Business Commissioner for a mediation.
If the dispute is not resolved at mediation, then either party can apply to have the matter determined by the Queensland Civil & Administrative Tribunal.
Where part of the rent is deferred (rather than waived) then:
If the tenant’s financial circumstances change after an agreement is reached, then the tenant is entitled to make a further request for a rent reduction. However, the landlord is not obliged to offer a rent waiver as part of any further negotiation (i.e. any rent relief would only be a rent deferral).
If a tenant fails to pay rent or outgoings during the Response Period, a landlord is prohibited from taking the following Prescribed Actions in response to those breaches:
However, the Regulation does not prohibit a landlord from taking action in respect of any pre COVID-19 breaches. Similarly, if the parties reach agreement on rent relief under the Regulation, and the tenant then breaches that agreement, the landlord make take action in relation to that breach.
The Regulation prohibits a landlord from increasing the rent payable during the Response Period. So if a lease has an annual rent review, the landlord may still review the rent, but any increase cannot take effect until 1 October 2020.
The release of the Regulation hopes to offer certainty to parties, by providing a manageable path to achieve outcomes and resolve disputes. We understand that these are challenging times for all parties and whether you are a landlord or a tenant, you can contact us to discuss your position and concerns and options available to you.
"The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication."