The Queensland Government has issued the long-awaited regulations relating to rent relief for retail shop leases and commercial leases to SMEs during the COVID-19 pandemic.
This article is a snapshot of the Regulations. For more detailed discussions, you can read our articles titled Part 1 – Queensland government provides certainty for landlords and tenants: Leasing applicability and negotiation principles and Part 2 – Queensland government provides certainty for landlords and tenants: Dispute resolution processes.
The period during which rent relief under the Regulations will apply is 29 March 2020 to 30 September 2020 (the Relief Period) and only applies to tenants who are eligible for, or have obtained, assistance under the JobKeeper Scheme.
Parties to affected leases must co-operate, and act reasonably and in good faith during relief negotiations and, as part of those negotiations, tenants must provide sufficient information (including financial information) to a landlord to evidence their entitlement to any relief.
Assuming entitlement, landlords must offer rent relief to their tenants that is appropriate in the circumstances and 50% of any rent reduction offered must be by way of waived rent. The commencement of repayment of any deferred rent is prohibited until 1 October 2020 and, even then, only by way of amortisation of the deferred amount over a minimum of two years and a maximum of three.
A landlord is entitled to retain any Security under the lease, even after the end of the Term, for the purposes of securing repayment of the deferred rent. So this is a good time for to check expiry dates on bank guarantees!
Landlords are also required to offer a tenant an extension of the term of their existing lease that is equivalent to the period during which rent is waived or deferred. So if rent is waived or deferred for four months, the extension offered must be for four months. A tenant doesn’t have to accept this offer.
The agreement reached between the parties must be in writing. However, please note care should be taken in using email exchanges to evidence this agreement.
During the Relief Period it is important to note:
- landlords cannot take action against tenants who don’t pay rent/outgoings or open for trade: except in relation to certain limited circumstances, a landlord is prohibited from taking action against a tenant who fails to pay rent and/or outgoings, or who does not open for trade;
- scheduled rent increases are deferred: any scheduled rent increases are deferred from taking effect until 1 October 2020; and
- either party can re‑negotiate the initial rent relief agreement: if the circumstances of either party materially changes, the parties may re‑negotiate the rent relief initially agreed. That could be by way of further rent relief, or if the tenant’s circumstances have improved, a reduction in the original relief.
Importantly, the validity of any existing agreements relating to COVID-19 relief is not affected by the Regulations, even if those agreements are inconsistent with the Regulations. And parties are not prevented from entering into future agreements that are inconsistent with the Regulations should they choose to do so.
As expected, the dispute resolution processes under the Regulation are methodical and process-driven. A Small Business Commissioner has been appointed who will have the sole responsibility of dealing with disputes under the Regulation.