What does the extended lockdown in NSW mean for commercial landlords?

The New South Wales Government has announced a new economic support package to assist businesses that are impacted by the extended restrictions and lockdowns in New South Wales. The package includes land tax concessions for eligible landlords and new regulations preventing landlords from taking action against a tenant in breach of their lease as a result of COVID-19 restrictions without first mediating the dispute.

Land tax relief

As part of the new economic support package, which includes support payments and grants for businesses that meet certain eligibility criteria, landlords who provide rent relief to financially distressed tenants of commercial premises that are subject to land tax may be eligible for land tax relief of up to 100%.

A landlord of commercial premises will be eligible if:

1. Their tenant has an annual turnover of up to $50 million and is eligible for the 2021 micro-business or small business support grants and/or the JobSaver scheme;
2. The commercial tenant is in financial distress as a result of COVID-19 (that is, the tenant has a reduction in turnover compared to a previous comparable period of 30% or more);
3. The landlord reduces the rent of the affected tenant for any period between 1 July 2021 and 31 December 2021; and
4. The landlord does not require the tenant to pay back the rent reduction amount at a later date.

Landlords required to mediate before taking action against tenants in breach

The NSW Government has also announced that landlords of commercial and retail premises will not be able to take certain prescribed actions against tenants affected by the COVID-19 restrictions (an "impacted lessee") including recovering a security bond, or locking out or evicting a tenant, until first attempting a mediation.

The new regulation appears in the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW), which commenced on 14 July 2021 and will remain in effect until 20 August 2021.

A lessee will be an "impacted lessee" if they qualify for one or more of the 2021 micro-business or small business support grants and/or the JobSaver scheme, and the tenant's business had turnover of less than $50 million for the 2020/2021 financial year.

While the language of the new regulation is similar to previous versions of the regulation, and the intention appears to be to encourage landlords and tenants to negotiate their lease arrangements, including rent, the regulation does not require landlords to provide rent relief to impacted lessees.

Landlords who do agree to rent reductions, or other changes to their tenant's commercial lease, should ensure the agreement is documented in a formal variation of lease. Lander & Rogers' commercial leasing and dispute resolution experts are available to assist landlords and tenants with their negotiations over the coming weeks of Sydney's lockdown.

For a complete summary of the 2021 land tax relief measures, head to the Revenue NSW Guideline.

For more information on the 2021 business support payments and grants available in NSW, head to the Service NSW website.

Author: Bonnie-Anne Talese, Lawyer.