Landlords with protected commercial leases

What are my obligations?

Tenants who are eligible under  COVID-19 Disease Emergency (Commercial Leases) Act 2020 (the Act) and are in need of rent relief, will need to negotiate new terms with you.

As a landlord you are required to:

  • negotiate with your tenant rent to be paid
  • not engage in misleading or deceptive conduct
  • provide accurate and sufficient information to enable negotiations, and
  • not use or share any information provided to you except where expressly allowed or beyond the purpose it is provided.

Rent

How to work out reducing rent

Both parties need to negotiate reducing the rent however they must be in line with the Act and the National Code .

Rent reductions should be:

  • in proportion to the reduction in turnover of the tenant’s commercial operations
  • in the form of a waiver or deferral, with at least 50% to be in the form of a waiver.

Deferred rent will be paid to the landlord in instalments until the end of the lease or within 24 months.

You should consider your financial circumstances (financial hardship) as well as the tenant’s when negotiating reductions in rent.

Waiving the rent

Rent waivers mean that the landlord waives the rent entirely and the tenant does not have to pay it at a later date, or accrue any debts or liabilities due to that non-payment.

You are required to offer a rental waiver to your tenant that is proportionate to the tenant’s reduction in trade during the financial hardship period and subsequent recovery period.

Rental waivers should be no less than 50% of the agreed rent reduction. However, your tenant may waive their rights to the 50% waiver by an agreement with you.

Your financial position is also a factor in calculating the rent reduction. It is expected that both parties negotiate acceptable terms.

Deferring the rent

The tenant pays deferred rent in instalments until the end of the lease or within 24 months (whichever is greater). You may also negotiate this term with your tenant.

Can I increase the rent?

No. From 1 April 2020, a landlord cannot increase the rent, unless agreed by the tenant, until the end of the financial hardship period. This is even if the rent was due to increase due to a rent review defined by the agreement. The rent review may be undertaken during this period, but will not take effect until after the financial hardship period, currently 30 September 2020.

A rent increase, that is deferred during the financial hardship period, cannot create a debt that the tenant has to repay later.

Fees and charges

Can I charge extra fees?

No. You cannot charge fees, interest or any other charges for any rent waived or deferred.

Passing on to the tenant a portion of relief you have received

You may have received benefits from being a landlord, such as a reduction in statutory charges (for example land tax, council rates, or insurance). You are required to pass this on to the tenant in an appropriate proportion under the terms of the lease.

Waiving fees when a tenant is unable to trade

If possible, you can waive any other expenses payable by the tenant as part of their lease agreement, for the period that the tenant is unable to trade.

You also have the right to reduce services that you provide during this time.

Negotiating repayments of other expenses (not rent)

If you negotiate any other repayments with the tenant, the repayment period must be over an extended and agreed period of time to avoid placing an undue financial burden on the tenant.

Repayments should not be required to start until:

  • after the COVID-19 pandemic has ended, or
  • the existing lease expiring, and
  • taking into account a reasonable subsequent recovery period. The Government will determine the pandemic end date.

Can I use the tenant's bond to cover money owed?

No. You cannot draw on the tenant’s security deposit (bond) for the non-payment of rent during the financial hardship and a recovery period.

Leases

The tenant wants to extend the lease. Am I obliged to extend?

If the tenant asks, you must extend the period of the lease on similar terms until the end of the financial hardship period. This is intended to provide the tenant additional time to trade, on existing lease terms, during the recovery period after the COVID-19 pandemic ends.

This does not apply if you:

  • have already entered into, or agreed to enter into, another lease agreement in relation to the premises
  • intend to occupy the premises for business purposes.

Can I evict the tenant during the financial hardship period?

From 1 April 2020, a landlord cannot terminate a commercial protected lease agreement due to failure to:

  • pay rent, fees or charges
  • meet sales or turnover based performance criteria
  • pay outgoings
  • be open during the days or hours specified in the lease.

Mediation and dispute resolution

If you are unable to reach an agreement with your tenant you can apply for mediation services through CBOS.

You will need to demonstrate that you have attempted to negotiate and supplied relevant information to assist with negotiations.

CBOS will engage an independent mediator and you will be required to contribute to the costs associated.

Apply for mediation

If you are unable to complete the application form online, you can download and complete the Commercial lease mediation application form (DOCX, 94.7 KB) and email or post to CBOS:

Need more help?

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Related information

Updated: 03 Jun 2020