COVID-19 Leasing Regulations – the latest from the Supreme Court
The new COVID-19 leasing regulations set out the general principles of how landlords and tenants should share the costs of the current downturn in many businesses. However, it remains unclear how those principles should be applied and what happens if the landlords and tenants can’t agree.
Supreme Court Decision
The recent Supreme Court decision of Sneakerboy Retail Pty Ltd v Georges Properties Pty Ltd has given us some guidance on how the regulations will be interpreted by the Courts. Whilst this is a NSW Supreme Court case and applies to the NSW regulations, it shows how the Courts are likely to approach similar rental regulations in Victoria and nationally.
The Court confirmed that it may compel parties to negotiate in good faith or attend a mediation, but it will not make orders varying the terms of a lease. So it appears parties are obliged to negotiate and mediate, but not to agree to any particular outcome.
COVID principles require landlords to grant proportionate relief to tenants based on the reduction in the tenant’s turnover during the COVID-19 pandemic period.
The Court confirmed the turnover will include turnover generally, including turnover from the leased premises, and other premises, as well as turnover from other sources, such as internet sales.
The Court emphasised that each circumstance will be different and the COVID regulations would require agreements that are tailored. Although this emphasis is of little help if an agreement is not reached.
The Court also addressed the prohibition on landlords from terminating leases and enforcing other rights. The Court confirmed that the prohibition is not intended to stop landlords from terminating a lease during the relevant period only (currently up to the 31 December 2020). Rather, it is intended to prohibit landlords from taking prescribed actions at any time (even after expiry of the prescribed period) if the relevant circumstances occurred during the prescribed period.
So landlords planning on terminating a lease as soon as January 2021, will need to think carefully before they take action.
If you need assistance with negotiating rent relief or understanding your obligations under the COVID-19 Regulations, please contact a member of Taurus Legal Management on (03) 9481 2000 or at firstname.lastname@example.org