The Queensland Government released the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Amendment Regulation 2020 (Amendments) in the nick of time. The Amendments regulate those leases where the tenant is still impacted by the COVID-19 pandemic and provide an extension of certain rent relief and protections for tenants for the period 1 October 2020 to 31 December 2020.
With heightened eligibility requirements, many leases may no longer be entitled to relief and the protections of the Regulation and those that do meet the eligibility requirements will only be entitled to rent deferrals. Waivers are not mandated for the extension period.
The emergency COVID-19 Regulation for retail leases
At the time of its initial commencement in late May, the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 applied to "affected leases" during the "response period", being the period from 29 March 2020 to 30 September 2020.
Critically, the Regulation provided a framework for negotiating COVID-19 related variations to these lease arrangements and restricted the ability of a landlord to enforce the lease during the response period.
Instead of varying the "response period", the Amendments introduce an "extension period", which runs from 1 October 2020 to 31 December 2020. The Amendments also require a tenant to meet an increased eligibility threshold.
Do you have an "affected lease" during the extension period?
During the extension period, a lease is only an "affected lease" if the tenant is eligible for the updated JobKeeper scheme which applies for the period 28 September 2020 to 4 January 2021.
The JobKeeper scheme for this period requires (amongst other things) tenants to show an actual reduction in turnover for July to September 2020 when compared to the same quarter in 2019. It is no longer sufficient for tenants to "anticipate" a reduction in turnover, as was the case initially.
If you are a Landlord assessing a request for the extension period, you should request:
- confirmation that the tenant's application for the updated JobKeeper scheme has been accepted by the ATO; and/or
- the tenant's actual turnover information for July to September 2020 and the same period in 2019 to demonstrate the requisite reduction in turnover (which is generally 30% for companies under $1 billion in revenue).
It is not necessary that the tenant actually apply for JobKeeper. This is different to the position in other States.
What if your lease is not an "affected lease" during the extension period?
If your lease does not meet the eligibility criteria for the extension period, then the Regulation no longer applies to your lease.
If this is the case, the default position applying from 1 October 2020 (subject to any other agreement between the parties) is that:
- landlords and tenants may enforce the lease in accordance with its terms;
- full rent is payable by the tenant;
- landlords may take enforcement action pursuant to the lease for any breach (including calling upon security, termination, charging interest on arrears); and
- any rent relief or other protections or prohibitions set out in the Regulation will cease to apply.
Repayments of deferred rent from the "response period" may have also commenced, as 1 October 2020 was the earliest date that parties could agree for the deferred rent repayments to start.
Rent reviews are still on hold until 1 January 2021.
Importantly the Amendments don't affect eligibility during the response period – ie. 29 March 2020 to 30 September 2020. In addition, the Amendments confirm that variations entered into before or after the commencement of either the initial Regulation or the Amendments remain valid. Further, landlords and tenants who have not agreed waiver and rent reductions for the response period now have until 31 December 2020 to finalise those arrangements either by agreement or mediation/dispute resolution under the Regulations.
Your lease is an affected lease during the extension period – what now?
For leases that are "affected leases" during the extension period, the Amendments have changed the way the relief, powers and obligations under the Regulation apply to your lease from 1 October 2020:
Next steps for Queensland tenants and landlords
It is time for tenants and landlords to communicate and share information to determine whether a lease remains an "affected lease" for the purposes of the extension period according to the updated eligibility requirements. If the lease is no longer an "affected lease", landlords and tenants will have to consider next steps to navigate a return to 'business as usual'.
If you are a party to an "affected lease" during the extension period, you may need to enter into a new variation of lease to navigate the Amendments and Regulation. All variations will need to be finalised (including by mediation) by the end of the year.
If you need assistance with preparing variations that are consistent with the Regulations and Amendments, our team is here to help.