New COVID-19 economic support package opens door to rent reductions, land tax concessions for NSW landlords and tenants
A new economic support package aimed at helping NSW businesses and individuals during the current COVID-19 lockdown will give some land tax relief to eligible landlords, and prompt negotiations for possible rent reduction – although certain elements, such as implementation, are yet to be revealed.
Key elements of the COVID-19 economic support package
The main focus of this package is to provide extra financial support to individuals and business up to an overall amount of $5.1 billion, which includes protections and financial support to affected tenants and landlords. The property-related parts are:
- In the commercial sector, both commercial and retail landlords will be required to attempt mediation before recovering a security bond, or locking out, or evicting a commercial or retail tenant impacted by the Public Health Order restrictions.
- In the residential sector, a 60-day moratorium on eviction for rental arrears will apply until 11 September 2021 where a residential tenant suffers loss of income of at least 25% due to COVID-19 and meets a range of criteria.
- To assist landlords, the NSW Government will introduce a land tax concession for commercial, retail and residential landlords. This will allow landlords to claim a concession equal to the value of rent reductions granted to their tenants up to 100% of their 2021 land tax year liability.
- Residential landlords that agree rent reductions but who are not liable to pay land tax may apply for a grant of up to $1,500.
Next steps for NSW landlords and tenants
Although this latest support package's scope is not as wide-ranging as the mandatory national code of conduct introduced in the early part of 2020 for commercial tenancies, it does appear to encourage landlords and tenants to engage in discussions over rent reductions, and landlords to take advantage of a land tax concession or a grant in return.
Whether rent reductions will be mandated is not yet known. Landlords and tenants should prepare themselves to have open and honest discussions over the financial impact suffered by the parties due to the Public Health Order restrictions.
Any agreement for a rent reduction should be formally documented. Any permanent changes to a commercial lease (such as an extension of the term) will need to be documented by way of a variation of lease, which can be registered on title if the lease is registered or required to be registered.
The finer details of how this support package will be implemented are not fully known. It is likely the NSW Government will now enact legislative regulations to formally introduce parts of the support package in a similar manner as the national code of conduct. Applications for grants are likely to be administered via Service NSW and land tax concessions to be administered via Revenue NSW.
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