Queensland passes rent relief code
The Queensland government has passed new legislation giving legal effect to the national mandatory code announced by the federal government.
Passed on 28 May 2020, the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld) applies to retail shop leases or leases for carrying on the business of the tenant.
Under the Queensland code, the lease, agreement to lease or other agreement must have been binding on the tenant on 28 May 2020.
However, the Queensland code only applies to commercial tenants whose annual turnover was less than $50 million in FY18–19 or is likely to be less than $50 million in FY19–20.
The move is in line with the federal government’s announcement in April of a mandatory code for the provision of rent relief by commercial landlords to tenants.
In a blog, Michael Donnelly of Cooper Grace Ward Lawyers said that under the Queensland code, landlords must negotiate with tenants in accordance with any requests received and tenants may ask landlords in writing to negotiate the rent payable under (or other conditions of) its lease.
Further, within 30 days of receiving sufficient information from its tenants (see further discussion of this below), landlords must:
- submit an offer to the tenant that:
- has regard to:
- the reduction in turnover of the business carried on by the tenant at the premises between 29 March 2020 and 30 September 2020;
- the tenant’s financial and other circumstances;
- the extent to which a failure to reduce the rent payable would compromise the tenant’s ability to otherwise comply with its obligations under the lease;
- the landlord’s financial position, including any financial relief provided as part of any COVID-19 response measure (for example, payroll tax relief);
- any reduction in (or waiver of) any amount payable on account of land tax, local government rates, statutory charges, insurance premiums or other outgoings.
- offers a rent reduction that:
- provides for at least 50 per cent of the rent reduction to be in the form of a waiver;
- provides that any deferred rent will be repaid as follows:
- not until after 30 September 2020;
- amortised over at least two years (but not more than three years);
- without any interest charges or other fees being payable, unless the tenant fails to comply with its repayment obligations in respect of the deferred rent; and
- that (notwithstanding what the lease might say) the landlord can continue to hold any security deposit or bank guarantee until such time as the deferred rent is repaid in full.
- offers to extend the term of the lease equivalent to the period for which rent is waived or deferred on the same terms and conditions as the existing lease, unless the landlord:
- has already agreed to lease the premises to someone else at the end of the term; or
- requires the premises for its own commercial purpose.
- put forward the landlord’s proposal in respect of any other changes requested by its tenant (to lease conditions other than the payment of money).
“If a temporary rent relief agreement is agreed and thereafter a ground on which it was based changes (for example, the tenant’s turnover does not increase as significantly as expected or its income decreases substantially), the tenant can seek a further reduction before 30 September 2020, and the same process will apply,” Mr Donnelly said.
“Similarly, if a tenant’s financial circumstances improve before 30 September 2020, a landlord can seek to renegotiate the agreement. However, there is no obligation on tenants to disclose this.
“Another restriction imposed on landlords is that they cannot increase or give effect to any increase in rent (for example, pursuant to a standard rent review clause) until after 30 September 2020 (or seek to backdate thereafter). This does not apply to rent payable by reference to turnover.”
The Queensland code will expire on 31 December 2020 barring any future announced extensions by the Queensland government.