Snapshot: NSW Government tweaks ‘Impacted Lessee’ status

Published: 30 September 2021

Written by: Duane Keighran and Sara Ibrahim

The new amendments

Recent amendments to the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (as reviewed by us here) have clarified the treatment of payments received by tenants by way of government grants and provide further clarity around what is to be considered in any further negotiations between a landlord and tenant.

The Retail and Other Commercial Leases (COVID-19) Amendment (Eligibility) Regulation 2021 (NSW) commenced on 24 September 2021 (the Amendment Regulation).  We establish the effect of these amendments on both landlords and tenants below.

Assessment of money received from Government grants

A Commonwealth COVID-19 Disaster Payment (the Commonwealth Disaster Grant) will not be considered when assessing whether or not a tenant would have otherwise qualified for one of the available NSW grants (and qualification for one or more of the NSW grants is a necessary requirement for a tenant to be considered an ‘impacted lessee’).  The explanatory note to the Amendment Regulation does not specifically confirm if the Commonwealth Disaster Grant must also be considered, and in fact, only refers to the inclusion of “certain New South Wales payments or grants.”

A tenant is now able to be assessed as an impacted lessee regardless of whether it has received the Commonwealth Disaster Grant – but payments received pursuant to the Micro-Business Grant, the Business Grant, or the JobSaver Payment will be included in a tenant’s turnover calculations.

What are the further changes?

As noted above, the amendments made provide greater certainty for impacted tenants by clarifying the application of assessing Government grants received. The amendments also provide further power for landlords to require evidence on whether or not a tenant remains an impacted lessee during the prescribed period (and by extension – what relief a landlord is required to provide).  This allows a landlord the ability to monitor a tenant’s change in trade and therefore may reduce a landlord’s requirement to provide relief.  A landlord may not make a request for further evidence more than once in any two week period.

Either party may make a subsequent request to renegotiate the current terms of the lease. While this may not be necessarily common, a tenant may do this if it wishes to finalise any waivers or deferrals which have been previously negotiated, and a landlord may consider requiring a renegotiation after a tenant’s turnover has improved.

What do the new parameters for re-negotiation look like?

The Amendment Regulation sets out provisions to be adhered to when assessing any further tenant relief (or indeed, the discontinuation of such relief). The current requirements include:

• NSW based grants (as confirmed in the explanatory note to the Amendment Regulation) that are made to a lessee are to be treated as if it were part of the trade or turnover of the lessee;

• the landlord is now not required to reduce rent for any periods where the lessee is not an impacted lessee; and

• a landlord’s entitlement to include terms which provide that a negotiated rent reduction will not apply at times during which the lessee ceases to be an impacted lessee.

The overall impact

The new amendments are very much designed to facilitate further interaction between a landlord and tenant so that the real impact of COVID-19 is used to assess a tenant’s turnover.  This is achieved by assessing the relevant NSW grants as turnover, and also allowing flexibility in terms of rental relief being based on a tenant’s status on a rolling basis.   This should provide greater transparency between the parties during the prescribed period and allow a more realistic assessment to be used as the basis for any relief granted.