The Commercial + Retail Leasing National Code of Conduct: back to life in NSW

Date Published: 17 August 2021

Written by: Duane Keighran

The Retail and Other Commercial Leases (COVID-19) Regulation 2021, as previously reviewed by us here, was amended from 13 August 2021, and applies across New South Wales.  

The Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (the Regulation) has extended the prescribed period so that the originally enacted regulations apply until 13 January 2022.  The Regulation retains the restrictions on a landlord undertaking prescribed actions, and also re-introduces concepts the market first grappled within 2020.  

Principles from the National Code of Conduct re-introduced 

The Regulation allows the parties to a lease to renegotiate the rent and any other terms, by reference to the established principles of The National Cabinet Mandatory Code of Conduct introduced on 3 April 2020 (the Code).  As in 2020 and by way of reminder, one of the largest impacts is that the Code requires negotiation of rental waivers and deferrals on a percentage basis by reference to a tenant’s loss in revenue – with rental waivers constituting not less than 50% of the total rental reduction negotiated.  

Whilst the actual financial impact of the COVID-19 pandemic needs to be considered in any negotiations, parties to a lease are reminded that the established principles of the Code must also be adhered to.  The market will be generally familiar with the requirements of the Code, and therefore we do not propose to repeat its contents in detail.  

Strict requirements for application of the Regulation  

In addition to negotiating in good faith and in accordance with the established leasing principles of the Code, parties must commence negotiations within 14 days of receiving a request from the other party to do so (or another date agreed between the parties).  Tenants must also provide evidence to the landlord that it is in fact an impacted lessee. If a tenant does not comply with any one of these requirements, a landlord is taken to have complied with the strict requirement to renegotiate.  

Resolving disputes 

The direction to first attend mediation (which fails to resolve the dispute) prior to taking any prescribed action under an impacted lease remains, however as in 2020, the tribunal or a court are again directed to consider the leasing principles of the Code whenever making a decision that relates to recovery of possession, termination of a lease, or the exercise or enforcement of another right under an impacted lease. 

Are there any built-in Landlord reprieves? 

Commercial and retail landlords are directed to provide the above relief, however it is at least arguable that landlords have not received the same level of support from the Government that tenants have.  In addition to the land tax relief for landlords mentioned in our previous article, there has now been a new fund of $40 million announced to provide support for landlords.  Details of the fund are unclear at this stage, except to state that it will be for ‘small commercial and retail landlords who provide rental waivers.’