Queensland has now enacted the principles of the Federal Government’s Mandatory Code of Conduct for Commercial Leasing. The Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (the regulation) came into effect on 28 May 2020. This regulation implements the National Cabinet mandatory code of conduct – SME commercial leasing principles during COVID-19 (the Code). We have summarised some key points for tenants and landlords below:
Does it apply to me?
The Code and Regulation apply to ‘Affected Leases’ An Affected Lease is:
- a retail shop lease; or
- a prescribed lease (a lease, other than a retail shop lease, under which the leased premises are to be wholly or predominantly used for carrying on a business); and
- on the commencement the lease, or an agreement to enter into the lease, is binding on the lessee, whether or not the lease has commenced; and
- the lessee under the lease is an SME entity (annual turnover of up to $50 million); and
- the lessee under the lease, or an entity that is connected with, or an affiliate of, the lessee responsible for, or involved in, employing staff for the business carried on at the leased premises, is eligible for the Jobkeeper scheme.
However, an Affected Lease does not include—
- A lease under which premises are to be used wholly or predominantly for a farming business under the Farm Business Debt Mediation Act 2017, schedule 1; or
- A lease, permit, license or sublease under the Land Act 1994, unless—
- it is a sublease of premises under a lease that has a rental category of 13 or 16 under that Act; and
the sublessor under the sublease is not a government leasing entity within the meaning of the Land Regulation 2009, section 30(3).When does the Regulation and the Code Apply? The Code is given effect, and the regulations apply to, lease arrangements between 29 March 2020 and 30 September 2020.
What does this mean for my lease?
During this period, businesses with affected leases:
- may not be evicted or have their lease terminated for non-payment of rent or outgoings;
- must have rent reduced in proportion to their lost turnover (at least 50% of the rent reduction offered must be in the form of a waiver, leaving the rest to be deferred);
- may not have their rent increased;
- may not be penalised for reducing trading hours or not opening;
- may not have a claim made by their landlord on a bank guarantee or security deposit for unpaid rent or outgoings.
What Steps Should I Take?
Landlords and Tenants for all Affected Leases should start exchanging information and negotiating, seek legal advice and ensure their arrangements are formalised as necessary. Either party may commence negotiation of rent by notice in writing to the other party. The initiating party must supply information including, but not limited to:
- a clear statement about the terms of the lease the initiator is seeking to negotiate; and
- a statement by the lessee that demonstrates why the lease is an affected lease accompanied by supporting information and evidence, including:
- accurate financial information or statements about the turnover of the lessee’s business;
- information demonstrating that the lessee is an SME entity under section 5, having regard to any entities that the lessee is connected with, or an affiliate of;
- evidence of the lessee’s eligibility for, or participation in, the Jobkeeper scheme;
- information about any steps the lessee has taken to mitigate the effects of the COVID-19 emergency on the lessee’s business, including the details of any assistance being received by the lessee from the Commonwealth, State or a local government;
- in relation to a franchisor—information about any concession or benefit provided to or by the franchisor in relation to rent or outgoings for the premises occupied by the franchisee, and any undertakings to pass those concessions or benefits on to the franchisee.
Where can I get more information?
You can find out more via the following links:
- Access the legislation HERE
- Access the Code HERE
- Access the REIQ website HERE and toolkit HERE
- Access Business Queensland information for Tenants HERE and Landlords HERE
Where can I get legal advice?
As always, we are here to help. Please contact us on 5479 4733 or by emailing firstname.lastname@example.org if you need assistance with understanding the Regulation and the Code, negotiating with your Tenant or Landlord or formalising your arrangements.
Please note we no longer offer Estate Planning and Business Law as part of our legal services. We would be happy to refer you to one of our referral partners.