COVID-19 Leases – Pandemic Period

Posted on Sep 11, 2020 by Terry Morgan   |   Categories: Commercial & Business Law, Commercial & Retailing Leasing

A recent decision of the Supreme Court of NSW has clarified certain important aspects of the legislation enacted to address the effects of the COVID-19 pandemic on commercial leases and will provide welcome guidance to landlords and tenants in NSW trying to navigate those laws.

 

The COVID-19 rent relief package was announced by the Federal Government on 3 April 2020 but there was a 20 day delay before the Federal Government’s COVID-19 Regime was implemented in NSW by way of enactment of Regulations.  As a result of this delay there was quite a deal of confusion regarding the legal position for the period between 1 April and 23 April, and in fact many landlords demanded full rent for that period.

 

In the case of Sneakerboy Retail Pty Ltd v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141 (26 August 2020) the Court determined that the legislation has retrospective effect from at least 1 April 2020.  Therefore, even though the Regulations commenced on 24 April 2020, this case means that tenants may obtain the benefit of rent relief under the Regulations from 1 April 2020 onwards.

 

The case also considered a number of other very important questions regarding the effect and application of the Federal Government’s COVID-19 Mandatory Code of Conduct and the NSW Regulations.

 

One such issue that the Court determined was the question of the “tenant’s trade” when determining any adjustments to rental.   It was determined that the expression “tenant’s trade” relates to the whole of the turnover, including online sales, that are generated by a business even where that business may operate from several different sites. The Court determined that it is the whole of the income of the Lessee where the Lessee, for example, may operate from a number of different sites and may also conduct online sales. The “tenant’s trade” is not limited to any particular site operated by that business.

 

Obviously if a business only operates from one site, such as a franchisee, then it is only the income of that franchisee that is taken into account to determine “tenant’s trade”. However, if the tenant in that one site also conducts online sales those online sales are to be treated as part of the “tenant’s trade” for the purpose of determining any reduction in that “tenant’s trade”.

 

This will likely not be the last case to consider these laws.  It is certainly a complex and evolving area of law so landlords and tenants that are subject to the laws should monitor things closely and seek legal advice on their position.