New regulation for Commercial landlords and tenants affected by Queensland Covid-19

The information in this page is correct at 3 June 2020

Queensland’s response to Covid-19 Mandatory Code for retail shop and commercial leases

Summary: On 28 May 2020 Queensland passed a regulation to govern relations between landlords and tenants and provide stability and certainty moving forward. See bullet points below for details.

On 23 April 2020, the general Queensland COVID-19 Emergency Response Act 2020 (the Act) was passed to give effect to the federal Mandatory Code.

The Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation

The laws that commercial landlords and tenants have been waiting for is now current. It’s the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (the Regulation).

That will implement the National Cabinet decision in relation to good faith leasing principles set out in the National Code for “affected leases” in Queensland.

What is an “affected lease”?

  • it is a retail shop lease (under the Retail Shop Leases Act 1994) 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);
  • 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);
  • the lessee under the lease is a small and medium enterprise entity under the Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Rules 2020 (Cwlth), section 5; and
  • the lessee under the lease, or an entity that is connected with or an affiliate of the lessee and responsible for employing staff for the business carried on at the leased premises, is eligible for the Commonwealth’s JobKeeper scheme under the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cwlth), sections 7 and 8.

What the new Queensland regulation does / does not do:

  • does not prevent parties from entering into an agreement that is inconsistent with the obligations of lessors and lessees under part 2 of the Regulation, or affect the validity of an agreement entered into before the commencement, but preserves a party’s right to negotiate a condition of an affected lease;
  • requires the lessor and lessee under an affected lease to cooperate and act reasonably and in good faith;
  • prohibits a lessor under an affected lease, from taking a prescribed action (such as recovery, termination of possession, charging interest on unpaid rent) on the following grounds occurring wholly or partly during the response period: a failure to pay rent; a failure to pay outgoings; or the business carried on at the leased premises not being open for business during the hours required under the lease;
  • prohibits a lessor under an affected lease from increasing the rent payable by the lessee during the response period (except when worked out with reference to turnover);
  • provides for how re-negotiations of rent payable and other conditions are to be initiated and conducted;
  • imposes requirements relating to deferred rent;

The new regulation also:

  • provides that, subject to some exceptions, if rent under the lease is waived or deferred for a period, the lessor must offer the lessee an extension to the term of the lease, for a period equivalent to the period for which rent is waived or deferred, on the same conditions as those contained in the lease (except that the rentpayable during the extension must be adjusted for the waiver or deferral);
  • provides that, if a lessee under an affected lease is unable to operate a business at the premises for any part of the response period because of the COVID-19 emergency, the lessor may cease or reduce any services at the premises;
  • imposes an obligation of confidentiality on parties to an affected lease dispute or a small business tenancy dispute (each, an eligible lease dispute) not to disclose protected information, other than in specified circumstances;
  • imposes an obligation on parties to cooperate and act reasonably and in good faith in all discussions and actions associated with resolving an eligible lease dispute;
  • provides for the Small Business Commissioner to refer eligible lease disputes to mediation and establishes procedures for mediation;
  • provides for matters to be considered by a court or tribunal in the hearing and deciding of an eligible lease dispute;
  • provides a general exemption for an act or omission, on or after the commencement of the Act, of a lessee under a retail shop lease, a prescribed lease or other small business lease, if the act or omission is required under a COVID-19 response measure or a law of the Commonwealth or another State in response to the COVID-19 emergency; and
  • stays or suspends proceedings or actions for prescribed action in relation to affected leases that are started in the pre-commencement period but are unresolved, incomplete or not finalised prior to commencement of the Regulation.

Benefits and costs of implementation

The benefit of the Regulation is that it will protect lessees under affected leases from prescribed action during the response period, facilitate the renegotiation of these leases according to good faith leasing principles and provide the framework for dispute resolution when agreement cannot be reached. There will be costs for the State in facilitating dispute resolution and in terms of the resources of Queensland Civil and Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020

Administrative Tribunal and the courts for matters that cannot be successfully mediated.

The Regulation will provide small businesses with a pathway for resolving tenancy disputes via a single point of contact that is connected to pre-mediation support service provided by the Small Business Commissioner. This will increase the likelihood of disputes being resolved earlier, avoiding protracted negotiation and additional costs for small business.

Consistency with fundamental legislative principles

The Regulation potentially breaches the fundamental legislative principles to the extent that it impacts the rights and liberties of individuals (section 4(2)(a) Legislative Standards Act 1992) by interfering with and overriding the legal rights of landlords under current legislation and lease arrangements through the implementation of the National Cabinet decision in relation to good faith leasing principles.

Overriding landlords’ ordinary property rights is justified by the need to respond to the financial hardship being experienced by some tenants due to closures and restrictions on movement and social distancing which the COVID-19 emergency has caused (and will continue to cause) and to provide a fair sharing of the burden of the emergency between landlords and tenants.

Disclaimer

This page is not intended to provide legal advice and does not create a client-lawyer relationship. This post is provided for general information purposes and should not be relied upon as a substitute for legal advice. If you need help with legal advice for your particular situation, please contact our office (details below or on ‘Contact’ page) and we’ll be happy to assist you.

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