Commercial Leasing - South Australia's response to COVID-19

Articles Written by Paul Turner (Partner), Grace Black (Associate), Charles Jordan (Associate)

This insight provides a short summary of the cumulative effect of the Act and the Regulations.

On 9 April 2020, the COVID-19 Emergency Response Act 2020 (the Act) was introduced. Among other things, the Act modified South Australian law in respect of commercial leases to assist lessees suffering financial hardship as a result of the COVID-19 pandemic.

On 16 April 2020, the SA Government introduced the COVID-19 Emergency Response (Commercial Leases) Regulations 2020 (the Regulations) to provide clarity as to when a lessee will be considered to be experiencing financial hardship.

Application of the Act

The Act applies to “commercial leases” which are defined broadly and include:

  1. retail shop leases under the Retail and Commercial Leases Act 1995 (SA);
  2. leases under the Landlord and Tenant Act 1936 (SA); and
  3. agreements under which a party, for consideration, grants another person a right to occupy premises for the purposes of carrying on a business.

A business is defined as being an undertaking (whether or not carried on with a view to profit) involving manufacture, sale or supply of goods or services.

Effect of the Act

Prevents a lessor from taking any prescribed action against a lessee suffering financial hardship as a result of the COVID-19 pandemic on the grounds of a breach of the lease due to:

  1. any failure to pay rent or outgoings; or
  2. the business not trading for any required trading hours stipulated in the lease; or
  3. any other act or omission prescribed by regulations (of which there are none at the date of this memorandum).

Prescribed actions include eviction, re-entry, the distraint of goods, forfeiture, termination of the lease, seeking damages, enforcing guarantees, requiring the payment of interest on unpaid rent, seeking recovery of security, and any other remedy otherwise available at law.

Prevents a lessor from increasing the rent under the lease (other than where rent is determined as a multiple of the businesses turnover) if the lessee is suffering financial hardship as a result of the COVID-19 pandemic (except where an increase is otherwise agreed by the parties).

Prevents a lessor from requiring a lessee to pay or reimburse a lessor for land tax if the lessee is suffering financial hardship as a result of the COVID-19 pandemic.

Provides that any prescribed action that a lessor has taken or commenced, but not yet completed, against a lessee be suspended or stayed, if the lessee is suffering financial hardship as a result of the COVID-19 pandemic.

Allows either party to apply to the Commissioner for mediation of any other dispute in relation to issues that have arisen as a result of the COVID-19 pandemic and which relate to the Act, a commercial lease or any other matter relating to the occupation of the premises or a business conducted at the premises.

Financial Hardship

The Regulations provide that a lessee will be taken to be suffering financial hardship as a result of the COVID-19 pandemic if the lessee is eligible for, or receiving, a JobKeeper payment in respect of the business of the lessee (whether in their capacity as an employer or on their own behalf).

The JobKeeper payment is a wage subsidy available to businesses that have suffered a substantial decline in turnover as a result of the COVID-19 pandemic. The JobKeeper Payment was established pursuant to the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 and associated Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 which provides that qualifying employers will receive a payment of $1,500 per fortnight for each eligible employee until 27 September 2020.

Importantly, the Act allows either party to a commercial lease to apply to the Small Business Commissioner for mediation of a dispute or determination as to whether or not a lessee is suffering financial hardship as a result of the COVID-19 pandemic.

If you require further information in relation to the Act, or wish to obtain more specific advice in relation to the operation of your commercial lease, please contact Paul Turner or Andrew Wilton.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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