On 24 April 2020, the Western Australian Parliament passed the Commercial Tenancies (COVID-19 Response) Act 2020 (WA) (the Act). The Act modifies Western Australian law in respect of commercial leases to assist tenants suffering financial distress as a result of the current economic downturn due to the COVID-19 pandemic.
The Act applies to small commercial leases which include:
Landlords and tenants cannot contract out of the Act and any waiver of a right, remedy or benefit conferred on a party under the Act is of no effect.
The Act prevents a landlord from increasing the rent during the emergency period.
The Act also prevents a landlord from taking prohibited actions against a tenant during the emergency period on the grounds of a breach, if the breach consists of:
Prohibited actions include eviction, re-entry, possession, recovery of land, seizure of goods, forfeiture, termination of the lease, damages, requiring payment of interest on unpaid rent or other money payable, seeking recovery of security, enforcing guarantees, and any other remedy otherwise available at law.
The emergency period is defined as beginning on 30 March 2020 and ending on the day prescribed by the regulations in the future. If the regulations do not prescribe an end date before 29 September 2020, then the emergency period ends on 29 September 2020.
The emergency period has been backdated to capture actions taken since the emergency period began but before the Act was introduced. The Act provides that any prohibited action, measure that is contrary to the Act or rent increase taken or commenced since the start of the emergency period against a tenant, be suspended or stayed.
The Act allows for a dispute resolution process in the event landlords and tenants cannot resolve a dispute. A party to the dispute may apply to the State Administrative Tribunal (the Tribunal) to determine the dispute during the emergency period. In making its decision, the Tribunal must have regard to the financial impact of the COVID-19 pandemic on the tenant’s business and its capacity to meet its lease obligations, the landlord’s financial capacity (if relevant), and the principles of proportionality and fairness. Instead of applying to the Tribunal, a tenant operating a small business may request the Small Business Commissioner to provide assistance or use alternative dispute resolution mechanisms under the Small Business Development Corporation Act 1983 (WA).
The Act provides that the soon-to-be legislated regulations will adopt a Western Australian code of conduct governing commercial leasing principles during the COVID-19 pandemic. The WA code of conduct will be based on the National Cabinet Code of Conduct and provide a framework for negotiations to be carried out in good faith.
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