On 7 April 2020, the National Cabinet announced the Mandatory Code of Conduct for small and medium sized commercial tenancies impacted by the COVID-19 pandemic (the Code). We previously wrote an extensive summary of the Code including updates on jurisdictions that have since enacted the Code in a separate article available here.
This article will focus on a comparison between New South Wales' Retail and Other Commercial Leases (COVID-19) Regulation 2020 passed on 24 April 2020 (NSW Regulations), Victoria's COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 which was passed on 1 May 2020 (Victorian Regulations) and Queensland's Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 which was passed on 28 May 2020 (Queensland Regulations). While broadly similar, the various Regulations differ in some key areas as examined below with the Victorian Regulations imposing more prescriptive requirements compared to the other two Regulations.
The Code does not apply to larger businesses, with annual turnovers greater than AU$50 million.
For completeness, the status of the enactment of regulations adopting the Code in each of the following States and Territories are:
|NSW Regulations||Victorian Regulations||Queensland Regulations|
|Criteria for an eligible tenant (Eligible Tenant)||Tenants who are eligible for JobKeeper program + annual turnover below AU$50 million.
||Tenants who are eligible and receiving JobKeeper payments + annual turnover below AU$50 million.
||Tenants who are eligible for JobKeeper program + annual turnover below AU$50 million.|
Includes all entities which are considered 'related body corporates' as defined by the Corporations Act 2001 (Cth) and turnover is assessed on the group level.In practice, these definitions import similar concepts of 'effective control' and will include the overall turnover of any foreign parent company and/or overseas companies within the same corporate group.
|Includes all entities which are considered 'connected entities' as defined in the Income Tax Assessment Act 1997 (Cth) and turnover is assessed on the group level.
||Includes all entities which are 'connected with' or 'affiliated' and turnover is assessed as the aggregate turnover of the group.|
|Regulation end dates||The period from 24 April 2020 to 24 October 2020 (NSW Period).||The period from 29 March 2020 to 29 September 2020 (Victorian Period).
||The period from 29 March 2020 to 30 September 2020 (Queensland Period).|
Only a general process outlined.
NSW General Process
There is a general obligation that the landlords must, if requested by the Eligible Tenant, renegotiate in good faith the terms of the commercial lease having regard to the leasing principles under the Code.
Implements a prescribed process.
|Implements a prescribed process.
Queensland Prescribed Process
a statement setting out the terms sought to be negotiated;
supporting information and evidence of their turnover reduction; and
any steps the Eligible Lessee has taken to mitigate their losses caused by the COVID-19 pandemic.
3. Within 30 days after providing sufficient information, the landlord must offer the Eligible Tenant a rent reduction along with any other proposed changes to the lease terms (set out below).The parties must cooperate and act reasonably and in good faith to negotiate a reduction in rent for the Queensland Period.
Determination of relief amount
(i) the economic impacts of the COVID-19 pandemic; and
The notes to that section reference specific leasing principles including the proportionate reduction of rent based on the reduction in the Eligible Tenant's turnover due to the COVID-19 pandemic. Further information on calculating the proportionate reduction under the Code is available here.
Duration of the relief
We wrote about the difficulties of this in practical negotiations in a separate article available here.
Determination of relief amount
Instead landlords are to consider a wide range of factors in determining the relief amount, including:
The last factor is an important distinction as (unlike in NSW) it allows consideration of the landlord's financial position in the overall rental relief being offered.
Duration of the relief
Contrasted with the open-ended wording of the NSW Regulations, rental reliefs negotiated under the Victorian Regulation will likely be significantly shorter in duration compared to their counterparts in NSW.
|Determination of relief amount
Under the Queensland Regulations, the landlord's offer must include:
|Restrictions on landlord enforcement actions||
Broadly, both the NSW and Victorian Regulations impose wide-ranging prohibitions on landlord enforcement actions for tenant breaches during each State's respective Periods. These tenant protections include against terminations, evictions, re-entering, recovering damages and/or charging interest, fees or charges on the unpaid rent.
Prescribed process for protection
This is an important distinction as it means that unless the tenant has submitted a formal request to the landlords they do not receive the protections under the Victorian Regulations.
As referenced above, the Queensland Regulations specify that any rental relief is to apply for the Queensland Period (i.e. an end date of 30 September 2020).
The NSW Regulations do not define the 'turnover' of other than that it includes any turnover derived from internet sales of goods and services.
Notably, unlike the Victorian Regulations, it is unclear whether government subsidies received by the SME Tenant such as payments from the JobKeeper program should be included in their calculation of annual turnover.
The Victorian Regulation includes an expansive and prescriptive definition of what is included in the calculations of the SME Tenant's 'annual turnover' which includes:
|The Queensland Regulations defines 'turnover' of the business to include income earned from internet sales.
Notably, the definition of turnover does not include any grants or assistance received from any Commonwealth, State or local government to mitigate the effects of the COVID-19 pandemic.
Last reviewed: 01 June 2020