COVID-19 and the Emergency Commercial Lease Regulations

When can a Landlord increase the rent: The impact of extending the COVID-19 Emergency Commercial Lease Regulations?

The South Australian government recently extended the relief for Lessees of commercial tenancies provided under the COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020 (Emergency Regulations) from 30 September 2020 to 4 January 2021.

Two key changes from the amended Emergency Regulations are:

  1. The Landlord may now pursue actions against a Lessee for any breach prior to the 30 March 2020.
  2. The period before 30 September 2020 is now distinguished from the period after that date, so that the Lessee must show that it is an affected lessee; that is, that it is experiencing financial hardship in each period to request relief during that respective period.

When can the Landlord increase the rent?

Since the periods before and after 30 September are distinct, there is now an opportunity for Landlords to increase the rent in accordance with the annual rent reviews as shown in the table below.

When a rent review can occur, this can be backdated to the date that the rent was supposed to increase under the Lease.

Was the Lessee affected before 30 September 2020? Is the Lessee affected after 30 September 2020? When can you increase the rent?
Rent set to increase before 30 September 2020 Rent set to increase after 30 September 2020
YES YES 4 January 2020, backdated to the review date 4 January 2020, backdated to the review date
YES NO 1 October 2020, backdated to the review date 1 October 2020, backdated to the review date
NO YES The review date in the Lease (even if before 30 September 2020) 4 January 2020, backdated to the review date

 

There is always the possibility that the South Australian Government will extend the Emergency Regulations beyond 4 January 2020 depending on the trade that occurs over the Christmas period.

Given the uncertainty, Lessees should approach Landlords as soon as possible to negotiate an agreement if they have not done so already or if they are still experiencing financial hardship after 30 September 2020.

Landlords must also be careful that any negotiated agreement with Lessees does not have the effect of inadvertently surrendering the original lease and automatically granting a new lease.  Additionally, increasing the duration of a Lease to allow time to recover rent relief may create obligations to provide an updated Disclosure Statement or impact personal guarantees under the original lease.

PGC Legal can advise you on the impact of the Commercial Leasing Code and the Emergency Regulations, mediating an agreement through the Small Business Commissioner, and enforcing the matter through the Courts.  If you need advice, please contact Peter Charatsis, Brenton Priestley or Steven Polyichanin by email or on (08) 8221 6162.

The advice above is general in nature.  You should seek specific legal advice which has regard to your specific circumstances.