COVID-19 and its impact on commercial and retail leases
- Published: March 31, 2020
- Author: Alex Stapleton
The rise of the current COVID-19 pandemic and the concurrent isolation measures introduced by the Australian Government are having an adverse impact on tenants and landlords of commercial and retail premises.
The current recommendation of the Government is that tenants and landlords should cooperate to ensure that businesses survive and are able to successfully resume trade when the COVID –19 protection measures come to an end. Tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease.
It is important to note that these recommendations by the Government are currently only guidelines. Without the foundation of a moratorium or legislation, landlords are under no obligation to provide their tenants rent-free periods or concessions, unless their lease states otherwise.
Nevertheless, whilst there is no binding obligation on landlords, it is widely regarded that it is within landlords’ best interests to help and support their tenants through the difficulty of the COVID-19 pandemic.
If parties are unable to agree on a form of rent relief or temporary amendments, there are options available to tenants which may allow such relief, if their lease permits:
- Abatement of rent;
- The doctrine of frustration; and
- Force majeure.
Whilst success of achieving relief under each of the above options is considered rare in the current circumstances, there is a stronger claim for a tenant who has been forced to close their business by way of Government measures rather than a tenant who has voluntarily elected to close their business.
In light of the financial distress of landlords and in particular tenants, the National Cabinet has agreed on the following measures for State Governments to implement:
- Moratorium on evictions over the next 6 months for tenants in financial stress if they are unable to meet their commitments under the lease due to the impact of COVID-19.
- The reduction or waiver of rental payments for a defined period of time for tenants impacted by COVID-19.
- The ability for tenants to terminate their lease or seek mediation/conciliation on the grounds of financial stress caused by COVID-19.
- Commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by COVID-19.
- Landlords and tenants who are not significantly affected by COVID-19 are expected to honour their lease and rental agreements.
We can expect further information around the above measures in the coming days. Please note that the above information will change concurrently with the Governments movements.
Should you have any queries regarding your position as a tenant or landlord, please do not hesitate to contact Asparq Legal for further advice and support.
The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such, require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.