Limited extension of COVID lease protections for small businesses

On 13 March 2022, substantially all rent relief protections for commercial tenants impacted by COVID-19 came to an end.

So, for breaches after 13 March 2022, including not paying rent, renegotiation is no longer needed before a landlord terminates or takes any other 'prescribed action'.

Also, courts and tribunals no longer need to consider the National Code of Conduct.

However, in recognition of the continuing challenges faced by small businesses caused by COVID-19, the NSW Government has amended the Regulations in March 2022 to extend the requirement for mediation with small businesses until 30 June 2022.

Eligible tenants

The extended mediation protections only apply to tenants that:

  • had a turnover of less than $5 million in 2020 – 2021 (previously $50M); and

  • qualify for the 2022 Small Business Support Program, 2021 COVID-19 Micro-business Grant, 2021 COVID-19 Business Grant, or the 2021 JobSaver Payment.

Mediation protection

For tenants that fit in the above category, landlords will not be able to take certain actions against tenants (such as eviction or termination), unless they have first attempted mediation through the Small Business Commissioner.

Mediation is a process where landlords and tenants are assisted by an independent person (“mediator”) to explore and discuss settlement options. Generally, mediation is a cost-effective and faster way to solve a dispute, compared with going to court.

This requirement to mediate before taking action, aims to benefit both landlords and tenants, by encouraging parties to negotiate mutually beneficial outcomes and keep small businesses open for trade.

Landlords however are not prevented from increasing rent beyond 13 March 2022, even if the tenant is eligible for mediation protections.

Ineligible tenants

Tenants who do not fit the above criteria, such as those with an annual turnover greater than $5 million, do not have any protection from the effects of COVID-19 on their business after 13 March 2022.

Pre-13 March 2022 breaches

Although the rent relief protections have come to an end, landlords must still negotiate rental abatement under the National Code of Conduct, as well as engage in mediation, in respect of arrears for the pre-13 March 2022 period if the tenant can demonstrate that it is an “impacted lessee”.

Author: Stella Sun

Supporting partners: Melissa Potter & David Creais