NSW rent relief for COVID-19 impacted lessees

NSW rent relief for COVID-19 impacted lessees


The NSW Government has now made rent relief assistance available to help minimise the impact of lockdown on NSW businesses with lease agreements.

The relief comes following amendments to the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (NSW) (‘the Regulation’) earlier this month.

The amendments were passed on 13 August 2021 and provide greater protections to impacted lessees by reinstating National Cabinet’s Commercial Leasing Code of Conduct. The Regulation seeks to ensure that the economic impact of COVID-19 is shared by both property owners and tenants.

Combined with the land tax concessions and the newly established Commercial Landlord Hardship Fund available to property owners, the Regulation seeks to limit the economic damage of COVID-19 and maximise the number of businesses able to resume normal operation when public health orders are lifted.

What do the Regulations provide for?

Under the Regulation, property owners must negotiate rent relief agreements with eligible impacted lessees in accordance with the leasing principles in the National Code of Conduct.

Under those principles, property owners are required to offer tenants rent relief proportionate to the tenant’s decline in turnover. Waivers should make up at least 50 per cent of any rent relief provided (unless the impacted lessee agrees otherwise). Rental deferrals make up the balance.


In order to be eligible an ‘impacted lessee’ must:

  • first qualify for the 2021 COVID-19 Microbusiness Grant, the 2021 COVID-19 Business Grant or the 2021 JobSaver Payment
  • have a turnover of less than $50 million for the 2020/2021 financial year.  If the lessee is a member of a group, the turnover of the group is the relevant turnover. If the lessee is a franchisee, the turnover of the business conducted at the premises of the franchisee is the relevant turnover.  In all other cases, the turnover of the business conducted by the lessee is the relevant turnover. Turnover includes any turnover of the business and would therefore include amounts earnt from internet sales (notwithstanding the business may ordinarily operate from a shopfront), and
  • have entered into their lease before 26 June 2021.

Decline in Turnover Test

The Regulation does not prescribe a specific period that parties should use to calculate decline in turnover. As such, parties are free to determine an appropriate period that works for them.

Impacted lessees should provide evidence of their decline in turnover to their property owner to help them calculate the appropriate rent reduction. Evidence could include a Business Activity Statement (BAS) or an Accountant’s Letter.

If an impacted lessee’s circumstances change, they can make a subsequent request to negotiate future rent adjustments.

For the purposes of calculating an appropriate rent reduction, payments from Government COVID-19 grants should be included as part of an impacted lessee’s turnover.

Process for agreeing rent relief

The period during which the rules apply is 13 July 2021 to 13 January 2022. Impacted lessees in financial distress and their property owners should start the process of negotiating rent relief agreements as soon as possible. Support measures will be reviewed regularly as required due to the changing environment brought about by the pandemic.

For the six-month period (July 2021 – January 2022), commercial and retail property owners cannot take certain actions against an impacted lessee (e.g. evict an impacted lessee, increase rent level) unless they have first renegotiated rent and attempted mediation.

If a lessee is asked to negotiate rent reduction, they must respond within 14 days of receiving the request, or another period if agreed by both parties.

Commercial property owners and impacted lessees must negotiate rent relief agreements by taking into consideration the following principles in National Cabinet’s Code of Conduct on commercial tenancies (unless otherwise agreed by both parties):

  1. Landlords must not terminate leases for non-payment of rent
  2. Impacted lessees must remain committed to the terms of their lease, subject to any amendments negotiated, and material failure to do so will forfeit additional COVID-19 protections provided to impacted lessees
  3. As noted above, landlords must offer impacted lessees proportionate reductions in rent (in the form of deferrals and waivers) of up to 100 per cent of the amount ordinarily payable, in proportion to the decline in the impacted lessee’s trade.
  4. Rent waivers, as opposed to deferrals, must constitute at least 50 per cent of the rent reduction provided by landlords (in negotiating this, regard must be had to the landlord’s financial ability to provide such a waiver)
  5. Any rent deferral must be amortised over the balance of the lease term and for a period no less than 24 months, whichever is greater, unless otherwise agreed by the parties
  6. Landlords must pass any reduction in statutory charges (e.g. land tax, council rates) to the impacted lessee
  7. Landlords should seek to share any benefit received due to deferral of loan payments by a bank or otherwise with the impacted lessee in a proportionate manner
  8. Landlords should, where appropriate, seek to waive recovery of any other expense (or outgoing payable) by an impacted lessee under the lease terms during the period the impacted lessee is unable to trade
  9. Repayment of other (non-rent) expenses should not commence until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government), or the existing lease expiring
  10. Landlords must not charge fees or interest on rent or fees that are waived or deferred
  11. Landlords must not draw on a impacted lessee’s security for the non-payment of rent (be this a cash bond, bank guarantee or personal security) unless agreed by the impacted lessee and landlord
  12. Impacted lessees should be allowed to extend their lease for an equivalent period of any rent waiver/deferral period.
  13. Landlords must freeze rent increases (except for retail leases based on turnover)
  14. Landlords may not apply any prohibition or levy any penalties on impacted lessees that reduce operating hours or cease to trade during the COVID-19 pandemic.

Requirements for both parties

Commercial property owners and impacted lessees should work together to negotiate a rent relief agreement. Where parties are unable to do this, they must attend mediation through the Small Business Commission.

Interim arrangements for urgent matters involving a threatened or actual eviction, can be sought through the NSW Civil and Administrative Tribunal or the courts.
For standard matters, the Small Business Commission aims to offer a date within five weeks of application.

For urgent matters, mediation can be arranged within days. The mediator cannot impose any outcome but, if a mediation is successful, parties can enter a binding deed.
Where mediation is unsuccessful, parties can pursue action through the NSW Civil and Administrative Tribunal or the NSW civil courts.

As a result of the Regulation a landlord may not:

  • try to regain possession of premises with respect to a relevant lease,
  • try to terminate such a lease, or
  • exercise or enforce any other right of the landlord with respect to such a lease

unless the Small Business Commissioner has first certified that mediation has failed to resolve the dispute, whilst also enunciating the reasons for the mediation being unsuccessful.

It is important that impacted parties obtain advice from their legal advisers with respect to the matters noted above to ensure their obligations and rights are appropriately dealt with as provided by the Regulation.

Landlord’s assistance/relief

Where landlords have provided rent relief to ‘impacted lessees’, they are entitled to land tax relief of an equivalent amount of their land tax liability for 2021, with the relief limited to the actual land tax liability. The relief will be a rebate for those landlords who have already paid land tax and a waiver for those landlords that have not paid their land tax. Please refer to our previous update on land tax relief for further information.

The New South Wales government is also in the process of establishing a new $40 million Hardship Fund. This Fund will provide a monthly grant of up to $3,000 for qualifying landlords who provide a rent waiver of at least the same value of the Hardship Fund grant, as well as any land tax relief that the landlord is granted.

How SW can assist

Whether you are a commercial landlord or business tenant, our experts are highly experienced in assisting with calculations of decline in turnover, eligibility assessment, the application and negotiation process.

Reach out to one of our tax and property experts below for a conversation about your circumstances.

Get in touch

Tony Principe

E [email protected]

Helen Wicker

E [email protected]

Blake Rodgers

E [email protected]

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