Commercial Leases – How Will Queensland Address The Issue?

NSW was the first state to regulate commercial leases following the Mandatory Code of Conduct (Code). The new regulation (Regulation) took effect from 24 April 2020 and will apply for six months.

To consider how the Queensland government will address the Code we can consider what NSW has implemented.

What commercial leases are covered?

1. 1. retail shop leases; and
   2. commercial leases for the leasing of land or premises for commercial purposes.

The Regulation does not apply to leases entered into after 24 April 2020, except if it was an option to extend or renew the lease.

How does the NSW Regulation apply?

It offers protection to an “impacted lessee” who:

1. 1.  qualifies for the JobKeeper Scheme; and
   2.  had a turnover for the 2018-2019 financial year of less than $50 million.

If a lessor has an impacted lessee the lessor must not:

1. 1.  terminate the lease or take other action to evict
   2.  issue proceedings for forfeiture or damages
   3. require the payment of interest on unpaid rent
   4.  call upon a security bond or bank guarantee
   5. enforce a personal guarantee under the lease
   6. apply for any other remedy available to the lessor.

If the lessee is an impacted lessee the parties must negotiate the rent and other terms of the lease in good faith. If a lessor does not negotiate in good faith, the lessor is prohibited from taking action against a lessee for the non-payment of rent.

The Regulation specifically states that nothing prevents a lessor from taking action against a lessee for non-COVD-19 economic impacts. Similar to the Queensland regulation for residential tenants, a lessor in NSW may terminate a commercial lease if the lessee is damaging the premises.

Next steps in Queensland

At the time of writing, there have been no regulations dealing with commercial leases tabled in the Queensland Parliament.

The Queensland Parliamentary website notes that the next sitting date is 19 May 2020. It is expected that Parliament will sit earlier to introduce further regulations.

If any landlord and tenant require assistance in negotiating commercial leasing relief, then please contact Bill Purcell or Daniel Ronan in our Property and Real Estate team.

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
This article was authored by Jacob Duane while under employment of Bennett & Philp Lawyers.