New laws supporting tenancies through COVID-19

In response to the continuing impact COVID-19 is having on the community, State Parliament is in the process of introducing urgent legislation to support tenants and landlords of both commercial and residential tenancies.

The overarching principles of the new laws are that tenants and landlords should:

  1. Work together to ensure business continuity;
  2. Work through relevant issues with the aim of achieving mutually satisfactory outcomes; and
  3. Negotiate in good faith.

Residential Tenancies

The Residential Tenancies (COVID-19 Response) Bill 2020 will:

  1. Introduce a moratorium on evictions for 6 months;
  2. Prohibit rent increases during the emergency period;
  3. Provide that any fixed term tenancy agreement due to expire during the emergency period will continue as a periodic agreement;
  4. Relieve lessors of the obligation to conduct ordinary repairs if the reason they cannot do so is COVID-19 related financial hardship or a lawful restriction on movement; and
  5. Enable a tenant to end a fixed term tenancy prior to its end date without incurring break lease fees (tenants will still be liable for damage and rent arrears).

Does this mean a tenant cannot be evicted / a landlord cannot evict?

It is important to note that the proposed laws will not obviate all compliance with tenants’ and landlords’ respective obligations under a lease. Tenants can still be evicted if they are causing damage to property, posing a threat to the landlord or neighbours, or abandon the property.

Does this mean a tenant can stop paying rent?

The moratorium on evictions means landlords cannot evict tenants in cases of severe financial hardship related to COVID-19. It is a moratorium on evictions, not a moratorium on rent. Tenants should continue to pay rent to avoid building up a debt.

Is evidence required to be produced as proof a tenant cannot pay rent?

Landlords are able to ask tenants for evidence to support an assertion that they are suffering severe financial distress leaving them unable to pay their rent. This may be in the form of communication from an employer, evidence of a tenant losing their job or other evidence of severe financial hardship. However, landlords should not ask tenant’s to provide evidence of the tenant’s financial position, such as bank statements evidencing savings.

What if a tenant is in arrears not resulting from COVID-19?

Any breach or termination process already underway due to non-payment of rent or property damage can continue.

What should I do if a dispute arises with my landlord / tenant?

Should a dispute arise between tenant and landlord, parties are encouraged to negotiate a mutually acceptable short-term agreement to preserve the tenancy. However, if an agreement cannot be reached, the Commissioner for Consumer Protection will be given new powers to make conciliation of disputes between tenants and landlords mandatory in an effort to relieve pressure on the Magistrates Courts and State Administrative Tribunal.

Commercial Tenancies

The Commercial Tenancies (COVID-19 Response) Bill 2020 will:

  1. Introduce a moratorium on evictions for 6 months due to non-payment of rent;
  2. Prohibit rent increases;
  3. Restrict penalties for tenants who do not trade or reduce their trading hours;
  4. Prohibit interest charges on rent arrears;
  5. Introduce a dispute resolution process; and
  6. Enable the government to prescribe a code of conduct.

What is the Code of Conduct?

The National Cabinet have released a Mandatory Code of Conduct (“the Code”) which will apply to commercial leases. The Code is to be implemented by all state and territory governments. The Code outlines a set of good faith leasing principles applicable to negotiating amendments to existing leasing arrangements.

Who does the Code apply to?

Application of the Code is determined by eligibility for the Commonwealth Government’s JobKeeper program, that being small to medium enterprises:

  1. With an annual turnover of up to $50 million; and
  2. That have experienced at least a 30% downturn in revenue as a result of COVID-19.

What does this mean for landlords?

Landlords are unable to terminate leases due to non-payment of rent during the COVID-19 period or reasonable subsequent recovery period. Instead, landlords must offer tenants ‘proportionate’ reductions in rent payable in the form of ‘waivers and deferrals’.

What does this mean for tenants?

Tenants must remain committed to the terms of their lease. A material failure to abide by substantive terms of the lease will forfeit any protections provided under the Code.

Can a landlord draw on a tenant’s security?

Landlords must not draw on a tenant’s security (whether this be a cash bond, bank guarantee or personal guarantee) for the non-payment of rent during the pandemic period or the subsequent recovery period.

When will deferred payments be due?

Unless otherwise agreed between the parties, any deferred rental amount must be repaid in equal installments over the greater of:

  1. The balance of the lease term; or
  2. A period of no less than 24 months.

Tenants should be given the opportunity to extend their leases for an equivalent period of the rent waiver and/or deferral period.

What about land tax, council rates or insurance?

Any reduction in land tax, council rates or insurance granted to the landlord must be proportionally passed on to the tenant.

What should you do?

It is crucial that tenants and landlords impacted by the new laws and the Code seek advice as to its respective application before negotiating and agreeing to revised lease terms.

If you would like further information or assistance in relation to the above, please contact us on (08) 9321 5451 or by email at danielle@bailiwicklegal.com.au.

By Danielle Williams (Solicitor)

For further information about our legal services, please visit our website: https://www.bailiwicklegal.com.au

The above information is a summary and overview of the matters discussed. This publication does not constitute legal advice and you should seek legal or other professional advice before acting or relying on any of the content.

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