NSW Commercial Rent Support

UPDATE 13 January 2022 – the NSW government has extended to period in which you can get rent support to 13 March 2022.

If your business is struggling to pay your commercial rent during the period 13 July 2021 to 13 March 2022, you may be able to get some commercial rent support under the NSW Retail and Other Commercial Leases (COVID-19) Regulation 2021.

Eligibility for tenants till 30 November 2021:- This regulation brings on a responsibility on both landlords and tenants to negotiate in good faith for any NSW business.

• with turnover of less than $50m;
• whose lease was in place before 26 June 2021; and,
• who is impacted by the current lockdowns as evidenced by your business being eligible for any of the current NSW Covid grants being, the 2021 COVID-19 Micro-business Grant, 2021 COVID-19 Business Grant or the 2021 JobSaver Payment.

What is called an “Impacted Lessee”.

Eligibility after 30 November 2021 This regulation brings on a responsibility on both landlords and tenants to negotiate in good faith for any NSW business:

• with turnover of less than $5m;
• whose lease was in place before 26 June 2021; and,
• whose revenue means that you would continue to meet the eligibility rules for the 2021 COVID-19 Micro-business Grant, or the 2021 JobSaver Payment.

What is called an “Impacted Lessee”.

If you are an impacted lessee what is the actual commercial rent support you can get? 

For those eligible till 30 November 2021, firstly the landlord can’t increase the rent during period 13 July 2021 to 13 January 2022, unless the rent is determined based on turnover.  But there is nothing to stop them implementing a rent increase on 14 January 2022 if it was due between 13 July 2021 and 13 January 2022.

Secondly, the landlord can not evict you from the premises till 13 January 2022 for non payment of rent or outgoings in the period 13 July 2021 to 13 January 2022 unless the parties have been to mediation.  But they can evict you for other breaches of the lease and if you were in rent arrears prior to 13 July. 

The third part of the regulation is the obligation of the landlord to negotiate in good faith within 14 days of an impacted lessee asking for rent assistance / reduction.

For those eligible after 30 November 2021, the landlord can’t increase the rent during period 13 July 2021 to 13 March 2022, unless the rent is determined based on turnover.  But there is nothing to stop them implementing a rent increase on 14 March 2022 if it was due between 13 July 2021 and 13 March 2022.

Secondly, the landlord can not evict you from the premises till 13 January 2022 for non payment of rent or outgoings in the period 13 July 2021 to 13 January 2022 unless the parties have been to mediation.  But they can evict you for other breaches of the lease and if you were in rent arrears prior to 13 July

The third part of the regulation is the obligation of the landlord to negotiate in good faith within 14 days of an impacted lessee asking for rent assistance / reduction.

Now there is nothing in the regulation that actually mandates the rent support you can get.

What the regulation does is prescribe that both parties need to negotiate in good faith.  And negotiating on good faith means that the impact on both sides needs to be considered.  An impacted lessee demanding 100% reduction in rent if the landlord proves that they can’t afford this is not acting in good faith.

To help negotiate in good faith there are some core principles that help here.  The key ones are that:

• reduction in rent should be in proportion to the decline in turnover. But the landlord as able to ask that any grants you receive are added back.   For example, your turnover went from $10,000 a week to zero, but you are getting $1,500 a week in JobSaver, the turnover decline for the rent negotiation is 85% (not 100%).
• A minimum of 50% of the rent reduction should be waived or forgone rent. The balance of the rent reduction can be deferred rent.
• Any rent deferred must be repaid over the term of the lease, or for a period of no less than 24 months, whichever is greater. This starts from 14 January 2022.

For example, your eligible business experienced a 50% decline in revenue and your monthly rental is $5,000.  You can renegotiate with your landlord to get the following commercial rent support:

• A monthly reduction in your cash payments for rent of $2,500 per month term till not later than 13 January 2022.
• If 50% of this is waived, $1,250 per month will never have to be paid to the landlord.
• The other $1,250 per month will be accumulated till 13 January 2022 and then the total amount will need to be repaid in equal instalments over the term of the lease or for a period of no less than 24 months, whichever is greater. For example, the total deferred is $6,250 and you have 25 months to run on your lease as at 13 January 2022, you will be paying an extra $250 per month for 25 months.  Note this extra $250 will be on top of the full rental you are paying.  In this case the full rental was $5,000 so your payments will now be $5,250 per month (outside of any rent increases).

It is important to note none of the above calculations are mandated by law.  Both parties need to negotiate about any rent reduction in good faith.

What commercial rent support does the Landlord get?

And to determine if both parties are acting in good faith, any impacted lessee needs to understand what the landlord is entitled to under this commercial rent support.

Firstly, you landlord may be able to arrange some loan repayment deferrals form their bank.

Secondly, the landlord can potentially get land tax relief up the value of their 2021 land tax liability on the property.

Thirdly, if your landlord is a smaller property owner (with less than $5m in land holdings as at 31 December 2020 not including their principal place of residence, plus some other requirements) they may also be eligible for the Commercial Landlord Hardship Fund with a monthly grant of up to $3,000 per property where they provide rental waivers of at least the value of the hardship grant and any land tax relief they are eligible for.  Note this Commercial Landlord Hardship Fund commences in August 2021.

A landlord acting in good faith needs to take the above into consideration.  Simply stating they don’t want to apply for any of this support could be taking as not acting in good faith.

Next steps

If you are eligible for this commercial rent support, the first step is to approach your landlord.  They need to negotiate with you in good faith in a prompt manner.  You can do this informally or you may want to do this in writing to ensure you have a documented date to start the relevant timelines.

The landlord then has 14 days to commence negotiating with you.

If they don’t start negotiating in good faith in this timeline, the next step is to mediate.  And probably the best way to do this is via the Small Business Commission.

For more information visit the Small Business Commissioner website here.

If you want a confidential discussion on your business situation, or help with this grant contact me below

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