Commercial Leases during COVID-19: What You Need to Know

Commercial Leases during COVID-19: What You Need to Know

There has been a lot of dialogue in the media regarding the Federal Government’s initiatives to combat the impact of COVID-19 on Australian businesses. It can be confusing to understand what exactly your responsibilities are as a tenant or landlord in the circumstances.

In this article, we break down these initiatives for you and explain your responsibilities as either a landlord or tenant during these uncertain times.

Tenancies

The Mandatory Code of Conduct (the Code) applies to commercial tenancies, including properties which are:

  • retail
  • office
  • industrial

For Tenants

The Federal Government announced the introduction of the Mandatory Code of Conduct (the Code) which will apply to commercial leases for eligible small to medium enterprise (SME) tenants.

How do I know if I qualify?

The Code will apply to SMEs that:

  1. are suffering ‘financial stress or hardship’; and this means that you must demonstrate the ‘company’s inability to generate sufficient revenue as a direct result of the COVID-19 pandemic that causes the tenant to be unable to meet its financial and/or
    contractual commitments’
  2. are eligible for the JobKeeper program; and
  3. have an annual turnover of up to $50 million.

What are my obligations under the Code?

  • You must remain committed to the terms of your lease (subject to any changes to the rental agreement as a result of negotiations with your landlord due to the Code).
    • Any failure to not properly abide by the terms of your lease will mean you forego any protections provided to you as a tenant under the Code.
  • You must negotiate in good faith.
    • This means to act in a sincere and fair way to ensure your interests as well as your landlord’s interests are considered.
  • Provide accurate information.
    • It is your responsibility to provide truthful financial information for the purposes of negotiation with your landlord. For example, you must provide evidence of your financial position such as accurate turnover figures and other relevant financial statements.
  • You must have regard to your landlord’s financial situation and ability to provide additional waivers and deferrals of rent.
  • Pay back your rental deferrals.
    • Payment of rental deferrals by the tenant must be paid in instalments or transferred over the balance of the lease term and for a period of no less than 24 months.
  • Consider your insurance policy.
    • Contact your insurance provider to find out whether your insurance policy will apply in the current conditions.
  • You must work towards achieving a mutually satisfactory outcome with your landlord.

For Landlords

Once the Code takes effect, ‘eligible’ tenants may be able to receive rent reductions, either in the form or waivers or deferrals by their landlords. A “waiver” means the liability no longer exists, whereas a “deferral” means the liability remains but is paid later.

What are my obligations under the Code?

  • You must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable, based on the decrease in the tenant’s trade and profit during the COVID-19 pandemic period.
    • Rental waivers must constitute no less than 50% of the total reduction in rent payable.
    • Tenants may decide to waive the requirement for a 50% minimum waiver by an agreement with you.
  • You must not terminate your lease with your tenants due to non-payment of rent during the COVID-19 pandemic period.
  • You should provide to the tenant an opportunity to extend their lease for an equivalent period of the rent waiver and/or deferral period.
    • This is intended to provide the tenant additional time to trade, on existing lease terms, during the recovery period after the COVID-19 pandemic concludes.
  • You must discuss relevant issues to the tenancy, negotiate appropriate provisional leasing arrangements, and work towards attaining a mutually satisfactory outcome for you and your tenant.
  • You must act in an open, honest and transparent manner.
  • You must provide adequate and correct information within the context of negotiations.
  • You must communicate and pass on any reduction in charges (e.g. land tax, council rates). This is important if the lease obliges the tenant to contribute to “outgoings”.
  • You should, where appropriate, attempt to waive recovery of any other expense (or outgoing payable) by a tenant, under lease terms, during any period in which the tenant is not able to trade.
  • You must agree to a freeze on rent increases for the duration of the COVID-19 pandemic (except for retail leases based on turnover rent).

A copy of the Mandatory Code of Conduct can be found here.

Further Information

It is important to be fully aware of your obligations under your commercial lease agreement. If you would like more information on how we can assist you with your matter, do not hesitate to contact us on 9963 9800 or at law@etheringtons.com.au. Check out our blog here for further more information and analysis on the restrictions and rules in place during COVID-19.

Etheringtons Solicitors extends our deepest sympathies to those experiencing hardship or health concerns during this difficult time. Further information about COVID-19 can be found at: www.health.gov.au.

COVID-19 lockdown rules and restrictions in New South Wales

COVID-19 lockdown rules and restrictions in New South Wales

Since 31 March 2020, residents of New South Wales (NSW) have been subject to strict COVID-19 lockdown rules and restrictions. Residents have been ordered to stay at home unless they have a ‘reasonable excuse’ for leaving. In the Public Health Order, the NSW government described ‘reasonable excuses’ as:

  • obtaining food or other goods and services
  • travelling to work or for education purposes, only where the person cannot do it at home
  • exercise
  • medical or caring reasons
  • the full list of reasonable excuses provided by the NSW Government can be found here

Further to the above, a person must not participate in a gathering in a public place of more than 2 persons. Exceptions to this include:

  • gatherings of household members; and
  • gatherings which are essential for work or education.

These orders are in addition to the pre-existing ‘social distancing rules’ whereby if a person leaves their home, they must stay at least 1.5 metres away from others.

What you can and cannot do in NSW

Due to the broad nature of the COVID-19 lockdown rules and restrictions, the nation has been subject to profound confusion as to what you can and cannot do. To add to the confusion, individual states and territories have varying rules and infringements.
To put your mind at ease, we have compiled a general list summarising what you can do (as long as social distancing measures are complied with) and what you cannot do in NSW.

What you can doWhat you cannot do
Visit a “romantic partner”Have a social catch-up with family or friends that are not household members
As a learner driver, learn to drive and get hours loggedGather in a public place with more than two people
Children across two households can continue to switch between housesGo for a drive, unless it is for a ‘reasonable excuse’
Go to the supermarket/grocer to obtain foodTake a holiday in a regional area
Obtain takeaway from a café/restaurantGo camping
Go to the pharmacist/shops to obtain medical productsAttend a pub, registered club, casino, micro-brewery or distillery or gaming lounge
Exercise indoors or outdoorsDine in at a food and/or drink premises
Travel a short distance for exercise purposes e.g. to go surfing at an open beachAttend entertainment facilities or amusement centres
Take your dog for a walkAttend places of public worship, except for a wedding (5 people or less) or a funeral (10 people or less)
Go fishing for work or passive exercise Go swimming in a public pool
Attend work, where you cannot work from homeAttend any public playgrounds, outdoor gymnasium or skate parks
Attend your education provider, where you cannot be educated from homeReceive services from a spa, nail salon, beauty salon, waxing salon, tanning salon, tattoo parlours or massage parlours
Attend a wedding with five or less peopleAttend a house auction, open house inspection or betting agency
Attend a funeral with ten or less people (including the person conducting the service)Play a team sport
Move houseHost at premises which does not provide 4 square meters of space for each person on the premises
Provide care or assistance to a vulnerable person
Provide emergency assistance
Donate blood
Fulfil a legal obligation (e.g. attend court or tribunal)
Go to the dentist, for dental emergencies
Take your pet to the vet
Travel for any of the above purposes

What happens if you break the rules?

  • Generally, enforcement is up to the discretion of police officers.
  • Police have the power to give on the spot fines of $1,000 for persons, plus an additional $5,500 fine each day the offence continues.
  • Corporations who ignore COVID-19 restrictions can be fined $5,000.
  • If the matter goes to court, courts can impose a maximum penalty of $11,000 and six months jail time against individuals. For corporations, the maximum penalty is $55,000.

Further information

If you would like further information or assistance in relation to any legal matters, please do not hesitate to contact one of our experienced solicitors on 9963 9800 or via email at law@etheringtons.com.au

Parenting orders in the pandemic: How does COVID-19 influence my parenting orders?

Parenting orders in the pandemic: How does COVID-19 influence my parenting orders?

COVID-19 has generated a great deal of uncertainty and anxiety in the community. One concern many parents may have is what to do if their ability to comply with parenting orders from the court is affected by COVID-19; particularly as a result of the progressive shut down and restriction on movement that Australians are facing. In this article we will clarify the court’s position in relation to the parties’ obligations towards parenting orders in light of this pandemic.

The best interests of the child

The paramount concern of the family courts is ensuring that decisions are made in the best interests of the children and those interests need to be balanced with the child’s health and safety.

In a media release, the Honourable Chief Justice Will Alstergren of the Family Court emphasised that the best interests of the child in the context of COVID-19 means ensuring the safety and wellbeing of the child and “caring for and determining the practical day-to-day best interests of a child”. However, consistent with this interest, parents must still, as reasonably as possible, comply with court orders in place with respect to parenting. This includes ensuring that time spent with the children is acted upon by each parent or carer insofar as the parenting orders necessitate.

Sensible and reasonable

In highly uncommon circumstances such as a global pandemic, strict compliance with parenting orders can become somewhat difficult, such as when orders stipulate that time with a parent or carer is to occur at a designated location which may not be operating anymore due to forced closures. Another example is when state borders are closed and parents are unable to facilitate transport for the children. There are also the pressing health issues that may complicate those situations such as when one parent, or someone close to that parent, having been exposed to COVID-19 goes into quarantine, and this may prevent the children from spending time with that person.

In these situations, the courts require parties to find practical solutions to overcome these difficulties that are both sensible and reasonable. It also emphasises that members of a family are important to a child and the risk of contagion to vulnerable members of the child’s family and household, such as grandparents or sick relatives, should also be taken into consideration.

Approaching the court electronically

If, as a result of this pandemic, parties are unable to comply with their existing parenting orders, the parties are encouraged to reach an agreement then approach the court electronically to seek a variation of those orders. In the meantime, parents and carers should, as soon as practicable, ensure they maintain contact with the children through platforms such as skype, zoom, FaceTime, social media or telephone.

Seek legal advice

It is important to be fully aware of the impact COVID-19 may have on your parenting orders and family law matters generally. If you would like further information, please do not hesitate to contact one of our experienced family law solicitors on 9963 9800 or via email at law@etheringtons.com.au.

Etheringtons Solicitors extends our deepest sympathies to those experiencing hardship or health concerns during this difficult time. Further information about COVID-19 and how to protect yourself can be found at: www.health.gov.au.

COVID-19: Commercial and Retail Leases

COVID-19: Commercial and Retail Leases

Due to the recent outbreak of COVID-19, businesses and individuals are being forced to navigate a myriad of challenging issues which they have never had to face before. One of the most common questions businesses may ask is “I need to shut my business but what happens to the leases?”

To answer that question, the starting point is your lease agreement.

Tenant perspective

Businesses which rely on overseas supplies, tourists and overseas students, are experiencing a significant disruption in operations and a major decline in revenue. This will not only put a strain on their ability to deliver products but also on the cash flow thus making it challenging to keep the business afloat. In these circumstances, businesses are considering shutting their operations until the COVID-19 crisis is over.

Rent is a major expense for most businesses – particularly for retail shops in shopping centres. Tenants may be bound by long term leases which do not provide for early termination. One may look to the doctrine of frustration of contracts. Frustration of contract occurs when an event (beyond the parties’ control) occurs that makes the performance of the contract impossible. A frustrating event will end the contract early and allow each party to be discharged from future performance of the contract. Is COVID-19 a frustrating event? Frustration is incredibly difficult to prove and it is unlikely that a court will find COVID-19 to be a frustrating event but it depends on the circumstances of a particular case. If the government orders a lockdown, whilst difficult to prove, there may be an option for one of the parties to argue frustration.

‘Force majeure’ means an unforeseeable event that prevents you fulfilling a contract. Force majeure clauses allow parties to a contract to end the contract early where a party is affected by an unavoidable or unforeseen event such as destruction of premises or a natural disaster. Typically leases do not contain force majeure clauses. If it does, however, the clause may list lockdown as one of the force majeure events. If the government orders shopping centres to close in order to slow down the spread of virus, it may constitute a force majeure event allowing early termination.

Force majeure clauses are contractual terms which the parties agree upon execution of contract. They are express terms which cannot be implied. Frustration, on the other hand, is a common law principle.

You may want to continue operating, however, your landlord may decide to shut the building to prevent the spread of COVID-19. Your lease agreement should contain a clause in a tenant’s favour allowing a reduction in rent if you cannot reasonably access the premises. You may also consider a claim against your landlord for breach of quiet enjoyment of the premises.

Landlord perspective

Your tenant may unilaterally decide to shut their business or store due to spread of COVID-19 and demand a rent relief for the period of closure. Tenants do not have a right to unilaterally shut their business and demand rent relief, without an express condition in a lease allowing the tenant such a right unless they can successfully argue ‘frustration’ or ‘force majeure’.

Your retail tenant will be required to shut if the government requires retail shops to close. Both parties are required to adhere to notices or orders issued by public and statutory authorities. A failure to comply with government notices or orders constitutes a breach of your lease.

You tenant does not have a right to withhold rent under any circumstances. Recently, however, in response to the COVID-19 outbreak, legislation has been passed to regulate or prevent the exercise or enforcement by a retail lessor of a right that they have under the lease or the Retail Tenancies Act or Retail Leases Act. This includes prohibiting a lessor from taking possession of the premises. These measures will last no longer than six months commencing 25 March 2020.

Practical approach to leases

As the COVID-19 situation is evolving daily, we recommend that you check your lease documents and consider the actions you should be taking to minimise the damage to your business, if you are a tenant; or to your investment, if you are a landlord. You should also be reviewing your insurance policies to ascertain what losses are recoverable under your policy, if any.

Further information

If you would like further information regarding leases or simply corporate and contract law advice, please do not hesitate to contact one of our experienced solicitors on 9963 9800 or via email at law@etheringtons.com.au

COVID-19 and the Family Court system: What changes are being made?

COVID-19 and the Family Court system: What changes are being made?

COVID-19 is impacting the operation of every facet of life and work around the world. There is no exception for the courts in Australia which have seen major changes to the procedure and operation of the court system. In this article, we explore how the Family Court in particular is dealing with the COVID-19 pandemic.

The Changes

The Court has altered its operation in a variety of ways to ensure the health and safety of litigants and court staff and members.

Hearings:
The majority of court hearings and events will now be done remotely via a telephone or video conference. The Court has said that telephone appearance procedures will generally be most appropriate for the following:

  • First Return Duty Lists;
  • Abridgements;
  • Mentions;
  • Directions; and
  • Interim Hearings

The Court will notify the parties as to whether their matter is able to be dealt with remotely. If it is possible, the judge and court staff will be in the courtroom during the time of the listings. Interpreters may also appear by telephone, if required. The parties can attend by telephone or video conference in the comfort of their homes or office.

Once the Court has notified the parties of the requirement to attend court via telephone, a party may ask that the matter not be heard by telephone, due to it being impractical. They may also say that their matter is urgent and requires the parties to attend in person. In this circumstance, the matter may be adjourned or remain listed for a face-to-face hearing. However, the Court has strictly imposed a limit on the number of matters which will be dealt with in open court.

Changes to Everyday Operations:
There are a number of changes the Court has imposed as a result of the Covid-19 pandemic:

  • Non-urgent matters may be adjourned to a future date (meaning postponed). This is at the discretion of the judicial officer.
  • The registry services of the Court will be provided remotely via telephone or online services.
  • In urgent circumstances, face-to-face interaction in a registry may be allowed, but only after an initial assessment.
  • All documentation will need to be filed electronically through the online Commonwealth Courts Portal.
  • For urgent matters (such as those involving domestic violence) which are held in court, matters will not be listed for more than 1.5 hours, and with sufficient time in between to allow cleaning of the court to occur.
  • To reduce the length of any face-to-face hearing, where possible, hearings are to be complemented with written submissions or conducted via telephone, if necessary

Impact for Future Proceedings

If you are involved in current proceedings before the Court, there may be changes in the way your matter is dealt with. It is important to be prepared for changes in the way your matter runs and what form of communication will be utilised. If your matter is classified as ‘non-urgent’ you should be prepared for your matter to be potentially postponed for a period of time.

Further information relating to court operations and COVID-19 can be accessed from the COVID-19 updates and information page on the Family Court’s website.

Where Can I Find More Information?

It is important to be fully aware of the impact COVID-19 may have on your legal matter. If you would like further information, please do not hesitate to contact one of our experienced solicitors on 9963 9800 or via email at law@etheringtons.com.au.

Etheringtons Solicitors extends our deepest sympathies to those experiencing hardship or health concerns during this difficult time. Further information about COVID-19 can be found at: www.health.gov.au.

COVID-19 Challenges: Strata buildings and body corporates

COVID-19 Challenges: Strata buildings and body corporates

It is an uncertain time for everyone with the rapid increase of COVID-19 infections and government restrictions. To slow the spread of the virus, the protective measures may last up to six (6) months. There may also be further restrictions. Such measures have a momentous impact on those who live in a strata complex.

Due to the rise of high density living, more and more people are living in strata buildings where resources, assets and facilities are shared. This means that strata residents have higher risk of exposure to virus. Think of how many people touch lift buttons, the stair rail and entrance door handles. This is an unfortunate reality for many, which can be extremely difficult to avoid. Social distancing is almost impossible in high rise lifts.

1. Disclosure

Where there is someone that lives or works in the building, or even someone who has visited the building, has a confirmed case of COVID-19 or has been asked to self-isolate, there may be an obligation for the strata corporation to notify the building residents. This can be easily done by sending out notices and placing further notices in the common areas. For privacy reasons owners corporations cannot disclose the name, the unit number or any other information which might identify the person(s) who has contracted the virus or is required to self-isolate.

2. Repair and Maintenance

Owners corporations are responsible, under the Strata Schemes Management Act 2015 (NSW), to repair and maintain common property. In doing so, owners corporations should be proactive and take the necessary precautions to ensure the building is safe and protect their residents from the risk of the virus spreading. Where possible, these include:

  1. closing amenity rooms;
  2. closing recreational facilities;
  3. increasing cleaning and sanitisation protocols in the building;
  4. installing sanitisation stations, if possible;
  5. encouraging residents to use proper hygiene measures and to self-isolate; and
  6. restricting meetings.

3. Health and Safety for workers

Where a contractor is working on site, owners corporations have legal obligation to upkeep the health and safety of the workplace. This includes taking the necessary precautions to protect workers from harm, including the risk of contracting COVID-19.

4. Restrict AGM, EGM and other meetings

Recently, the government has implemented strict social distancing rules which include:

  1. all persons should be at least 1.5 metres apart;
  2. there should only be 1 person per 4 sqm indoor; and
  3. public gatherings must be avoided altogether.

With such strict measures, this limits the ability for owners corporations to hold general meetings. If a meeting must be held and approvals are required, you should consider:

  1. holding an electronic meeting (video conferencing), where possible;
  2. asking every owner to sign a waiver to waive the requirement to hold a meeting and consent to the resolutions at the resolutions of the meeting; or
  3. holding the meeting but ensure it is held at a venue which accommodates for the current social distancing rules (outdoor space) but this would only be possible for smaller body corporates.

We recommend that you seek legal advice before deciding whether or not to hold a meeting.

Further information

It is important to be fully aware of your obligations and options during these difficult times. If you would like further information, please do not hesitate to contact one of our experienced strata law solicitors on 9963 9800 or via email at law@etheringtons.com.au.

More information about COVID-19 can be found here: www.health.gov.au