As of Friday 15 May 2020, the South Australian Government has made changes to the COVID-19 Emergency Response Act 2020 (COVID Act) through the implementation of the COVID-19 Emergency Response (Further Measures) Amendment Act 2020 (Amendment Act).
Changes relating to commercial leases
The Amendment Act has deleted the existing section 7 under the COVID Act (Provisions relating to commercial leases) and replaced it with a new section 7 that provides the Government with a broad power to make any regulations that it deems necessary "for the purposes of mitigating the adverse impacts on a party to, or any other person with an interest in, a commercial lease resulting from the COVID-19 pandemic."
The new section 7 contains an extensive list of what any new regulations may provide for, including but not limited to:
- The provision of rent relief for a lessee under a commercial lease;
- Prohibiting or restricting the ability of a lessor to terminate a commercial lease; and
- Imposing obligations on a party to a commercial lease, including requiring them to negotiate and agree on modifications to a commercial lease.
These are just three examples of what is a very broad power, one which will give lawmakers the freedom to update and implement new regulations relating to commercial leases on the fly and as the current situation with respect to COVID-19 evolves.
The first set of new regulations with respect to commercial leases, the COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020 (Regulations), commenced operation on the same day as the Amendment Act, last Friday. We have summarised the key new regulations below.
COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020
The Regulations have incorporated many of the provisions that were originally found under the COVID Act, such as the prohibition on lessors terminating a lease as a result of a lessee failing to pay rent or not being open for business during the hours specified in the lease.
The key new regulations provide the following:
- The parties to a commercial lease must make a genuine attempt to negotiate in good faith the rent payable under, and other terms of, the commercial lease during the prescribed period (30 March – 30 September 2020);
- Should negotiations fail, a party to a commercial lease may apply to the Commissioner for mediation of a relevant dispute in relation to a commercial lease;
- In circumstances where a mediation under the Regulations is unsuccessful (this must be proven to have occurred), then a party to a commercial lease may apply to the Court for resolution of a relevant dispute.
Determination of relevant dispute by Court
Whilst the clear hope and intention of the legislature is that disputes will be resolved by way of negotiation between the parties or, failing that, at a mediation presided over by a Commissioner, the ability to apply to the Court does now provide parties to a commercial lease with a method of obtaining a certain resolution to any dispute they might have in relation to the COVID Act and Regulations.
With respect to proceedings brought under the Regulations, the Court may make orders including, but not limited to:
- an order granting rent relief to an affected lease;
- an order modifying the terms and conditions of a lease; and
- an order to defer the payment of rent under an affected lease for a specified period.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.