The new South Australian legislation – the COVID-19 Emergency Response Act 2020 came into operation in SA on 30 March 2020. It will affect commercial leases in SA until the first to occur of the 6 months (i.e. 30 September 2020) or the date fixed by the Minister if COVID-19 declarations in SA have ceased earlier.
During that maximum 6 months “prescribed period” and notwithstanding what a commercial lease may otherwise provide, if a lessee is suffering financial hardship as a result of the pandemic then, the lessor cannot take any “prescribed action” against the lessee for breach of the lease, including, for non-payment of rent or outgoings.
The expression “prescribed action” includes recovery of a security bond, lease termination or enforcement of a bank or personal guarantee.
“Financial hardship” is deemed to apply if the lessee is receiving or eligible for a JobKeeper payment. The Small Business Commissioner can be asked by either party to mediate or make a determination as to whether the lessee is suffering financial hardship. There is a right of appeal to the Magistrates Court as to that determination made by the Small Business Commissioner.
Although financial hardship is deemed if the lessee is eligible for JobKeeper, the lessor wouldn’t necessarily know if the lessee is eligible, so unless otherwise agreed, that determination would need to go to the Small Business Commissioner for a determination. Also, the deadline to enrol for JobKeeper has been extended to 31 May 2020 and hence eligibility may not be known until then. There is also no right for a lessor to require a lessee to produce trading records to substantiate its financial hardship.
The Small Business Commissioner can look at a reduction in the lessee's turnover but there isn’t a specified turnover percentage reduction before there is deemed to be financial hardship.
We have developed a streamlined and cost-efficient process for helping with any lease variations required. The first part of this is helping to assess tenant requests, to which we have assisted in preparing a Tenant Application Proposal. The second part is helping to document agreed variations.
We are hopeful that most tenancies suffering financial hardship can be resolved commercially, as intended by the Government. However should disputes arise that require mediation or other legal action, we are also here to help with any queries you may have.
Included below are a number of Client Alerts that we have issued around Commercial Leasing and also our Instruction Sheet for Deed of Variations.