The numerous responses by state government to the current health pandemic are under the umbrella of a single enactment, the COVID-19 Emergency Response Act (CERA) which allows the making of regulations to temporarily amend other laws until the “COVID-19 legislation expiry day”.
In the case of retail and commercial leases, the Retail Shop Lease and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2000 prevents landlords taking “prescribed action” in respect of “affected leases” and provides a framework for good faith negotiation by landlords and tenants for rent waivers and rent deferrals.
The regulation is made under CERA itself, not under the Retail Shop Leases Act and does not only apply to retail leases. Non-retail leases – called “prescribed leases” – are covered if they are for premises wholly or predominantly used for carrying on a business.
Intended to implement the National Cabinet Mandatory Code of Conduct, the regulation was to address lessor conduct during the “emergency response period” ending on 30 September 2020 but that period was extended by an amending regulation to end of December.
The regulation still has force in relation to “affected leases” – ie to retail and prescribed leases impacted up to the end of December 2020 – until “the COVID-19 legislation expiry day” which was extended in April to 30 September 2021 “or another day prescribed by regulation”.
Thus a dispute concerning lease liabilities for any period from March 2020 until 31 December 2020 – including those relating to a landlord’s failure to bona fide negotiate as required by the regulation – remains actionable until 30 September 2021.
A recent QCAT ruling explains how the regulation continues to apply.
Coastal Pontoon and Jetty Repairs entered into a three-year lease of workshop space at Molendinar on the Gold Coast in October 2019.
Rent payments were prompt until March 2020 when difficulties arose because of the consequences of the pandemic. The tenant approached the landlord to negotiate a rent reduction. Rather than consider the tenant’s actual financial difficulties, the landlord applied a reduction of $800 per month for the months of April, May and June.
Arrears to December 2020 were about $11k. In June 2021 landlord issued a notice to remedy breach of covenant in respect of $24k rental arrears from January 2021 prompting the tenant to apply to QCAT for relief under the Covid regulation claiming that the landlord – by refusing to consider his actual financial position – had failed to act reasonably and in good faith as required.
The pontoon company applied to the Queensland Small Business Commissioner as envisaged by the regulation but not until May 2021.
Seeking time to engage in the dispute resolution process before the landlord could take action as regards any alleged default in rent payment, it applied to QCAT.
Member Richard Oliver agreed that the Covid Regulation extended to “affected” commercial leases that were “prescribed leases”.
He noted though that QCAT’s dispute resolution jurisdiction was only in respect of “eligible” leases – namely retail and “small business” leases ie to businesses with less than 20 employees – and then only in the circumstances set out in regulation 42.
In this instance the matter engaged QCAT’s jurisdiction having met the reg 42 criteria that “the parties to the dispute cannot reach a settlement agreement”.
Fatal though to the tenant’s application was the fact that the tenant had failed to give the requisite “dispute notice” to the Commissioner within the Covid response period and the landlord’s default notice only referred to rent arrears for January and February 2021 i.e. after the response period had ended.
In the absence of any wider powers in relation to commercial leases, the Tribunal considered itself to be confined by the limited jurisdiction that the Covid regulation extended and that this did not include power to grant relief against rental arrears outside the emergency response period.
Aztech is therefore free to evict the tenant and retake possession of the premises.
The Public Health and Other Legislation (Further Extension of Expiring Provisions) Amendment Bill 2021 is currently before parliament. If it becomes law, the “COVID-19 Legislation Expiry Date” will be extended from 30 September 2021 to 30 April 2022.
There appears to be no intention at this stage to extend the emergency response period past 31 December although it is possible that the final form of the law might include such a measure.