The current COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020 (Regulations) which deal with the impact of COVID-19 on parties to a commercial lease were due to expire on 30 September 2020.
However, on 25 September 2020 the South Australian Government varied the Regulations with the introduction of the COVID-19 Emergency Response (Commercial Leases No 2) (Prescribed Period) Variation Regulations 2020 (Variation Regulations) to extend the application of the Regulations to 3 January 2021.
The Variation Regulations come into operation on 1 October 2020.
What does the extension mean for commercial landlords and tenants?
- The Variation Regulations introduce the concept of a ‘second prescribed period’ being from 1 October 2020 to 3 January 2021. During the second prescribed period, parties to a commercial lease are to continue to negotiate in good faith appropriate relief having regard to the impacts of the COVID-19 pandemic on the parties.
- If the parties agreed to variations or modifications to the operation of the lease during the ‘first prescribed period’ (i.e. from 30 March 2020 to 30 September 2020) that agreement remains valid (initial arrangement). However, if the terms of the initial arrangement extend beyond the end of the first prescribed period and the tenant continues to be impacted by the COVID-19 pandemic, new arrangements or substitute arrangements are to be negotiated insofar as the initial arrangement applies to the second prescribed period. A party can apply to the Small Business Commissioner for mediation if a dispute relates to the terms of the initial arrangement as they apply to the second prescribed period.
- The Variation Regulations maintain that a landlord cannot take any ‘prescribed action’ if a tenant is an ‘affected lessee’ and breaches the lease during the second prescribed period. Although, a landlord can take prescribed action, even if the tenant is an affected lessee in the second prescribed period, if the tenant was not an affected lessee in the first prescribed period and the breach occurred prior to commencement of the second prescribed period.
- In addition, the Variation Regulations have clarified that a landlord is not prohibited from implementing a prescribed action on the grounds of a breach by the tenant which occurred before the first prescribed period (i.e. before 30 March 2020) even if the tenant was an affected lessee in the first prescribed period.
- The Regulations as varied do not apply to leases entered into after 30 March 2020.
If you have any questions about the Regulations and the Variation Regulations, please contact a member of our National Property Team.