The NSW Government introduced new measures to restrict when landlords can evict tenants due to rental arrears as a result of COVID-19. These restrictions were originally due to end on 15 October 2020. They have now been extended until 26 March 2021 .

The measures include:

• a restriction on landlords evicting tenants who are financially disadvantaged by COVID-19, unless they have first attempted to negotiate a rent reduction with the tenant.

• extended notice periods for certain other lease termination reasons

• allowing tenants financially disadvantaged by COVID-19 to terminate a tenancy agreement where a landlord will not negotiate or where it is necessary to avoid financial hardship

• retaining the ability of landlords to terminate a tenancy agreement in cases of undue hardship.

Under the measures, landlords must attempt to negotiate a rent reduction with an impacted tenant in good faith before seeking to terminate a tenancy, and can only give a termination notice or apply for a termination order if it is fair and reasonable to do so in the circumstances.

Fair Trading offers a tenancy moratorium dispute resolution service that can assist landlords and tenants to try to reach an agreement.

Landlords can still apply to the Tribunal at any time to take possession of a property if they are suffering undue hardship.

All tenants not impacted by COVID-19 are expected to continue paying all rent and charges in full.

If a tenant can no longer pay their full rent due to the impact of COVID-19, the landlord and tenant should discuss whether they can agree to a reduced rent or repayment arrangement. Landlords may be able to negotiate reduced repayments or a repayment freeze with their mortgage provider.

A landlord can issue a termination order or apply to the Tribunal for a termination order only if:

• the landlord has first participated in good faith in a rent negotiation process run by Fair Trading, and

• it's fair and reasonable in the circumstances for a tenancy to be terminated.

In considering an application for a termination order the Tribunal may consider:

• advice from NSW Fair Trading relating to the landlord and tenant's participation in the formal rent negotiation process overseen by NSW Fair Trading, including whether the landlord or tenant refused, or refused to make, a reasonable offer about rent

• whether the tenant has continued to make payments towards the rent

• any financial hardship and the financial position of the landlord and tenant

• any special vulnerability of the impacted tenant

• the public health objectives of ensuring citizens stay at home and that avoidable movement of people is prevented during the COVID-19 pandemic, and

• any other matter the Tribunal considers relevant.

Assistance for landlords

Landlords facing financial difficulties are encouraged to:

• ask their financial institutions for a temporary mortgage freeze or reduced repayments if their tenants are struggling to pay the rent

• check if their insurance covers rental reductions or default

• check eligibility for land tax reductions.

Land tax relief

If you’re a commercial or residential landlord who has reduced your tenants’ rent due to COVID-19, you may be eligible for the NSW Government’s land tax relief.

Landlords are encouraged to apply for land tax relief before 31 December 2020. Please contact us for assistance

Commercial rental relief

A rent deferral (or deferring rent) means that the rent still needs be paid, but only at a later date agreed by the parties.

Under the Retail and Other Commercial Leases (COVID-19) Regulation 2020, eligible tenants and landlords must work together to renegotiate rent and the other terms of the lease, if either party to the commercial lease requests this.

Note that in the National Code of Conduct (leasing principle 5), any deferred rent must be paid back over the balance of the lease term or for a period of no less than 24 months (whichever is greater).

When the rent does not need to be paid back, that is called a rent waiver (or waiving rent). The National Code of Conduct refers to the parties negotiating for rent waivers as well as rent deferrals.

The Retail and Other Commercial Leases (COVID-19) Regulation 2020 [NSW] commenced on 24 April 2020 and applies until 31 December 2020. At this stage, these measures will not apply after 31 December 2020. However, the NSW Government will continue to review the situation to ensure the support remains appropriate in the changing environment.

Important: Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

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