Essential commercial leasing update: Extension of COVID-19 Emergency Response protections for South Australian commercial lessees

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The COVID-19 Emergency Response (Commercial Leases No.2) Regulations 2020 (the Regulations) in South Australia have recently been extended to apply for an additional period commencing on 1 October 2020 and expiring on 3 January 2021.

Existing protections continue to apply

The existing protections under the Regulations for an affected lessee (i.e. who is suffering financial hardship as a result of the COVID-19 pandemic) under a commercial lease will continue to apply during this additional period. These protections include prohibitions on a lessor taking a prescribed action (including an eviction or a termination of a lease) and the requirement for an affected lessee to be provided with rent relief.

Applicable prescribed period

The amended Regulations contain new provisions dealing with how the extended application of the Regulations affects previous agreements reached between the parties, or a previous order of a court, in the original period of the Regulations.

They acknowledge the existence of two separate periods being:

  • The period beginning on 30 March 2020 and ending on 30 September 2020 (period 1), and
  • The period beginning on 1 October 2020 and ending on 3 January 2021 (period 2)

Prohibitions and restrictions on prescribed actions

The amended Regulations provide that nothing prevents a lessor from taking a prescribed action against a lessee in respect of a breach of a commercial lease that occurred:

  • In the case of a lessee who is an affected lessee in period 1—before the commencement of period 1, or
  • In the case of a lessee who is an affected lessee in period 2 but who was not an affected lessee in period 1—before the commencement of period 2

However, a lessor is prevented from taking a prescribed action in respect of a failure to pay rent that constitutes a breach of an agreement between the lessor and the lessee under a mediation, or an order of the court, made before the end of period 1 in respect of that period if:

  • The agreement or order relates to the payment of rent in respect of a period that occurs after, or extends beyond, the end of period 1, and
  • The breach of the agreement or order of the court occurs in relation to the operation of that agreement or order in period 2 (in so far as it applies to that period), and
  • The lessee is an affected lessee in period 2

Mediation by Commissioner

The amended Regulations also stipulate that if the parties to a commercial lease entered into an agreement (the initial agreement) (whether under a mediation or otherwise) before the end of period 1 in relation to that period, and that agreement applies, or purports to apply, in respect of a period that occurs after, or extends beyond, the end of period 1, a party to a commercial lease may, despite the terms of that agreement, apply to the Commissioner for mediation of a relevant dispute that relates to the terms of the initial agreement in so far as the terms apply in relation to period 2, provided that the lessee under the lease is, or is claiming to be, an affected lessee in period 2.

However, nothing, including any agreement reached under a subsequent mediation, may affect the operation of the initial agreement in so far as it applies in respect of period 1.

Determination of relevant dispute by the court

Finally, the amended Regulations grant the court an additional power to make an order varying, revoking or substituting an agreement, or the terms of an agreement, entered into by the parties to the commercial lease. If a lessee under a commercial lease is, or is claiming to be, an affected lessee with respect to period 2, then a party to the lease may apply to the court for an order to vary or revoke an order made by the court in period 1 if that order applies, or purports to apply, in respect of a period that occurs after, or extends beyond, the end of period 1.

Further action

Implementation of actions in compliance with the amended Regulations will involve case by case judgements as well as an overall commercial strategy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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