- The final deadline for small commercial tenants to request rent relief in WA passed last week
- The National Cabinet approach to legislating rent relief caused delay, and failed to deliver uniformity
- A State-based approach may have delivered faster and appropriately tailored outcomes
Last Thursday marked the final (we promise, final) deadline for tenants under small commercial leases to request rent relief under WA’s “code of conduct”.
Under the code, small commercial tenants who could satisfy one or more of the decline in turnover tests under the various iterations of the JobKeeper scheme could request rent relief from their landlords in the form of waivers and deferrals over the 12-month period from April last year (finishing on 28 March 2021).
In addition, landlords were subject to a moratorium that prohibited them from applying scheduled rent increases and exercising default powers against qualifying tenants.
While there are likely to be a small number of rent relief disputes still working their way the Small Business Development Corporation (SBDC) and the State Administrative Tribunal (SAT), most commercial landlords will no doubt be overjoyed by the return of pre-COVID norms when it comes to rent entitlements and lease enforcement.
On the other hand, with the thrice-amended code of conduct regulations no longer in play, small commercial tenants must now either bargain with their landlords or rely on further radical intervention in contractual relations by the WA government in the event of future lockdowns: the recent Anzac Day lockdown gave many a taste of this.
Timeline of decisions
How did we get here?
- 20 March 2020: Prime Minister Scott Morrison first foreshadows rent relief for commercial tenants, confirming that National Cabinet was “working to identify how relief can be provided for tenants in … commercial tenancies”
- 7 April 2020: three weeks of National Cabinet dialogue eventually sees the release of the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19, with the stated aim of providing a roadmap for “a consistent national approach and timely, efficient application of rent relief”, with the States to give legal effect to the National Cabinet code by legislation
- 16 April 2020: the McGowan government introduces a Bill setting out the legislative framework for its own take on the National Cabinet code
- 23 April 2020: the Bill receives Royal Assent, but without the necessary regulations to define the legal rights and obligations of landlords and tenants in relation to rent relief
- 29 May 2020: regulations are gazetted to create the WA code of conduct, which officially comes into force on 30 May 2020
- 25 September 2020: the regulations are amended to extend rent relief entitlements for some small commercial tenants out to March 2021, in line with extensions to the JobKeeper scheme at Federal government level, and to address contentious interpretations of various aspects of the WA code
- 29 January 2021: the regulations are further amended to preserve the moratorium against the exercise of default powers while rent relief disputes remained on foot in the SBDC or the SAT
- 24 March 2021: the regulations are subject to one final amendment, giving small commercial tenants a further 60 days to make rent relief requests, or to refer disputes about rent relief to the SBDC or the SAT
What this timeline shows is that, when weighed against the National Cabinet code’s stated aims of national uniformity, timeliness and efficiency, the National Cabinet approach to rent relief under commercial tenancies comes up short on every measure.
What could have happened
With no legal compulsion on landlords to provide rent relief (and no right for tenants to demand it) existing prior to 30 May 2020, parties to small commercial leases were left floundering in an uncertain and increasingly desperate commercial environment for over two months while the effects of COVID-19 were felt at every level.
State governments could have used the three weeks that National Cabinet spent debating general rent relief principles to get cracking on their own tailored rent relief legislation, with criteria appropriate to their particular market conditions and State-specific property laws.
Many in the WA commercial property industry felt, for example, that the $50M annual turnover threshold was a very generous cut-off for a tenant to be considered an “SME”.
And despite the common threads that have existed, ultimately every State government put its own spin on the National Cabinet code, which has meant that rent relief entitlements have been neither uniform nor able to be dealt with efficiently by commercial landlords and tenants operating across multiple jurisdictions.
One important illustration of this divergence came in the form of last year’s Sneakerboy decision by the NSW Supreme Court, which had no application in WA because the National Cabinet code concept of “a reasonable recovery period” was not adopted.
While commercial landlords will naturally hope that the extraordinary interventions in private contractual rights by State governments over the past year are at an end, if history does ever repeat itself, a by-pass of the National Cabinet approach (at least on anything to do with commercial tenancies) is warranted.