End of ACT landlord restrictions ‘a shock’ to some tenants

MV Law20 March 2021
Sign on door of closed shop.

Many commercial and retail tenants closed their doors during the height of COVID-19, but were protected from their rental obligations. Photo: Erik McLean.

Protected from eviction since April 2020, thanks to a code of conduct implemented in response to the impact of COVID-19, commercial and retail tenants are now expected to honour their full leasing obligations.

Meyer Vandenberg Lawyers partner Christine Murray says despite the clear end date to the protections, some tenants have been caught out unaware of the changes.

“Since the code ended on 31 January, 2021, I’ve had many landlords tell me their tenants are surprised they’re now expected to honour their full leasing obligations,” she says.

“One client said their tenant, who hasn’t paid rent since last December, is still not paying rent. While my client can’t take action for unpaid rent for December and January, they are entitled to evict their tenant if rent is not paid for February and subsequent months.”

The National Cabinet Mandatory Code of Conduct that applied to ACT commercial and retail tenancies precluded landlords from giving a termination notice or evicting tenants if rent was unable to be paid between April 2020 and 31 January, 2021.

However, Murray says that despite many tenants continuing to find it difficult to pay rent in full from 1 February, 2021, landlords are now within their rights to take action in accordance with the lease and the law.

“Landlords will no longer be fettered by the code in terms of the range of actions they can take against a defaulting tenant,” explains Christine.

“They can now give a breach notice with an opportunity to remedy the breach by a specified date, or to terminate the lease. They are also able to charge interest on unpaid rent, call on the security bond provided by the tenant for the lease, or demand payment from an individual or company who personally guaranteed the obligations of the tenant under the lease.”

During the COVID-19 pandemic, Christine says many landlords and tenants made arrangements for proportionate reductions in rent by way of waivers and deferrals. She points out that rent which was waived in full is not repayable, even after the pandemic ends. However, rent which was deferred – in whole or in part – may be recovered by the landlord after a reasonable recovery period.

“Ideally, the terms of the rent relief arrangements negotiated by the landlord and tenant, including the date on which the deferred rent becomes repayable, would have been clearly documented by the parties,” says Christine.

“If not, the landlord should be cautious about taking any action against a tenant for failing to immediately commence repayment of deferred rent. Landlords and tenants may need to revisit their negotiations regarding deferred rent in order to agree upon a suitable timeframe within which the deferred rent should be repaid.”

Christine’s advice to both tenants and landlords who are experiencing difficulties is for the parties to come together to have honest conversations about the future and to negotiate constructive ways to move forward.

“Some landlord/tenant relationships were strengthened during the height of the pandemic, and it was encouraging to see the amount of goodwill between them,” she says.

“I think it is definitely worthwhile landlords and tenants having similar discussions now – whether it is to continue with some kind of discounted rent arrangement, or perhaps an early surrender of the lease.”

If you require any assistance in negotiating a commercial or retail lease, or understanding your rights and obligations under your existing tenancy arrangements, contact Christine Murray and her team at Meyer Vandenberg Lawyers or on 02 6279 4402.

Original Article published by MV Lawyers on The RiotACT.

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