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New measures to encourage agreement on fair rent during Covid-19 restrictions

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As part of the COVID-19 Response Legislation Bill which has been introduced to Parliament, measures are being taken to help businesses resolve disputes over commercial rent.

An amendment to the Property Law Act is proposed, to insert a clause into commercial leases requiring a ‘fair proportion’ of rent to be paid where a tenant has been unable to fully conduct their business in their premises due to the COVID-19 restrictions.

  • Landlord and tenant would need to agree on the amount of rent that is ‘fair’.
  • Arbitration will be required where landlords and tenants are unable to come to agreement about a fair rent proportion, unless they agree to an alternative dispute resolution process such as mediation.
  • Once the law is passed, it will take effect from 28 September 2021.

The proposed law change would only apply to leases which do not already provide for adjusted rent payment terms during an epidemic emergency. Therefore, agreements made prior to 28 September 2021 to adjust rent obligations to reflect the COVID-19 situation would not be affected. 

The Government says that this change will help to ensure that landlords and tenants come to reasonable agreements about rent obligations, while still respecting agreements that have already been made.

In principle agreements need to reflect the uniqueness of the current COVID-19 situation, and provide the means by which both landlords and tenants can share the financial burden of the impact of COVID-19 restrictions.

The changes are to be considered as a part of a short select committee process on the COVID-19 Response Legislation Bill. The Association will be making a submission and we encourage others to also make submissions, including from when the commercial rent clause should be effective.

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