COVID-19 | WA Government introduces new legislation to regulate commercial leasing arrangements during the COVID-19 pandemic

Following the Mandatory Code of Conduct released by the National Cabinet on 7 April 2020 (National Code of Conduct), the WA Legislative Council passed the Commercial Tenancies (COVID-19 Response) Bill 2020 (WA) (COVID-19 Bill) to introduce a range of temporary measures to provide for urgent relief for commercial tenants in response to the COVID-19 pandemic.

Once the COVID-19 Bill becomes law, a landlord must not take any prohibited actions including:

• terminating a lease;
• repossessing premises;
• seeking damages or interest; or
• calling on a guarantee (including a bank guarantee, security deposit or personal guarantee),

during the 6 month emergency period if a tenant of a small commercial lease fails to pay rent and other amounts or fails to trade (or reduces its trading hours).

In addition, rent payable under a small commercial lease (other than rent or a component of rent determined by reference to turnover) cannot be increased during the emergency period.  However, any scheduled rent review can take place but is suspended until the end of the emergency period.

Which tenancies will the COVID-19 Bill apply to?

The above prohibitions only apply to a small commercial lease being:

• a retail shop lease as defined in the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Retail Legislation); or
• a lease where the tenant owns or operates a small business and uses the land or premises that are the subject of the lease for the purpose of carrying on that business; or
• a lease where the tenant is an incorporated association as defined in the Associations Incorporation Act 2015 (WA); or
• any other lease that is of a class prescribed by regulations.

However, some parts of the COVID-19 Bill have wider application than just small commercial leases.  Specifically, it allows for a code of conduct to be adopted by regulation which is not limited to small commercial leases but instead may apply to any lease, sub-lease, licence or agreement permitting occupation (excluding residential tenancies, pastoral leases and mining tenements), even if the Retail Legislation does not apply to that lease or the tenant is not a small business or incorporated association.

It is also unclear at this time if the code of conduct to be adopted in WA will closely follow the National Code of Conduct.

When will the COVID-19 Bill come into effect?

The COVID-19 Bill is currently awaiting Royal Assent and will come into effect once the COVID-19 Bill is signed by the Governor.

Once the COVID-19 Bill becomes the law, the emergency period is backdated to commence on 30 March 2020 and continues for a period of 6 months unless an alternative date is regulated.

If a landlord has taken any prohibited action such as terminating a lease or calling on a bank guarantee after 30 March 2020 but before the COVID-19 Bill becomes law, then those actions are still valid and effective, but, if they are incomplete, they are taken to be suspended until the end of the emergency period.

Resolving disputes

Where landlords and tenants are unable to reach agreement, the COVID-19 Bill sets out the mechanism for resolution of any disputes in relation to this new legislation or the code of conduct.  Again, the dispute resolution process is not limited to small commercial leases but applies to any lease, sub-lease, licence or agreement permitting occupation (excluding residential tenancies, pastoral leases and mining tenements) that are covered by the code of conduct.

Where a dispute involves a small commercial lease or the landlord is a small business, the parties have the ability to first refer any dispute to the Small Business Commissioner.

If landlords and tenants are unable to reach agreement, the State Administrative Tribunal (SAT) is authorised to make orders including rent waivers and deferrals.

The SAT, when making orders must consider the financial impact of COVID-19 on the tenant’s business and capacity to meet their obligations, as well as the landlord’s financial capacity (where appropriate), and take into consideration the principles of fairness and proportionality.

Going forward

The COVID-19 Bill also empowers the Minister to make regulations (including adoption of a code of conduct).  The regulations and the code of conduct are yet to be released and are not expected to be introduced to the WA parliament until next month.  As the regulations will set out rent relief and other key aspects from the National Code of Conduct, both landlords and tenants should keep an eye out for our further updates on this issue.

For details of all our COVID-19 tips and updates, visit the Gadens COVID-19 Hub.

Authored by:

Shanna Livingstone, Special Counsel
Michael Mercier, Associate