Recently we provided guidance in relation to the COVID-19 Response (Management Measures) Legislation Bill (Bill) which was introduced to Parliament on 28 September 2021.
As a reminder, the Bill seeks to amend a range of different Acts, including the Property Law Act 2007 (PLA). The stated aims of the proposed amendments included in the Bill are to support commercial tenants and landlords to come to agreements to adjust the rent (including outgoings) due under their leases so that the parties share the financial burden of the COVID-19 response and to provide a way to resolve disputes if no agreement can be reached. The way that this is to be achieved is by the insertion of an additional contractual term, similar to clause 27.5 of the ADLS lease, into leases that do not contain that clause. A copy of our previous guidance on the Bill from September 2021 can be found on our website.
The Bill has been through a very short select committee process and is currently at Royal Assent stage, meaning the Bill will imminently become law, largely in the form outlined in our previous update. Following numerous submissions from various sectors and feedback on some of the uncertainties resulting from the wording of the Bill, there have been some key amendments made to it as outlined below.
The Bill, once enacted, will come into force retroactively from the first day of the 2021 Level 4 Lockdown, meaning that its provisions will now apply from 18 August 2021 regardless of when the enactment is passed.
What are the key changes to the bill?
1. Implied term applies from 18 August 2021
The key change is that the legislation will apply retroactively from 18 August 2021, being the first day of the current Covid-19 higher Alert Level restrictions.
This addresses the previous uncertainty that we had commented on, as to exactly which rental periods the implied term would apply – there had previously been two schools of thought on this, the first being that the implied term should apply from 28 September 2021 (the previous start date of the “affected period”) and the second being that the implied term should apply from 18 August 2021.
2. Tenants' loss of income relevant to the question of what is a "fair" proportion of rent relief
We had previously commented that the Bill was almost completely silent on what constitutes a “fair proportion” of rent and outgoings, but for one exception, which was that the matters that the parties will consider must include the taking into account of any rent relief provided between 18 August 2021 and 28 September 2021 because of access restrictions relating to the epidemic.
That exception has now been replaced with a requirement that in determining the “fair proportion” of rent relief, one of the matters that the parties will consider must include any loss of income experienced by a tenant in respect of a rental period because of access restrictions relating to the epidemic.
3. Timing of communication responses
The Bill now includes a requirement that the parties to a commercial lease with this implied clause must respond to each other within 10 working days of communication about the clause.
4. Dispute provisions
The previous version of the Bill provided for arbitration as the only dispute mechanism. Following submissions, the Bill now includes clarification that the parties may seek to resolve disputes through mediation or other forms of alternative dispute resolution before a referral to arbitration, and furthermore, that the Dispute Tribunal’s jurisdiction is not excluded as an option.
The Bill is expected to pass into law within the next few days. We recommend that you discuss the issues that you face with your landlord or tenant to see if you can come to a reasonable resolution in the circumstances.
In this regard, we recommend that you are prepared for any such discussions by understanding your legal position beforehand. We can review your leasing documents and advise you on them accordingly. We can also assist you to negotiate with your landlord or tenant, upon request.