Last updated: 25 May 2020
The WA Government has passed new laws offering greater protection for small commercial tenants who are in financial hardship resulting from restrictions imposed to combat the COVID-19 pandemic.
This legislation is known as the Commercial Tenancies (COVID-19 Response) Act 2020 (the CTCR Act) and applies to small commercial leases during the emergency period, which is six months from 30 March 2020 to 29 September 2020 (subject to change).
To help you understand the changes under the new CTCR Act, and how they apply to you, we have prepared this set of frequently asked questions (FAQs) which are broken down into:
- overview of legislative changes
- financial hardship
- prohibited actions
- new code of conduct
- types of dispute
- negotiating with your landlord
- summary of commercial tenancy support
What is the purpose of the CTCR Act?
It aims to help to protect small business tenants suffering financial hardship from a range of prohibited actions, while they try to negotiate rent relief with their landlords.
How does the CTCR Act assist tenants?
It puts into place a six month moratorium on evictions and other measures to offer support for commercial tenants financially impacted by the COVID-19 pandemic, and paves the way for a new code of conduct to be introduced shortly.
It should be noted that while the CTCR Act has passed State Parliament, the associated regulations (including a code of conduct) will take some weeks to complete.
In the meantime, if you are a tenant who cannot pay rent due to the impact of the pandemic you will now have some protection under the new law.
Which leases are covered by the CTCR Act?
The CTCR Act applies to the following small commercial leases:
- a retail shop lease regulated by the Commercial Tenancy (Retail Shops) Agreements Act 1985
- a lease where the tenant is a small business as defined by the Small Business Development Corporation Act 1983
- a lease where the tenant is an incorporated association as defined by the Associations Incorporation Act 2015.
Other leases may be included in the future.
The CTCR Act is intended to help tenants suffering financial hardship as a result of one or more of the following:
- a restriction imposed in response to the pandemic
- changes in how society is behaving in response to the pandemic
- any other consequences of the pandemic.
Which actions by landlords are prohibited (from 30 March 2020) by the CTCR Act?
- evictions during the emergency period due to non-payment of rent
- exercising a right of re-entry
- recovery of land
- distraint of goods (seizing property to obtain payment of money owed)
- termination of the lease
- rent increases (other than rent or a component of rent determined by reference to turnover)
- penalties for tenants who do not trade or reduced their trading hours
- charging interest on rent arrears or any other unpaid amount of money payable to the landlord under the small commercial lease (including operating expenses)
- using bonds or guarantees to recover money owing
- progressing with proceedings against a tenant for a breach that occurred after 30 March 2020, but before the new laws come into operation.
What if a landlord has already started an action prohibited by the new act?
If the landlords started and completed a prohibited action between 30 March and 23 April this will remain in place.
If the landlord started a prohibited action between 30 March and 23 April and was not been completed or is ongoing, this action should be suspended immediately, until the end of the emergency period.
On 7 April 2020, the National Cabinet released the Mandatory Code of Conduct – Small to Medium Enterprises (SME) Commercial Leasing Principles during COVID-19 and announced that states and territories would implement the code through their own legislation or regulation; in WA this is through the CTCR Act.
The code for WA is currently being developed by the WA Government, in consultation with stakeholders.
The code’s purpose will be to ensure negotiations between landlords and tenants are carried out in good faith, so that agreements can be reached to manage the impact of the COVID-19 pandemic. This includes a landlord taking into consideration the impact on a tenant in relation to their revenue, expenses and profitability. This should result in an agreement as to which temporary changes are appropriate, such as reductions and deferrals in rent payments.
It is acknowledged that disputes may arise relating to matters associated with financial hardship or the code of conduct.
A financial hardship dispute could arise between the parties involved in a small commercial lease in the following situations:
- during the emergency period, the tenant has breached their lease by failing to pay rent or any other amount of money payable to the landlord
- the landlord claims that the breach was not a result of the tenant suffering financial hardship, and
- the landlord has not granted a waiver, deferral or reduction in respect of the unpaid rent or other unpaid amount of money.
A code of conduct dispute will relate to how the code is applied to a small commercial lease, such as a dispute about a waiver or deferral of rent.
If you are a tenant who has been impacted by COVID-19 and are suffering financial hardship, you should contact your landlord or their agent to try to negotiate an arrangement. This may include a reduction to the amount paid in relation to the lease for a specified period of time.
You should also prepare sufficient information to validate your claim for rent relief to your landlord. This documentation should demonstrate your decline in turnover as a result of the COVID-19 pandemic.
We expect the detail related to demonstrating a decline in turnover will be included in a new code of conduct, which is likely to be enacted before the end of May. In the interim, information required to apply for the Commonwealth JobKeeper Payment is a reasonable guide.
If you are a tenant and your landlord is threatening you with an action (eg. eviction) that is listed as protected actions within the CTCR Act then you should contact us for advice.
To understand what the new commercial tenancy support packages could mean for you, download our Commercial tenancy support: COVID-19 pandemic fact sheet. This is an easy to understand summary of each program, what it means for tenants and landlords, key application dates and useful links to more information.
This page will be updated once the code of conduct is announced.