COVID-19 AND LEASES – A CASE STUDY
The phrase “unprecedented event” has circled the media since the World Health Organization deemed the Coronavirus a Pandemic. With an unprecedented event comes unprecedented circumstances, one being, the closure of many businesses across Australia. These closures have particularly affected many Tenants who are no longer able to afford rent repayments due to mandatory closure of business or due to a downturn in revenue as a direct result of COVID-19. Since the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (the “Regulations”) came into force in May 2020, De Marco Lawyers have assisted several clients with rent relief initiatives. Here, De Marco Lawyers outlines a case study of an all too common occurrence with rent relief initiatives.
CASE STUDY: BILL, TENANT
Bill owns a restaurant in Melbourne, due to Stage 3 Stay at Home Directions imposed by the Government, Bill is only able to operate his restaurant by way of take-away only. As Bill does not have his usual influx of diners per night, Bill is struggling to pay the rent, his staff, and other outgoings under his current Lease. Bill is eligible for JobKeeper and is already enrolled in the program.
Initially, Bill wrote to his Landlord requesting relief. His Landlord responded requesting financial information to prove a decline in turnover and proof that he was enrolled in the JobKeeper program. Understandably, Bill was unsure of his legal obligations to provide this documentation to the Landlord and whether the Landlord was within his right to request the financial information.
Bill approached De Marco Lawyers for assistance in understanding his rights under the Regulations and in negotiating rent relief from his Landlord. De Marco Lawyers reviewed Bill’s Lease and explained his obligations under the Regulations. With assistance from Bill’s accountant, De Marco Lawyers negotiated with the Landlord’s Solicitors to determine an ideal and lasting outcome for both parties involved. By having De Marco Lawyers assist in the negotiations, Bill was able to focus his time on other aspects of his business that required attention due to the Stage 3 Stay at Home Directions.
Bill and his Landlord agreed to waive 25% of rent and defer 25% to be repaid over a period of 24 months. Due to Bill’s take-away sales, Bill was satisfied that he could still repay this reduced rent which meant that the Landlord was still receiving an income from the property. The agreement was documented by De Marco Lawyers by way of a Deed of Variation of Lease to outline the obligations of both parties up until September 2020.
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