One of our clients (who owns a commercial industrial premises in Alexandria, NSW) during the first New South Wales COVID lockdown in 2020 negotiated with their Tenant for relief by way of a reduction of 50% of their Rent, to be payable over a period of two years.
Shortly before the second COVID lockdown in New South Wales, the Tenant failed to pay the reduced Rent and failed to provide the Landlord with financial information to support any further Rent reduction pursuant to the Retail and Other Commercial Regulation (COVID-19) 2021 (Regulation). The Landlord became frustrated with the Tenant and, pursuant to the Regulation, applied to the Small Business Commission of New South Wales for the appointment of a Mediator. The Mediator made attempts to contact the Tenant to arrange a mediation, but those attempts failed.
The Mediator issued a certificate that mediation had failed. The Landlord re-took repossession of the Premises by locking the Tenant out.
The Tenant broke into the Premises on the first night of lockout. On the second night, the Tenant broke into the Premises again.
The Landlord called the local police and asked them to remove the Tenant from the Premises, but the police refused on the basis that the Tenant was an impacted tenant and had rights to occupy the Premises.
The Tenant subsequently contacted the Mediator and asked for a mediation on the basis that the Mediator had failed to contact them. The Landlord agreed to the mediation.
The mediation took place on 19 November 2021. The Mediator, after reading our position paper (prepared by Joe Denina of our office), came back to us and put the position to us that the Regulation did not permit an impacted tenant (which the Tenant was) to be removed from the Premises by lockout during the COVID period for New South Wales, which expires on 13 January 2022.
We pointed out to the Mediator that section 6(c) of the Regulation provides that, if the mediation failed, the Landlord has the right to lock the Tenant out.
The Mediator accepted our submission and acknowledged the terms of section 6(c) of the Regulation and advised the Tenant that he must – if he wants Rent relief – provide to the Landlord all appropriate financial information and statements and seek Rent relief.
The Tenant refused to pay any further Rent, claiming he still had the right to stay in the Premises until 13 January 2022 and that he would do what we liked.
The Tenant claimed he could not speak or understand English and used an interpreter. The Tenant, towards the end of the mediation, suddenly dropped the interpreter and spoke and understood English. The mediation was ultimately settled by the parties entering a Deed whereby the Tenant agreed to leave the Premises within two weeks of the date of the mediation and for the Landlord to draw upon the Bank Guarantee.
Lessons learned from this mediation include:
- If in a mediation, ensure you are thoroughly aware of the legislation you are relying on so that, if a Mediator steps over the line and tries to persuade you that the Regulations do not permit the Landlord to lockout the Tenant, you are able to convince him otherwise.
- Thoroughly examine any Tenant’s claim that they need an interpreter, even though in this case (as it turned out) the Tenant could clearly speak and understand English.
- Act decisively when the certificate of failure to mediate is issued and insist on possession. Do not offer to mediate again which, if the Tenant wants to retain possession, would force them to seek an Order from the Court allowing them back into possession if the Landlord had incorrectly interpreted the Regulation.
- Try to avoid separate mediations wherever possible if the Tenant is prepared to provide the appropriate financial information and negotiate with the Landlord for a reasonable reduction in Rent.
How we can help
Russell Kennedy’s Property and Development team has dedicated expertise in commercial and retail leasing. Please contact Julian Peters, Mark McKinley or Sara Hatcher for advice.
This insight was written by Julian Peters, Special Counsel.
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