Legal Update: New Laws affecting Landlords and Tenants of Commercial Leases in WA

On 23 April 2020, the Commercial Tenancies (COVID-19 Response) Act 2020 (WA) (Act) came into operation. If you are a landlord or tenant of a small commercial lease, that is:

(a) a lease for a retail shop;

(b) a lease where the tenant owns or operates a small business and uses the land or premises the subject of the lease for the purpose of carrying on that business;

(c) a lease where the tenant is an incorporated association; or

(d) any other lease in a class prescribed by the regulations (as at the time of writing this article, no regulations have been prescribed),

the Act applies to you. It is not possible to contract out of or restrict the operation of the Act. It is also not possible to waive a right, remedy or benefit conferred on a person under the Act.

What is a landlord of a small commercial lease prohibited from doing?

Under the Act, if a tenant of a small commercial lease breaches that lease by:

(a) failing to pay rent or any other amount of money payable by the tenant to the landlord under the small commercial lease (e.g. operating expenses); or

(b) not opening for business at the hours or times specified in the small commercial lease; or

(c) doing any act or omission of a kind prescribed by the regulations,

during the emergency period, being between 30 March 2020 to 29 September 2020 (unless the regulations prescribe otherwise), the landlord cannot take prohibited action, which includes:

(a) evicting the tenant from the premises leased;

(b) exercising a right of re-entry to the premises leased;

(c) terminating the lease;

(d) requiring a payment of interest on unpaid rent or any other unpaid amount of money payable by the tenant to the landlord (eg. operating expenses); and

(e) seeking to recover the whole or part of any security provided by the tenant for the performance of the tenant’s obligations (e.g. having recourse to a security bond or making call on a bank guarantee).

Further, any act or omission by a tenant during the emergency period that is required under a written law in response to the COVID-19 pandemic is not to be regarded as a breach of that lease, grounds for termination of that lease or grounds for a landlord taking any prohibited action.

The Act also provides that rent payable (other than turnover rent) cannot be increased during the emergency period.

If between 30 March 2020 and 23 April 2020:

(a) a landlord has taken or commenced a prohibited action, to the extent that the prohibited action or measure remains incomplete or ongoing or has a periodic effect, that prohibited action or measure is to be stayed or suspended until the end of the emergency period; and

(b) the rent payable has increased, that increase is taken to be stayed or suspended until the end of the emergency period.

Dispute Resolution

The Act provides a dispute resolution process in the event that landlords and tenants cannot resolve a dispute.

An aggrieved party may apply to the State Administrative Tribunal (SAT) to have the dispute determined and must do so during the emergency period unless the Small Business Commissioner has issued a certificate under section 19 of the Act. The SAT has broad powers, including the power to:

(a) make an order requiring a party to pay money to a specified person;

(b) make an order terminating a lease where the tenant has failed to pay rent or any other amount of money payable and the SAT is satisfied that the tenant’s breach was not a result of the tenant suffering financial hardship; and

(c) make an order dismissing the proceedings where the tenant has failed to pay rent or any other amount of money payable and the SAT is satisfied that the tenant’s breach was a result of the tenant suffering financial hardship.

In the alternative, an aggrieved party may request the Small Business Commissioner to provide assistance to resolve the dispute or undertake alternative dispute resolution under the Small Business Development Corporation Act 1983 (WA).

Code of Conduct

Regulations are expected to be made under the Act adopting a code of conduct relating to small commercial lease principles during the COVID-19 pandemic. It is anticipated that the code of conduct adopted in Western Australia will be based on the Mandatory Code of Conduct released by the National Cabinet, which applies to tenancies in which the tenant has an annual turnover of up to $50 million and is eligible for the Commonwealth Government’s JobKeeper programme.

As at the time of writing this article, no code of conduct has not yet been adopted in Western Australia