The Reasonable Recovery Period
Following adoption of the National Cabinet Mandatory Code of Conduct, the NSW Government enacted 3 Regulations to provide rental relief for most tenants. The relief period for commercial tenants ended on 31 December 2020 and for retail tenants, on 28 March 2021.
There is however no doubt that many tenants, both retail and commercial, continue to feel the financial impact of the Covid-19 pandemic. The most obvious example are tenants whose livelihood depends on tourism.
Although the primary purpose was providing rental relief during the worst of the pandemic (when many tenancies were forced to close), the Federal Cabinet also envisaged that relief should apply during a “reasonable recovery period”.
Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (as outlined under “definitions,” below) of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period.
What is a reasonable recovery period and when does it start?
Although not defined, the reasonable recovery period is probably the period it will take a tenant’s trade to reach near parity with pre-Covid numbers. In most cases it will start after the expiry of the relevant Regulations (1 January 2021 for commercial tenants and 1 April 2021 for retail tenants).
Who is eligible for relief during the reasonable recovery period?
In order to be eligible, a tenant would need to show it:
qualified as an impacted tenant under the applicable Regulation; and
commenced negotiations with its landlord for rental relief before the applicable Regulation ended but has not completed those negotiations.
How long is the reasonable recovery period?
There have been no formal judicial pronouncements on this issue. In the only relevant case, the NSW Supreme held a reasonable recovery period was 6 months after the end of the Regulation but only because that’s all the tenant asked for. It could be much longer depending on the circumstances. For example, a college for foreign students might argue its reasonable recovery period would only end when there were no international travel restrictions.
Claims may still be made
The important takeaway is that eligible tenants might still be able to claim rental relief until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government) or expiry of its lease.