Commercial Leases: Relief on the Horizon
With the recent change to Alert Level 2 we are still advising a number of commercial landlords and tenants during this challenging time. The Government has signalled that they are investigating other measures to assist commercial landlords and tenants. In the meantime, the Government has introduced the COVID-19 Response (Further Management Measures) Legislation Bill into Parliament. This Bill's proposed changes include an extension to the notice period that typically applies for cancellation of a commercial lease for non-payment of rent.
Default notice period
The Property Law Act 2007 allows a landlord to cancel a lease for a failure to pay the rent only if:
1. the rent has been in arrears for not less than 10 working days;
2. the landlord has served on the tenant a notice of intention to cancel the lease which provides a notice period of at least 10 working days (these periods can overlap) and complies with the requirements of the Act; and
3. at the expiry of the period specified in the notice, the breach has not been remedied.
COVID-19 relief period
If enacted, the Bill will change the timeframes of 10 working days set out above to 30 working days. This is intended to provide tenants with an opportunity to catch up on any missed rental payments and to also provide the parties with an opportunity to negotiate a compromise that works for both landlord and tenant.
As it is currently drafted, the Bill provides that the extension of these timeframes applies to enforcement action (which includes a notice of intention to cancel) taken between 1 April 2020 and the date six months after the Epidemic Preparedness (COVID-19) Notice 2020 expires or is revoked. In other words, it is best for all parties to assume that this notice period applies now and will apply for a while to come.
It is important when dealing with commercial leases that the formalities are adhered to and that every landlord and tenant are familiar with the terms of their lease. At Corcoran French we have a number of property experts who can assist you with any questions or concerns you might have regarding your commercial lease.