This time in 2020, most landlords and tenants assumed COVID would disrupt them for only a few months. Many people reached agreements in that period that assumed that by September 2020 they would be back to normal. Unfortunately, while true for some, there are many who have not been so lucky. Tenants, landlords, businesses and investors across Queensland continue to struggle as their income has been impacted.
Initial Relief in 2020
Queensland was one of the slowest States to introduce COVID-19 Regulations to deal with rent issues. Eventually regulations were passed which provided a way forward. However, rather than providing clear answers, the regulations provided a framework for agreements to be reached.
For retail and commercial leases, the regulations prohibited landlords from terminating leases, cashing bank guarantees or starting proceedings for unpaid rent. These restrictions applied for the period up to 31 December 2020 for businesses who were still receiving JobKeeper in this period. Either party could seek to commerce negotiations about rent, and the parties were required to share information openly. The focus of these negotiations was the proportionate reduction in business turnover as compared to the year before.
For residential leases, the regulations imposed a moratorium on evictions for the period up to September 2020 for tenants suffering excessive hardship, and provided a framework for rent relief. Also, while during 2020 landlords of residential premises had relaxed maintenance and repair obligations, this ended on 30 April 2021.
Many parties did not reach formal agreements during this period, despite the regulations. Rather, affected tenants paid what they could, and landlord’s waited to see how the pandemic unfolded.
Current Situation
The COVID-19 legislation in Queensland expires on 30 September 2021, and the declared public health emergency currently runs until 29 June 2021. However, most COVID rent arrangements in place for leases currently have already ended. Commercial and retail lease evictions and enforcement actions have been possible since 31 December 2020. This includes locking out tenants, taking possession equiment, and cashing bank guarantees.
Since 1 October 2020 tenants could be evicted from residential leases even if they were still under excessive hardship. Landlords can issue a notice to remedy breach to a tenant who has a rental debt accrued during the pandemic period. Banks also gave landlords moratoriums on mortgage payments, and many of those arrangements were for six months and have now ended.
In practice, parties have continued to work together this the expiry of these periods. If tenants are being open and realistic, and paying a reasonable amount in the circumstances, most landlords have been accommodating. However, due to either the landlord’s own obligations or the reasonable evaluation of the tenant’s circumstances showing that recovery is unlikely, resolution may be required.
Approach to Continuing COVID Hardship in 2021
For business leases, if the parties have tried and failed to reach an agreement on rent reduction, mediation is an option. Mediation is started by sending a dispute notice to the small business commissioner. If mediation is unsuccessful, parties can apply to have the Queensland Civil and Administrative Tribunal (QCAT) decide the dispute. QCAT can decide disputes worth up to $750,000.
Landlords of retail and commercial tenants should start to assess their options if an amicable solution appears unlikely. Landlords have the option to enforce debts, terminate leases and take further action. While legally they may be able to recover and re-let the tenancy, business tenants have been hard to find in many areas. A landlord may take steps towards appointing a liquidator to a commercial tenant with unpaid debt. They may also seek to enforce guarantees from directors, to force payment. At this point, landlords will likely want to review their rights and security over equipment, chattels and inventory on the premises. Directors of tenants in this situation should seek advice to protect their interests.
For residential tenancies, the Residential Tenancies Authority offers a conciliation service to attempt to resolve disputes. Residential landlords technically also have the ability to commence debt recovery proceedings against tenants, but this is rare. Generally, their focus is on ending the tenancy first. For residential tenancies, an application to the Queensland Civil or Administrative Tribunal may need to be made before recovery of the premises can occur. However, if the tenant is able to pay and is simply recalcitrant, debt recovery may be an option. Until 30 September 2021, listing a tenant is a database for debts accrued due to COVID-19 is not permitted.
Tenants may have options to challenge actions to end the tenancy, particularly if the calculation of the alleged debt is disputed. Landlords who fail to follow the legislated requirements around notices of breach and documentation may find their decisions challenged. Specific notice periods always apply. For business leases, the landlord can often enter the premises and change the locks if the breach continues.