COVID-19 and Commercial Leases – Twin Creek Holdings Pty Ltd and BB Applecross Pty Ltd [2021] WASAT 93

Emergency period rent recovery – what are the landlord’s rights?

The recent decision of Twin Creek Holdings Pty Ltd and BB Applecross Pty Ltd, delivered by the State Administrative Tribunal, is one of the few cases dealing with the Western Australian COVID-19 rental relief legislation. It provides assurance to landlords that it is possible to recover emergency period unpaid rent where tenants do not meet rent relief requirements.

Background

BB Applecross Pty Ltd (the tenant) conducted a Pilates studio under a small commercial lease. Due to the COVID-19 pandemic, the tenant’s business was closed on 23 March 2020 and operations were restricted until 2 December 2020.

The restrictions to the tenant’s business were imposed pursuant to the Public Health Act 2016 (WA), the Emergency Management Act 2005 (WA) and the WA State of Emergency Declaration.

The tenant did not pay any rent from April to September 2020 but did pay outgoings.

The Dispute

Twin Creek Holdings Pty Ltd (the landlord) applied to the Tribunal, pursuant to section 16 of the Commercial Tenancies (COVID-19 Response) Act 2020 (WA) (the Act) for the determination of a dispute with the tenant.

The landlord claimed:

  • all rent due for the months of April to September 2020;
  • interest on unpaid rent as per the conditions of the lease; and
  • sought an order requiring the tenant to ‘provide meaningful financial information’ to determine rent relief as referred to in the Act and the Code of Conduct adopted by the Commercial Tenancies (COVID-19 Response) Regulations 2020 (WA).

The landlord argued the tenant was not an ‘eligible’ tenant to claim rent relief and claimed the tenant did not suffer any financial hardship over the disputed period. The landlord stated the tenant was able to continue receiving revenue during the disputed period as they diverted their classes to its alter ego, BB Online.

The landlord further stated the tenant was in a ‘group’ comprising 20 companies and the landlord was therefore entitled to all financial information of the ‘group’ to determine if there was a decline in revenue meeting the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (WA), r 7 and r 8, (JobKeeper legislation).

The tenant disagreed with the landlord’s claims and stated that the exact owing amount to the landlord was unclear.

The hearing

At the December hearing, the parties agreed the tenant did not pay rent for the period from April to September 2020. The total amount owing for this period was $51,935.31. There was also a dispute about the energy consumption outgoings ($9,921.81), but at this hearing the landlord agreed that the electricity outgoing should not be passed to the tenant.

The final contentions comprised two issues:

  • Whether the rent for the period April, May and June 2020 totalling $17,311.77 should be the subject of rent relief. The tenant contended the sum of $4,147.63 should be waived and a further $4,147.63 should be deferred and amortised over two years.
  • Whether the landlord was entitled to claim interest on unpaid or late-paid outgoings and rent.

The Tribunal’s decision

The Tribunal dismissed the interest claim under section 9 of the Act, which prohibits landlords from requiring a payment of interest on unpaid rent during the emergency period.

The Tribunal established there was insufficient evidence to prove that the tenant was a part of a company ‘group’. They also found that the tenant’s substituted services during the emergency period were not the same services the tenant was providing prior to the emergency period and the tenant did in fact suffer a decline of 30% turnover in the months of April and May. On that basis, the tenant was an eligible tenant to receive some rent relief for the purposes of the Act. However, there were still amounts outstanding which were owed to the landlord.

Regarding rent for the period from April to June 2020, this was reduced and rent relief pursuant to the Act was granted. The tenant was required to pay a reduced rent of $8,038.45. Half that amount was waived and an equivalent payment was deferred until 31 August 2021.

Finally, the amount of $17,311.77, in respect of July to September 2020 rent, was ordered to be paid to the landlord as the tenant offered no reason as to why the rent was unpaid.

Key takeaways

To be entitled to rent relief under the COVID emergency legislation, tenants must provide adequate information and a basis for their claim. Where tenants are eligible for rent relief, landlords can still seek recovery of any portion of rent which should have been paid.