The contents of this publication were correct as at the date of publication, 29 April 2020.
However, since that date, the State Government’s land tax package has been amended. Originally, the Small Business Development Commission website specified that in order to qualify for this land tax concession the landlord had to waive the tenant’s obligation to pay land tax for three months. This is no longer the case.
As a result, in order to qualify for this land tax relief, the landlord is required to waive the tenant’s obligation to pay rent (but not the obligation to pay outgoings) for three months.
The Commercial Tenancies (COVID-19 Response) Act 2020
The Commercial Tenancies (COVID-19 Response) Act 2020 (Act) came into effect on 23 April 2020.
The legislation was introduced to respond to the impacts of the COVID-19 pandemic on small commercial leases. It provides landlords and tenants in Western Australia affected by the COVID-19 pandemic greater clarity as to the way forward for their commercial tenancy arrangements.
Key concepts of the Act
The Act has 6 major concepts:
What is the Emergency Period?
The Act operates during the emergency period
What is a small commercial lease?
The Act applies to small commercial leases
A small commercial lease is any of the following:
What is a small business?
A small business is a business undertaking:
This is the definition contained in the Small Business Development Corporation Act 1983 (WA) (SBDC Act).
What is a prohibited action?
During the emergency period a landlord cannot exercise any prohibited action against a tenant under a small commercial lease that is regulated by this Act.
What is the code of conduct?
The National Code is not currently law in WA. It does not have legal effect in WA.
What is the dispute resolution process?
The Act includes a regime for the resolution of disputes, including “code of conduct disputes” and “financial hardship disputes”.
The SAT can make orders including:
If an application is made to the SAT for dispute resolution, the SAT must have regard to:
What protections are there for tenants?
During the emergency period in respect of small commercial leases:
What protections are there for Landlords?
Landlords can apply to the SAT for an order to terminate a lease where a tenant refuses to pay rent but is not experiencing financial hardship as a result of COVID-19.
Will tenants be able to terminate their leases?
The Act does not provide tenants with the ability to terminate their lease.
A tenant is in “severe financial distress” if:
“COVID-19 consequences” includes:
Land tax relief package
Commercial landlords may be eligible to receive a land tax relief grant where:
The relief is a grant of up to 25% of the landlord’s land tax bill for the qualifying property for the 2019 – 20 year.
The wording in the release is contradictory. However, we think that the rent relief and outgoings waiver is a full waiver of a tenant’s rent and outgoings for three months.
The relief is provided in respect of the property comprising the leased premises in respect of which the required Covid-19 assistance has been provided. It does not automatically apply to the whole of the landlord’s property portfolio.
Given that there is a cap on the total amount of the government land tax assistance, we think this benefit will be calculated on a single ownership basis. This is our impression as to how this benefit will be calculated – we have no hard evidence to support this conclusion.
The package places no obligation on the landlord to pass this land tax relief on to its tenants.
However, the terms of each lease will determine if the tenant is to receive any benefit from this land tax relief. Generally, the landlord can only recover outgoings to the extent they have been incurred by the landlord or charged to the leased premises. As a result, it is possible that tenants in the building the subject of this land tax relief may pick up a benefit from this land tax relief.
The total value of this land tax relief is capped at $100 million. It is allocated on a first in best dressed basis.
The Small Business Development Corporation will administer these grants.