While we hear a lot of talk about the NSW COVID-19 Grants, JobSaver and the federally administered COVID-19 Disaster Payment as the suite of assistance available to small business, the subject of rent relief has not gained the same headlines and media attention. There is a great deal of confusion about how the rent relief packages work and I am sure many businesses have been too overwhelmed to look into this.
For the majority of small businesses, their two largest costs (apart from the cost of the goods they sell) are wages and rent. The COVID-19 Disaster Payment is designed to cover the wage expense, but what happens with rent? Is this meant to be covered by the Grant and Jobsaver? What if you are still struggling to meet this expense?
The big issue is that that rent relief follows a Code of Conduct, not a defined set of rules. I think back to high school were we had a code of conduct, but not everyone abided by it. It was not the law, it was an expectation, and that is why the National Cabinet’s Code of Conduct is not as simple to access. It required you to negotiate with your landlord and come to an agreement. If that negotiation fails then you need to take it further (maybe you tell the Playground Duty Teacher), but that doesn’t guarantee an outcome.
The first step to gaining any rental relief is to open the negotiation. You need to contact your landlord or your landlord’s property manager to start the conversation.
Like any good negotiation, you should come to the table armed with facts. Right now, you do a have a few tools that can help your negotiation. Remember, landlords are not necessarily small business owners. They most likely cannot get COVID-19 Grant or Jobsaver, and they possibly can’t get the Disaster Payment either. You are asking them to give up your rent because the Code of Conduct says they should. It would be very helpful if you can help them understand there is some help for them too.
What the Code of Conduct suggests
The following words come directly from the website https://www.smallbusiness.nsw.gov.au/get-help/covid-19/commercial-leases-and-covid-19-faqs
Under those principles, property owners are required to offer tenants rent relief proportionate to the tenant’s decline in turnover. Waivers should make up at least 50 per cent of any rent relief provided. Rental deferrals make up the balance.
The rental deferrals can be made up over a period of two years or the remaining life of the lease – whichever is greater. Some tenants may already have this in place from the first lockdown and need to renegotiate the deferral from that as well.
Your landlord has a right for proof that your turnover has been impacted so that they can work out the adjustment required (and work out that the relief is legitimate). Anticipate the need to provide this information and provide it with your request to expediate an outcome.
Read the Small Business NSW Facts and Questions weblink above as it contains some helpful information. Know your facts before you ask.
What assistance is there for the landlord?
It could be helpful to direct your landlord to the assistance available to them. The assistance can be in the form of land tax relief or access to a payment of up to $3000 per month from the Hardship Fund.
The land tax reduction is obviously only available to landlords who pay land tax, and most of those who have a 2021 land tax liability should have paid this already for the year. Revenue NSW will refund up to 100% of the 2021 land tax liability or reduce the land tax payable in line with the amount of the rent reduction given to the tenant.
This is available now through Services NSW at the link below. There are a number of things you will need to provide in the application, including information to show your tenant was eligible for either the Microgrant, the Grant or Jobsaver, along with other eligibility criteria. Below is the link to the information and the application.
Not every commercial landlord pays Land Tax, so a $40m Hardship Fund has been established providing relief of up to $3000 per month for landlords impacted. The landlord need to show that their primary source of income is from rent, along with a bunch of other criteria.
This fund has not been opened as yet but it will be available in October. You cannot apply for both Land Tax relief and this payment, so a decision must be made for the best option. For more details see the website below.
What if we can’t come to an agreement?
If you cannot reach an agreement with your landlord you are entitled to apply to the Small Business Commissioner for dispute mediation. While hopefully it will not come to that, if you do need these services below is a link that explains how mediation works.
We know it is tough out there, both for the tenants and the landlords. Being informed about the relief available as a tenant or as a landlord will hopefully help both parties to come to a reasonable outcome.