Negotiating commercial rent and other conditions from 28 March to 31 Dec 2020

If your business suffered a reduction in turnover due to the COVID-19 emergency during the response period (29 March 2020 to 30 September 2020) and/or the extension period (1 October 2020 to 31 December 2020), you may be eligible to negotiate rent relief with your landlord as an affected lease under the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (the Regulation).


Your lease was an affected lease if it meets all of the following criteria:

  • it was a retail shop lease or prescribed lease (a lease, other than a retail shop lease, where the leased premises are wholly or predominantly used for carrying on a business).
  • it was binding on the tenant on 28 May 2020. This includes any form of lease, sub-lease, license or other agreement to occupy premises (e.g. month-to-month, verbal, agreement to enter into a lease etc.) all of which are considered binding on the tenant.
  • the tenant under the lease was a small and medium enterprise (SME entity) that carried on a business (or non-profit activity) in the current financial year and had a turnover that was:
    • less than $50 million for the 2019–20 financial year
    • and/or
    • likely to be less than $50 million for the 2020–21 financial year
  • the tenant under the lease was eligible for, but was not necessarily enrolled in, the JobKeeper Payment scheme (specifically, for the response period: the tenant meets rules 7 and 8 of the scheme, for the extension period: was eligible for the scheme for the period starting on 28 September 2020 and ending on 4 January 2021).

Under the Regulation, both the tenant and landlord are required to cooperate and act reasonably and in good faith in all discussions and actions to mitigate the effect of the COVID-19 emergency. This means:

  • responding to each other's requests in a reasonable way
  • being honest and providing information that is accurate
  • making a genuine attempt to reach an agreement
  • sharing, in a proportionate and appropriate way, any financial impact or risk
  • taking reasonable steps to resolve a dispute (such as mediation).

There are consequences if either party does not make a genuine effort to negotiate.

Before starting negotiations, each party should work out what amount of rent reduction is reasonable for their own financial circumstances. You can contact the free Small Business Financial Counselling Service in Southern Queensland or North Queensland.

You may need to seek your own independent legal or financial advice.

Negotiating rent and other conditions of the lease

There are 5 steps that tenants and landlords should follow when negotiating rent relief for a small business with an affected lease.

Either party (tenant or landlord) to the lease may ask the other party to negotiate the rent and other stated conditions of the lease. Your request must include a clear statement about the terms of the lease you are seeking to negotiate (e.g. rent, outgoings, extending the lease term).

You can use our templates for tenants and for landlords to start a conversation.

If you are a landlord and your tenant refuses to respond or negotiate, you can use our email template to write to your tenant to explain what the consequences could be.

If you receive a request to negotiate from your tenant or landlord, you must share information that is true, accurate, correct and not misleading. The information must also be sufficient to enable all parties to negotiate in a fair and transparent way.

The information shared must not be disclosed by either party except where permitted under section 20 of the regulation.

Examples of information tenants could share

  • Accurate financial information or statements about the reduction of turnover of your business. For example:
    • the business activity statement(s) (BAS) for the relevant month(s) during the response period or the extension period and the BAS for the same month(s) in the previous year. If you do not submit BAS, a statement containing the equivalent financial information is required
    • expenses that have substantially increased (or have been deferred, waived or suspended) due to the COVID-19 emergency.
  • Evidence showing that your business is an SME entity.
  • Evidence that your business is eligible for the JobKeeper Payment scheme (e.g. results of the Australian Taxation Office (ATO) JobKeeper turnover test, JobKeeper enrolment receipt from the ATO).
  • Information about any steps you have taken to reduce the financial impact of the COVID-19 emergency (e.g. government financial assistance applied or received).

Examples of information landlords could share

  • A statement explaining the costs of owning and maintaining the leased property.
  • Accurate financial information or statements about your financial position in relation to the leased premises. For example:
    • the business activity statement(s) (BAS) for the relevant month(s) during the response period or extension period or, if you don't use BAS reporting, a statement containing the equivalent financial information
    • expenses that have substantially increased (or have been deferred, waived or suspended) due to the COVID-19 emergency.
  • Information about any steps you have taken to reduce the financial impact of the COVID-19 emergency (e.g. government financial assistance applied for or received).

Information neither party should ask for

  • Future cash flow projections
  • Balance sheets, profit and loss or year to date financials
  • The tenant or landlord's bank balance
  • Trust account information
  • Evidence of refusal or ineligibility for government financial assistance packages
  • Requiring a party to have financial information verified, examined, assured, or audited by a third party such as an accountant
  • A letter of comfort or similar from an accountant on the financial information
  • Documentation that is considered onerous, for example where the provision of the information involves incurring a fee to produce or access

The landlord must make an offer about rent (and other lease conditions) to the tenant within 30 days of sufficient information being received.

During the response period, at least 50% of the rent reduction offered must be waived as a discount, and the remainder of the reduction deferred to be repaid by instalments after 30 September 2020. For offers related to the extension period this requirement doesn't apply. Nothing prevents a landlord and tenant from negotiating a different way of passing on a reduction.

As a landlord, you should consider your own financial position when offering an amount of rent reduction, however your offer must be made in good faith and generally proportionate to the tenant's loss of turnover.

Rent reductions for affected leases can cover all or part of the response period and/or the extension period. Rent reductions could be set or variable to allow for changes in the tenant's turnover during this time (there is no minimum or maximum reduction amount).

If a landlord has benefited from a reduction in outgoings for the leased premises, these benefits should be passed on to the tenant (as an example of good faith).

Once the landlord has made an offer, the tenant may accept or the parties may negotiate.

When negotiating rent and other conditions, understand that:

  • both parties should contribute to mitigating the impact of the COVID-19 emergency
  • providing rent relief will improve recovery and benefit both parties in the long term
  • everyone's circumstances are different and there is no single solution.

Use our commercial rent relief negotiation checklist to help with these negotiations.

Once you have reached an agreement (a settlement agreement) about a rent reduction and any proposed changes to other stated conditions, it must be recorded in writing. This can be in the form of a variation to the lease agreement, a signed settlement agreement, or a simple exchange of emails.

The agreement should include:

  • a statement that the agreement is made under the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020
  • when the agreement starts and finishes (including the months of the response period and/or extension period that it relates to)
  • the amount and arrangements of the rent reduction (e.g. waivers, deferrals, timing)
  • the arrangements for repaying any deferred rent (e.g. when repayments start, the amount and frequency of the repayments, and the final repayment date)
  • any changes to other lease conditions (e.g. outgoings, services, lease term)
  • if or when the agreement will be reviewed (e.g. who will review it, how, when and based on what information)
  • what happens if either party does not uphold their part of the agreement.

If the other party refuses to respond or negotiate, or you are unable to reach an agreement, you can contact us and we will help you find the best solution.

Example rent relief negotiations

Lucas runs a gym and has experienced a 100% reduction in turnover since being forced to close because of COVID-19 restrictions during the first few months of the response period.

Lucas emailed the landlord Malcolm asking to negotiate the rent, namely a 100% rent reduction. Malcolm considers this request, and his own circumstances. Malcolm explains to Lucas that he has to pay a mortgage, rates and insurance on the property and that the rent is his only form of income as a retiree. Malcolm provides information to Lucas demonstrating that he has unavoidable costs for the property.

Malcolm offers Lucas a 75% rent reduction comprised of a 40% waiver and a 35% deferral to be paid after 30 September 2020. Lucas and Malcolm enter negotiations and go back and forth. Lucas and Malcolm decide upon an 80% rent reduction comprised of 45% waiver and 35% deferral. Lucas continues to pay 20% of the rent until 30 September.

Lucas has been able to run one-on-one personal training sessions and approached his bank for a small overdraft. Lucas starts to repay the deferred amounts after 30 September, spread over a 2 ½ year period as agreed.

During the extension period, Lucas' business has recovered (as he now runs online classes and boot camps outside) and he now only has a 20% reduction in turnover so returns to paying full rent as Malcolm's costs have not changed. In response to Lucas' good faith, Malcolm offers to help out a little more by covering some of the outgoing costs until 31 December 2020.

Barb owns a business that is the tenant on leases for a pub and a detached bottle shop. The pub has closed due to COVID-19 restrictions and has had a 100% decline in turnover during the first few months of the response period. The bottle shop is still open and continues to suffer a 20% decline in turnover.

According to the JobKeeper turnover test, Barb's whole business (the lessee under the leases) has suffered a combined decline of 60% and she has therefore determined her business is eligible for JobKeeper. Barb's business meets the other requirements to be considered an affected lease.

Barb phoned George, the landlord of the bottle shop and asked to negotiate a rent reduction. Barb provides the information used in the JobKeeper test that shows her whole business has suffered a 60% decline in turnover. George has had a reduction in some outgoings which he has passed onto Barb already.

George takes this into account and his own financial position and decides to offer Barb a 40% reduction in rent for the detached bottle shop, comprised of 20% waived rent and 20% deferred rent for the response period. In negotiating, Barb, shows George some information from her bank and explains that a 40% rent reduction is unaffordable.

They keep negotiating until George and Barb settle on a 50% rent reduction comprised of 30% waived rent and 20% deferred rent for the response period. As a result, Barb only has to pay 50% of the bottle shop rent to George during this time and will repay the deferred amount later.

At the same time Barb approaches the lessor of the pub, Venue Holdings, for a rent reduction. Venue Holdings offers to reduce the rent by 100% while the pub is closed but asks Barb to keep paying outgoings during the response period. They agree to waive 75% of the rent with the remaining 25% deferred until after the pub reopens for business. In the meantime, Barb continues to pay the outgoings for the pub as required by the lease.

During the extension period, Barb reviews her financial position and notes her business is still eligible for JobKeeper, her pub is still down on turnover, however the bottle shop is booming. The bottle shop landlord, George, advises Barb they will not negotiate any further reductions which Barb accepts. Barb contacts Venue Holdings and provides an update on her businesses. Venue Holdings offers to continue a reduced rate of rent. Barb offers to replace some of the amount being waived by Venue Holdings, with it being deferred instead.

Kylie is unable to work but owns a shed she rents out to a printing business owned by Sharon. The rent she receives and a small monthly payment from her superannuation fund are Kylie's sole sources of income. Kylie hasn't heard from Sharon since she rang and left a message saying she managed to pay April's rent but couldn't pay rent for May. Kylie has received no rent since then.

Kylie cannot pay her bills so she emails Sharon explaining that she would like to negotiate the rent for the response period under the regulations. She asks Sharon to provide some evidence of her decline in turnover and other information showing the lease is an affected lease. Sharon has been struggling as jobs have dried up in her small regional centre and shares information with Kylie showing that her turnover has reduced by an average of 60% since April.

Kylie offers Sharon a 60% reduction in rent for the response period of which 30% is waived and 30% is deferred, to be paid back from 1 October 2020 as an extra $400 each month until paid off. Kylie goes on to offer to review the situation for the extension period on a monthly basis provided Sharon provides her turnover figures on the last day of each month but that she cannot continue to offer a large reduction due to deferred loan repayments restarting.

Kylie explains that for the extension period the offer is a 10% waiver of rent for every 20% reduction in turnover with the balance of rent and deferred repayments to be paid as normal. Sharon has started adjusting her business to find new revenue streams and to reduce costs and recognises that if Kylie cannot make her loan repayments then the lease will be in jeopardy. They finalise their agreement and ask a third party to record it in a settlement agreement which they both sign.

Grace is the landlord of a restaurant run by Luca. Luca had to close the restaurant in March and April during the response period. When Luca closed, he paid no rent for April and re-opened the restaurant for takeaway service in May. Luca has misunderstood the Prime Minister's announcement about commercial rent relief and thinks he is automatically entitled to a 50% discount of rent. He doesn't realise rent relief is a negotiated agreement between a landlord and tenant. Luca has told Grace that he only needs to pay 50% rent until the end of September.

Grace calls Luca to discuss the rent and refers him to the Queensland Small Business Commissioner's website information, pointing out the 5 phases of negotiating rent relief under the Regulation. As per phase 2, Grace requests to see Luca's BAS for the months he is seeking rent relief in 2020, compared to the same periods in 2019, so that she can see the portion by which Luca's turnover has declined. Luca refuses to share this information. He (incorrectly) insists that he is entitled to a 50% rent discount until Christmas and tells Grace she can't do anything about it.

Grace writes to Luca and tries to phone him several times to try and negotiate a rent reduction for the response period and extension period however Luca refuses to respond to the emails and won't answer his phone. Grace decides to use the email template provided by the Queensland Small Business Commissioner (QSBC) to write an email to Luca. The email explains the changed rights and responsibilities of each party under the Regulation. Grace encourages Luca to communicate and explains to him that he is not complying with his obligations under the Regulation and she could lawfully evict him.

When Luca receives Grace's email, he checks the QSBC information and realises he was wrong. Luca sees that he should have asked for a rent reduction, shared some reasonable information and negotiated a fair agreement with Grace. Luca also realises that Grace could lawfully evict him as she has made a genuine attempt to negotiate but he has not cooperated or acted in good faith.

Luca decides to share the requested information and phones Grace the next day to apologise and ask when she would be available to negotiate an agreement.

Other requirements for affected leases

Tenants who have negotiated a rent reduction with deferred rent during the response period do not need to start repaying the deferred rent until after 30 September 2020, or for deferrals during the extension period until after 31 December 2020 (unless agreed otherwise).

Deferred rent can be repaid by instalments, using a method both parties agree to. The repayments can be spread over a period of at least 2 years but no more than 3 years.

Despite the lease provisions (or any lawful termination of the lease), the landlord may continue to hold the security deposit until the deferred rent has been repaid; however, provided the tenant complies with the repayment conditions, the landlord must not charge interest or any other fee on deferred rent.

Under the Regulation, a landlord cannot take a prescribed action against a tenant with an affected lease who fails to pay rent or outgoings or is not open for trade during the response period or extension period. This includes taking such action after either of the periods. However, this does not mean that a tenant doesn't have to pay anything or otherwise comply with their lease.

A prescribed action is the starting of court or tribunal (such as the Queensland Civil and Administrative Tribunal (QCAT)) proceedings for any of the following lease (or other agreement) situations:

  • recovery of possession
  • termination of the lease
  • eviction of the tenant
  • exercising a right of re-entry to premises
  • seizure of any property, including for the purpose of securing payment of rent
  • forfeiture
  • damages
  • the payment of interest on, or a fee or charge relating to, unpaid rent or outgoings
  • a claim on a bank guarantee, indemnity or security deposit for unpaid rent or outgoings
  • the performance of an obligation by the tenant or another person under a guarantee under the lease
  • exercising or enforcing another right by the landlord under the lease or other agreement relating to the leased premises.

If you have made a genuine attempt to negotiate and your landlord has proposed to take a prescribed action against you, you can use our email template to write to your landlord. If the landlord takes a prescribed action during this time, you can apply directly to the Queensland Civil and Administrative Tribunal (QCAT), or make an application to the appropriate court for an order to stop your landlord taking this action.

During the response period and extension period (from 29 March to 31 December 2020), a landlord can take action against a tenant (e.g. eviction) provided it does not relate to not paying rent, not paying outgoings, or not being open for trade during the response period or extension period. For example, a landlord can take action if the tenant has:

  • unpaid invoices before 29 March 2020
  • otherwise breached the lease
  • wilfully damaged the property.

Tenants and landlords can follow the steps to resolving business disputes and, if you are still unsure about what to do, the Queensland Small Business Commissioner encourages you to seek independent legal advice about your options.

Note: The Queensland Small Business Commissioner provides general information and guidance in relation to small businesses in Queensland. We do not provide specific financial or legal advice. We cannot compel people to do certain things and cannot make rulings or decisions about disputes.

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