WA Commercial Tenancies (COVID 19 Response) Act 2020 Commences

On 23 April 2020, the Western Australian Commercial Tenancies (COVID-19 Response) Act 2020 (the Act) was assented to, with Parts 2 and 3 of the Act (dealing with terminology and with prohibited actions) being deemed to have commenced on 30 March 2020 and the remainder commencing on 23 April 2020. The main purpose of the Act is to create a "moratorium on evictions for small commercial tenancies". The Act also incorporates a range of other measures to provide urgent relief for commercial tenants in response to the COVID-19 pandemic and includes a mechanism for the introduction of a code of conduct for landlords and tenants.

Overview of the Act

The Act introduces a range of measures to provide for urgent relief for commercial tenants in response to the COVID-19 pandemic and provides for the following in relation to small commercial leases:

• a six month moratorium on termination for certain breaches;
• a freeze on rent increases;
• a restriction on penalties for tenants who do not trade or reduce their trading hours;
• a prohibition on landlords charging interest on rent in arrears;
• a prohibition on landlords making a claim on any form of security (for example, a bank guarantee or security deposit) for the performance of the tenant’s obligations under the lease; and
• a prohibition on landlords progressing proceedings against a tenant for a breach that occurred after the COVID-19 restrictions were implemented, but before the new laws come into operation.

Additionally, the Act provides for:

• the adoption of a code of conduct for landlords and tenants under certain commercial leases; and
• a dispute resolution mechanism for disputes arising out of, or in relation to, the operation of the new legislation or the code of conduct

The Act provides that the new measures will be in place for the period prescribed by regulations or if no period is prescribed, for a period of six months.

Some of the Key Provisions

Application of the Act: The Act provides in section 5 that it has effect despite anything to the contrary in any other written law of Western Australia. Section 6 provides that the provisions of any lease or any other contract or agreement is taken to be modified to give effect to the operation of the Act. The Act provides in section 7 that a lease or any other contract or agreement, has no effect if it restricts the operation of the Act and also that "any attempt to waive a right, remedy or benefit provided to a person under the Act has no effect".

Prohibited Action: For the purposes of the Act, section 8 provides that the term "prohibited action" means an action "under or in respect of a small commercial lease" (and that such includes seeking orders, or commencing proceedings in a court or tribunal) in relation to a number of specified actions which are:

• eviction of the tenant;
• exercising a right of re-entry;
• possession;
• recovery of land;
• distraint of goods;
• forfeiture;
• termination of the small commercial lease;
• damages;
• requiring a payment of interest on unpaid rent, or other unpaid amount of money payable under the commercial lease (including operating expenses);
• recovering the whole or part of any security under the small commercial lease (including a security bond);
• requiring performance of obligations under a guarantee, including making a demand on a bank guarantee; or
• any other remedy against a tenant at common law or under a written law.

The Act provides (in section 9) that except in the circumstances (if any) prescribed by regulations that a landlord is prohibited from taking a prohibited action against a tenant during the "emergency period" for a breach of a small commercial lease that occurs during the emergency period and consists of:

• a failure to pay rent or any other amount owing under the lease including operating expenses;
• not opening their business at the hours or times specified in the small commercial lease; or
• any other act or omission that is prescribed in the regulations.

Acts or Omissions: The Act provides that any action (or inaction) by a tenant that may be required by law in response to COVID-19 is "not to be regarded" as:

• a breach of a small commercial lease; or
•  grounds for termination of a small commercial lease; or
• grounds for the taking of any prohibited action under or in respect of the small commercial lease (section 10).

Rent increases: The Act (section 11) prohibits any increase in rent during the emergency period with an exception for rent or a component of rent determined by reference to turnover.

Code of Conduct: The Act provides a  power for the regulations to the Act to adopt a code of conduct relating to commercial leasing principles during the COVID-19 pandemic. The mechanism for adopting a code of conduct includes incorporating the code of conduct in the regulations or by reference and enables the regulations to provide for:

• an adopted code of conduct to apply to a specified person or class of lease;
• for a specified class of persons to comply with the adopted code of conduct; or
• in a specified manner.

Resolution of Disputes: Part 5 of the Act provides the process for the resolution of disputes between the landlord and the tenant by way of the Small Business Commissioner and reference to the State Administrative Tribunal.

The Act is to be repealed at the end of a period of 12 months, which begins on the day after the day on which the emergency period ends (section 25).

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Commercial Tenancies (COVID 19 Response) Act 2020 No. 19 of 2020 as reported in the TimeBase LawOne Service.

Commercial Tenancies (COVID-19 Response) Bill 2020, second reading speech and explanatory memorandum as reported in the TimeBase LawOne Service.

Commercial Tenancies (COVID-19 Response) Act 2020 (WA) [Written by Teresa Lusi (Special Counsel), Louise Dinnie (Law Graduate) - April 2020]

COVID-19: Australia New WA COVID-19 Laws Sets Wider Net for Impacted Landlords/Tenants [The National Law Review - 28 April 2020]