The NT Tenancies Legislation Amendment Act 2020 (Business tenancies)

The following is intended to provide commentary and general information only in relation to this topic as at 27 April 2020. It is not legal advice.  Every effort is made to ensure the content is accurate; but no warranty is made as to the accuracy, currency or completeness of its content at any time.

What is it about? 

The (NT) Tenancies Legislation Amendment Act (TLAA) has commenced and the Minister will shortly issue “Modification Notices” that will prevail wherever the matters in the MN are inconsistent with the (NT) Business Tenancies (Fair Dealings) Act (BTFDA) and leases.

This is related to the public health emergency declared in March.  On 18 Mar 20, the Northern Territory (NT) Minister for Health under the (NT) Public and Environmental Health Act (PEHA) declared “a public health emergency for the whole of the Territory arising out of the serious public health risk from Novel coronavirus (COVID-19)” (Declaration).   The Declaration was extended for 5 days from 23 Mar 20.  On 27 Mar 20, after amending PEHA to allow for this, the Declaration was extended for 90 days from 28 Mar 20 (ie to 26 Jun 20).  For further information about PEHA, please see RLA update on that.

The TLAA was passed by NT Parliament on Fri, 24 Apr 20 and received assent from the NT Administrator the same day.  It commenced 25 Apr 20.  The changes made by the TLAA will (temporarily) amend the BTFDA. These changes, discussed below, will only be in place for the duration of the Declaration.   However, the Minister also said this will be for the “duration of the COVID-19 emergency and the recovery phase.”

The TLAA:

  • sets the basis for the Minister deciding what to do about leases and occupation arrangement.  The details will be provided in the “Modification Notice” (MN).
  • gives the Minister a considerable amount of power to make wide ranging changes to leases under the BTFDA and “occupation arrangements” (an arrangement relating to occupying premises for business purposes that the BTFDA does not cover).

What do you need to know?  

Because of legal constraints in the Northern Territory (we are not a State and we are subject to an overarching law of the Australian government), the NT cannot “impose measures such as a moratorium on evictions, rent waivers and rent freezes.” 

However, while the Declaration remains in force, the Minister has broad power to do many things, including make a MN.  The MN will override the provisions of a business lease or an occupation arrangement. 

For the period during which a MN is in force, a provision of a business lease or occupation arrangement is set aside to the extent that the provision is inconsistent with a provision of the notice.    In case any Landlord believes the operation of the MN would “result in an acquisition of property from a person otherwise than on just terms” then the person can apply for compensation.

Modification notice

In the MN, the Minister can “do any or all” of the following, including to:

  • suspend or modify all or part of the BTFDA and regulations made under it.
  • make provisions to regulate a business premises or a business lease to which the BTFDA applies and an occupation arrangement (an arrangement for the occupation of premises for business purposes that is an arrangement to which the BTFDA does not apply).
  • make provisions “in relation to matters ancillary to business premises, business leases or occupation arrangements, such as limitations or other modifications regarding the awarding of costs in court or tribunal proceedings hearing and determining disputes.”

Negotiations and alternative dispute resolution (ADR)

The MN may “require that a landlord must engage in a minimum period, not longer than 30 business days, of good faith negotiation with a tenant before the landlord issues a notice to quit premises.”

If, during the period of the Declaration, application is made to the Local Court for a warrant of possession of business premises, the Local Court must do one of two things – unless there are “exceptional circumstances, send the matter to NTCAT or allow the parties to engage in private mediation.

Where there is a private mediation, the mediator needs to advise the Local Court the date the mediation concluded and whether it was successful.  If successful, the application for the warrant “is taken to be withdrawn”.

Where the Local Court refers the matter to NTCAT for ADR:

  • if the ADR is successful, NTCAT is required to notify the Local Court settlement has been reached and “the application for a warrant of possession is taken to be withdrawn”.
  • if the ADR is not successful, NTCAT must notify the Local Court that it was satisfied “the applicant has participated in good faith in” ADR but “a settlement could not be reached”.  In any event, NTCAT needs to notify the Local Court if settlement is not reached within 60 days of the Local Court referring the matter to NTCAT.

If “the Local Court is considering the matter of costs in a proceeding, the court may request from NTCAT a report on the conduct of the parties in alternative dispute resolution proceedings before NTCAT.”

Termination of tenancies

As noted above, the MN “may require” that a landlord enter into good faith negotiations with a tenant before a notice to quit is issued. Division 5 of Part 8 of the Law of Property Act (LPA) sets out the notice requirements and time periods to terminate weekly, monthly, yearly and other tenancies.  If a business lease is for a period of 3 months or more, and the MN requires the Landlord to engage in negotiations for a minimum period, then the time for giving notice under the LPA “is extended by the same period as that required for the negotiations”.

Court proceedings – retail tenancy claims

BTFDA provides a “retail tenancy claim may be the subject of proceedings before a court only if a certificate is issued in relation to the claim”.   The Commissioner can issue a certificate, among other things, because “the parties have failed to resolve the retail tenancy claim and are unlikely to do so”. 

Usually, the Supreme Court has jurisdiction to deal with retail tenancy claims of a disputed matter involving in excess of $10,000.  The amendments to the BTFDA give the Local Court jurisdiction to hear and determine retail tenancy claims in respect of any disputed matter (Local Court jurisdiction $250,000).  The Supreme Court has jurisdiction to hear and determine retail tenancy claims that relate to a monetary amount in excess of $200,000.

Section 152 Law of Property Act (LPA)

Section 152 LPA deals with the holding over of premises after a demand is made and notice in writing has been given.   This provision will not apply in relation to a lease that ends in the emergency period (unless the demand was made prior to the commencement).

Legal costs

Section 140 of the LPA allows a Landlord to recover “all reasonable costs and expenses properly incurred by the lessor in respect of a breach giving rise to a right of re-entry or forfeiture that is, at the request of the lessee, waived by the lessor or from which the lessee is relieved under” the LPA. The amending legislation states the “costs and expenses recoverable by a lessor in accordance with” s140 LPA “do not include legal costs in proceedings commenced during the emergency period.”

Further to this, if a MN “makes provision in relation to costs of proceedings in a court or tribunal, the provision continues to apply to proceedings that had commenced during the emergency period but were not completed before the end of the emergency period.”

Offences

New offences are created in relation to the following:

  • .  Someone commits an offence if, during negotiations relating to adjusting “the terms of an arrangement for the occupation of premises for business purposes”, they are “a party to negotiations between a landlord and a tenant or is acting on behalf of such a party” and “the person intentionally or recklessly misrepresents the financial situation of the party in the course of the negotiations” (maximum penalty $31,400 or imprisonment for 2 years).
  • n.  It is an offence for someone to “intentionally or recklessly” disclose “information about the other party’s financial situation that was obtained in the course of the negotiations” (maximum penalty $78,500 or imprisonment for 5 years).

Overall

The Minister said:

  • “In relation to commercial tenancies, the bill does not lock in particular provisions of the code of conduct, but it does enable a notice to be issued that will require commercial tenants and landlords to engage in good-faith negotiations. This anticipates that they will be able to refer to the code as a starting point for those negotiations.”
  • “Where businesses are commercial landlords, their eligibility for the relief measures I have spoken about previously will depend on whether they have done the right thing and negotiated with their tenants in line with the good-faith principles in the National Cabinet’s Mandatory Code of Conduct. We reiterate to landlords—if they could please do the right thing, but equally, those tenants need to respect landlords and do the right thing and act in good faith.”

In terms of guiding principles, the Minister said the amending legislation was developed with the following in mind:

  • “parties are expected to keep meeting their tenancy obligations where possible, including by making best efforts to access government support, mortgage relief, and to transition businesses to alternative working arrangements, where this is possible”.
  • “where parties are struggling, they should at first attempt to negotiate to share the losses, with landlords strongly encouraged to reduce or defer rental obligations to assist tenants to get through the COVID-19 period without an unreasonable debt given the tenant’s capacity to repay.”
  • “where parties cannot agree, dispute resolution mechanisms take into account the COVID-19 situation, including – the public interest in ensuring that businesses can ‘hibernate’ through the COVID-19 period …”.

For further information please get in touch with our lawyers at RLA
office@rousssoslegaladvisory.com
+61 8 8981 8783
GPO Box 457 Darwin Australia 080

We hope you enjoyed reading our update.  It is not a substitute for specific legal advice.  We would be pleased to assist you with your specific enquiry; in which case please contact us per the details above.   We cannot accept any liability or responsibility for loss occurring as a result of anyone acting or refraining from acting in reliance on any material contained in this summary.