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Steven Brown sits down with 6PR to talk about commercial law with tenants and landlords and the changes in rental agreements during COVID-19.

3rd September 2020.

Transcript.

Oliver Peterson (00:00):

It’s great to have you in the studio this afternoon, Steven Brown, he’s a commercial lawyer from linen Brown lawyers, the director, in fact of lean and brand lawyers, Steven, lovely to meet you after an Ali you’re based there in Morley. And I’m going to guess you’re getting a lot of questions at the moment about these so-called hibernation period, coming to an end at Stephen, because tenants had had an opportunity whilst we’d been through this period of Corona virus, uh, to not be evicted by their landlord. Obviously there were no rental increases either during this time, but I imagine that there is a very changing day by day situation at the moment when it comes to those relationships between tenants and landlords.

Steven Brown (00:39):

Yeah, very much Ali. So the 29th of September, the state of emergency comes to an end and unless our state government decided to extend it, a lot of this relief that’s been given for rent increases, rent eviction, a termination of laces will also all come to an end. And unless the deal has been done to either defer or to reduce the rent during the emergency period. And I hadn’t been sorted out before the 29th of September, a whole lot of money is going to become due on the 30th.

Oliver Peterson (01:10):

All right. So this is going to obviously create a few headaches for a lot of tenants. Similarly, though, the same headaches are there for landlords as well, because it doesn’t necessarily mean if you’re a landlord that you’re mega mega wealthy and everything’s okay. You’ve also got bills to pay.

Steven Brown (01:23):

Yeah, exactly. Um, and the relief that was provided to the landlords with limited, uh, compared to the relief that was provided to tenants. So they got some land tax relief. There was some relief in regard to their ability to pay loans back to banks. But, um, yeah, they copped a lot of it as well.

Oliver Peterson (01:41):

Nine double two double one 82 for your questions this afternoon, Steven Brown, he’s from linen brand lawyers. Particularly if you are a tenant yourself or a landlord, if you’re having those conversations with each other, how are they progressing? Have you provided special treatment, special conditions have been put in place, or have you struggled to come to some sort of agreement, some sort of arrangement nine double two double one eight 82, because I imagine as well at the moment, Steven, and let’s just take out West farmers as an example, they’re looking to close a whole bunch of the target stores, the target brands. And I talk about them because they’re an anchor tenant, obviously of a big shopping center. So therefore a lot of other shops decided to open in that shopping center and they think, well, we can make a bit of money. There’s a target here. That’s obviously a massive space, a target store, like a supermarket huge space is going to be very difficult to fill that space. If these big B stores shut their doors, what do you do if you’re the neighbouring tenant at the moment and thinking our goodness, they’re going to be out of here soon. Can I go to the landlord or the shopping center owner and go, I know I’ve got that 2% increase in my yearly rent that I have to pay you. Can we sit down and start to renegotiate what our agreement might be?

Steven Brown (02:53):

Well, you can try Ali and good luck with that conversation because what we’re hearing as well through the media is a lot of the big players in this game, the big shopping centers, the multinationals are struggling at the moment as well. So it’s not just the small businesses. And we know that, you know, it’s small businesses are the heart and blood of our, of our state economy here. They employ over 200,000 Western Australians. So, um, but also these bigger businesses are struggling because of the relates that had to be provided to the smaller businesses to keep them afloat. So, um, I think there’s some really difficult times ahead,

Oliver Peterson (03:28):

Anybody trying it on at the moment? Are there any examples you have at the moment, Steve of landlords, even finding creative ways, I suppose to say, Hey, I know we had this period of hibernation or this grace period, but, uh, pack up your bags, get out. We don’t want you in here.

Steven Brown (03:43):

Yeah. We’re seeing some very interesting things. So landlords using other ways in which determinate, Elise, so they can’t terminate for non-payment of rent. Uh, but they can terminate say for, uh, say you’re an efficient chip shop and you started to think, Oh, I’m going to pivot a beat. Cause that’s not working for us. I’m going to go and do something else, uh, from the premises as well, to try and sustain our income. Uh, that might be a breach of the lease because the lease had a specific use and the landlord would use something like that. We were also hearing of landlords where some tenants have been struggling and, uh, staying in commercial properties and that’d be a breach of the lease generally to be using it as accommodation. So there are creative ways in which they’re terminating leases.

Oliver Peterson (04:25):

[inaudible] for your questions to Steven Brown this afternoon, I look at the CBD. Some of the estimates at the moment are we have office vacancy or shot vacancy rates upwards of 25, 27%. Uh, is it enough to say, Hey, I’m struggling. I want to break this lease and then, uh, go down the road a hundred meters in and set up shop once again.

Steven Brown (04:43):

So none of the rent, the rent relief is for this period of, um, until the 29th of September, but it doesn’t allow at the end of that, if you’ve terminated the lease early. So say you had two years left on your term, you’re still going to be up for the balance of that, that rental. So, and what we find with commercial, it’s not just that the company that you might be operating it through this up, they’ve usually personal guarantees there. So the individual directors and owners of the business behind it are going to be up for a person.

Oliver Peterson (05:11):

Okay. On the residential side of things, there’s been that period as well of, of holiday or hibernation as we call it. We know that the rental market in Perth as well is, is quite tight at the moment reports of 40, 50, 60, a hundred people through a property. And it goes like that. The game could change again, come October.

Steven Brown (05:31):

Yeah. So if there are tenants out there that haven’t been paying their rent for residential properties, I think we’re going to have an influx of matters hitting the magistrate’s court, trying to have them evicted because the landlords know, particularly in that residential space there, the demand, there’s not so much in the commercial space, but in the residential space as a demand. So if they haven’t met their repayments and it hasn’t been resolved, uh, and if it was just a third until the end of this state of emergency came to an end and they don’t come up with the money very quickly, I think we’ll see landlords evicting a lot of people.

Oliver Peterson (06:06):

Isn’t it? I mean, the lockdown in inverted commas that we experienced in Western Australia far less severe than obviously the state of Victoria at the moment that continues to go on week after week, month after month. So it’s probably a difficult argument at the moment, Stephen Brown for a lot of attendants tenants to map those arguments because the coronavirus locked down to the situation. It doesn’t exist as it did back in March and April.

Steven Brown (06:33):

That’s correct. Yeah. We’ve been very fortunate. Our economy is bounced back pretty quickly. Um, and while there are definitely people suffering still NWA from financial hardship there, a lot of us haven’t had significant impact, um, you know, strong mining sector. Um, short period of lockdown has allowed for us to rebound relatively quickly in a lot of sectors. Um, and so, yeah, there’s probably a lot less people out there that have really struggled to pay their residential rent. So

Oliver Peterson (07:02):

Steve you’re heading towards the end of the, this grace period is, is to just have that conversation between 10 and then landlord before having you involve people like yourself.

Steven Brown (07:10):

Yeah. Really important to have it very quickly because some of the relate in some of the abilities, particularly with the commercial, if you don’t get it, if you can’t come to an agreement and there is a dispute and you don’t get it in before the 29th of September to the SBDC, small business development corporation, they do some mediation there. And if it can’t be resolved through mediation, you’ve got to file an application with the state administrative tribunal before the 29th of September, or you’re going to miss out on resolving this, the rental that was due during this lock, this period of state of emergency, right?

Oliver Peterson (07:42):

Steve Brown. I really appreciate you coming into the studios this afternoon and it’s been great to meet you. Thank you very much for having me. Ali plays our commercial lawyer, Lina and Brown lawyers. It’s very, very interesting. So that is all coming to a close at the end of the month.

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