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COVID-19 Disease Emergency (Commercial Leases) Bill 2020


Cassy O'Connor MP

Cassy O'Connor MP  -  Wednesday, 6 May 2020

Tags: Legislation, Coronavirus

Ms O'CONNOR - Mr Deputy Speaker, the Greens recognise that formulating this bill and balancing the interests that are contained within it has been challenging for the Government and the Office of Parliamentary Counsel. I know it has been hard but in our view, having looked at the act and some of the bill in some detail and had a briefing yesterday - and thank you to the team who briefed us - you have come as close to achieving the balance as it is possible to do.

We understand that the legislation has a number of core concepts. It establishes protected leases and protected lessees, and defines who an eligible person is in order to have negotiations with a lessor for a rent reduction, deferral or waiver. That eligible person may also be a legal entity or a company. It also establishes a financial hardship period from 1 April this year for up to one year to 30 March next year.

Members would be aware that the Greens have been agitating for residential tenants to receive the same protections as commercial tenants will, presuming this legislation passes. When we look at the financial hardship period, notwithstanding Ms Butler's concern that it came into effect on the day the state of emergency was declared, for people living in rental homes there is no financial hardship period defined as such. The freeze on evictions came into effect by notice on 3 April and the freeze on residential rent increases came into effect on 22 April this year, so for residential tenants there are weeks in which they have not received the protections of government from landlords who are not doing the right thing.

I will go to an email we received from a primary school teacher and South Hobart resident. I noted what the Premier said this morning about not receiving much correspondence from residential tenants but my understanding is the Residential Tenancy Commissioner's office has, and I quote, 'never been busier'. That is because there are tenants in residential properties who are affected as a result of the pandemic but also the response that some landlords have had to it.

My constituent, Ruth Morton, received notice of a rent increase in late January. In my communication I suggested she go to the Residential Tenancy Commissioner for advice and potentially a level of mediation. Ms Morton and her partner unfortunately were waiting for the notices to be issued on evictions and rent increases so did not make representation to the Residential Tenancy Commissioner and, as a consequence, their rent was increased on 2 April this year, one day after the financial hardship period as defined in this legislation came into effect.

I have also heard from another tenant who had a kind of body corporate -

Ms Archer - The commissioner would have assessed it within 60 days, but they were over the 60 days.

Ms O'CONNOR - That is right. I know the details of it, but that is a situation where tenants had received notice that the rent was going up, then the pandemic arrived and a state of emergency was declared. They were led to understand that parliament would provide those wraparound protections for residential tenants, and to a significant extent we have but there are significant gaps. They are set out by the five signatories in this letter that was sent to the Premier and the Leader of the Opposition and me yesterday, among others: Ben Bartl from the Tenants Unions of Tasmania; Patty Chugg, Shelter Tasmania; Jane Hutchison, Community Legal Centres Tasmania; Dr Chris Jones, CEO of Anglicare Tasmania; and Simone Zell, acting CEO of TasCOSS.

It gives a handy comparison of the differences in protections provided to commercial tenants and residential tenants. For example, if there is an inability to negotiate a rent reduction, for commercial tenants under this legislation landlords will have to offer rent reductions proportionate to loss of trade. For residential tenants, landlords can continue to charge full rent and as we know, many are. There is no capacity for tenants and landlords to negotiate a waiver of part of the rent as there is for commercial tenants.

If a landlord has obtained a loan deferral or a mortgage freeze under the protections that have been put in place for commercial tenants, that landlord must let the tenant know and it must form part of the renegotiated rent, but for residential tenants the landlord does not have to let the tenant know and does not have to pass on any savings. For commercial tenants the Government can mandate mediation between the parties. Not so for residential tenants. The mediator can mandate a rent reduction under the legislation we are debating today but, again, there are no protections like that for residential tenants.

At the end of the emergency period, if there has been a rent reduction for commercial tenants, landlords must waive 50 per cent of arrears and provide a minimum of 24 months for payment of outstanding rent. For residential tenants, the landlord can ask the tenant to repay all arrears and evict them if not paid within 14 days.

I have spoken directly to a residential tenant who was able to negotiate part deferral of her rent payments. She works part time and it has been made very clear to her that at the end of the six months she will be expected to repay all the rent arrears. There is not the same expectation being placed on commercial tenants.

We have flagged with the Premier and the Attorney-General's office that we planned to move a series of amendments that ensured this legislation provided the same robust protections for residential tenants as it does for commercial tenants, but in good faith, having listened to the Premier this morning in response to our question and his willingness to acknowledge that for residential tenants there will need to be more measures and his willingness to sit down with the Tenants Union of Tasmania and seek further information from the Residential Tenancy Commissioner, we have decided to hold off on moving those amendments. However we flag with you, minister, that this is an area that is underdone in terms of our response and it needs to be dealt with.

The COVID-19 Disease Emergency (Commercial Leases) Bill 2020 provides protections to commercial tenants by prohibiting certain actions in clause 7. These are hefty legislative restrictions on what landlords are able to do during the financial hardship period and we agree that they are necessary. In clause 7(2), the legislation says:

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Without limiting the generality of subsection (1), a prohibited lessor action includes doing, or attempting to do, any of the following:

(a) evicting the lessee from the premises to which a protected lease relates;

(b) exercising a right of re-entry to the premises to which a protected lease relates;

(c) recovering land;

(d) distraining goods;

(e) seeking forfeiture;

(f) seeking or recovering damages;

(g) requiring a payment of interest, or any other fee or charge, on unpaid rent otherwise payable by the lessee;

(h) recovering the whole or part of a security bond, or bank guarantee, under, or in relation to, the lease;

(i) requiring the performance of obligations by the lessee, or any other person, pursuant to a guarantee, or indemnity, relating to the lessee's obligations under the lease;

(j) taking possession;

(k) terminating the lease;

(l) seeking or applying any other remedy otherwise available to a lessor against a lessee under an Act or the law of this State.

As you can see, Mr Deputy Speaker, there are very significant restrictions now on the owners of commercial properties who have a lease which is a protected lease under this legislation. I am sure there has been strong representations made to government particularly to a Liberal government, which regards itself as a friend of business, by commercial property owners. There is no question that there will be impacts felt by commercial property owners and it is unreasonable to assume that everyone who has a property that they are leasing for commercial purposes is a wealthy person.

For example, the owner of the Duke of Wellington hotel in Macquarie Street. For that person, the Duke and the rent that they received from the Duke of Wellington is their only income. I want to read from the proprietors of the Duke of Wellington, Doug and Kartika Franks, about their concerns about the situation that they are in and that their landlord is in.

As a small family-run pub business in Hobart the Duke is a long established venue with many iterations over the years. Since 2016 our focus has been to offer a home-away-from-home atmosphere to locals and visitors alike.

We showcase local fresh produce, free live jazz and blues music and provide a family friendly atmosphere. Year on year, the Duke has become renowned by locals and travellers as the place to go for a great Tassie food great music and great service.

We would like you to consider the position of businesses such as ours as we have limped along trying to keep our four remaining permanent staff on with a 90 per cent hit to our revenue and facing the likelihood of massive losses continuing, even as restrictions are lifted, for at least the next two years until borders are reopened and tourism gradually resumes.

I will pause there. The scale of the losses being felt by businesses is breathtaking. It is hard to imagine how the Duke of Wellington could survive sustaining 90 per cent less revenue over two years. This is the story that is being played out in business after business all over Tasmania. It is very dire.

We have met three times with our landlord and have managed to secure an arrangement in the form of a deed of indulgence. This arrangement may however be deemed to be non-compliant with the leasing principles and proposed mandatory code because it is not proportional to the losses our business has suffered but with the time lag between the announcement requiring closure of our venue, we have been left with no choice but to accept it.

The landlord has advised us that our rent payments are his only income and we have continued to pay our rent in full all the way up to the end of March 2020.

Doug and Kartika Franks urge the parliament to consider the continuity or otherwise of arrangements already agreed.

We do need to be very mindful of all the players in this difficult situation. We acknowledge that everyone is suffering.

We note that there is a significant time lag of six months between the maximum financial hardship period under this legislation, which can run out to the end of March next year and the federal government's mandatory code under which this legislation hangs, if you like, but also the special JobKeeper provisions. I am interested in the minister's thoughts on that six-month time period when we are unsure whether there will continue to be federal support measures in place and how does she see the state potentially working outside those federal provisions.

Minister, the question was about the six months between when JobKeeper expires and the maximum financial hardship period, which as we know only applies to commercial tenants and does not apply to residential tenants at this stage.

It seems pretty clear to me, following the briefing yesterday, that the mediation function that has been set up through the Director of Consumer Affairs and Fair Trading's office is likely to be required even after the financial hardship period formally comes to an end. Can you confirm that? I also make the point that needing to establish this mediation process within government points to a deeper need for a small business commission of some sort in Tasmania as an enduring entity. I hope the Government is giving that some consideration.

Can the minister confirm that the act will stay on the statutes even following the end of the financial hardship period? In broad terms, I am interested in what the Government's thinking is about the three pieces of legislation we have passed under the COVID-19 pandemic provisions, none of which had a sunset clause in them. It seems to me all will remain on the statutes. What is the Government's thinking about moving to repeal, at some point, those three literally extraordinary acts?

One of the provisions in this legislation enables a lessor and lessee to renegotiate rent income based on a reduction in turnover. I make the point again that landlords and residential tenants should be able to renegotiate rental payments, based on a reduction of income. I am certain that there would be a disproportionate number of people in the residential rental market who are socially and economically impacted by the economic downturn and people who are working in sectors that have been particularly hard hit. For example, hospitality and tourism are more likely and disproportionately to be represented in the residential rental market, so there is undoubtedly financial stress being felt significantly within the residential rental market.

My final question relates to the committee that is established towards the end of the bill - the Commercial Code Administration Committee. I note that all members will be appointed by the minister. I have no problem with that in these circumstances. Can the minister talk to us a little more about the operations of the committee? There is no stipulation within the legislation about operations and conduct of the committee, whether or not there will be any line of sight by parliament or to parliament for that committee? Does the committee cease to function and operate when the financial hardship cessation day is declared? It does not seem to me that it is the case. Again, what is the future of the Commercial Code Administration Committee noting that the federal mandatory code effectively lapses at the end of September? What is the future of this committee? That is in broad terms my contribution on the legislation.

We have 10 amendments to this bill. Ms Butler, if there are things to do like rewind the financial hardship day, it can be done by amendment. We would have amended the long title by inserting after the words 'commercial leases' the words 'and residential tenancy agreements'.

We would have amended clause 1 by inserting after 'commercial leases' the words 'and residential tenancy agreements'.

We would have amended clause 4 by deleting in the 'definition of rent' and inserting instead the [12:26:10] and (b) by inserting the following definition after the 'definition of rent', 'Residential Tenancy Agreement means a lease to which the Residential Tenancy Act of 1997 applies'.

Our fourth amendment was to clause 5 which was to be amended as follows, subsection (1)(a) is amended by inserting after 'commercial lease' the words 'or Residential Tenancy Agreement'.

Our fifth amendment was to amend clause 6(a) by inserting in subsection (1) after 'eligible person' the words 'in relation to a commercial lease'; (b) by inserting the following subsection after subsection (1) (a) 'for the purposes of this act, a person is an eligible person in relation to a Residential Tenancy Agreement at a time if the time occurs after the person satisfies the criteria, if any, prescribed for the purposes of this subsection'.

Our sixth amendment was to clause 9 to amend it as follows, '(a) subsection (1) is amended by inserting after 'commercial lease' the words 'or Residential Tenancy Agreement'; (b) subsection (3) is amended by inserting after 'commercial lease' first occurring the words 'or Residential Tenancy Agreement'; and '(c) subsection 3(a) is amended by inserting after 'commercial lease' the words 'or Residential Tenancy Agreement'.

Our seventh amendment would be to amend clause 11 by inserting after 'commercial lease' the words 'or Residential Tenancy Agreement'.

The eighth amendment was to amend clause 14 '(a) subsection (1) is amended by inserting after 'protected lease' the words 'that is a commercial lease'; and '(b) subsection (3) is amended by inserting after 'protected lease' the words 'that is a commercial lease'.

Our ninth amendment would have been to amend clause 15 subsection (2) (c) is amended by inserting before 'the lessor intends' the words 'in relation to a commercial lease'.

Our final amendment was to amend clause 18 as follows, subsection (3)(b) is amended by inserting before 'the leasing principles' the words 'in relation to a commercial lease'.

With the greatest of respect, we do not buy the argument that we could not have provided equal protections to residential tenants in this legislation. We certainly could have if that had been the will of the Government. That said, I am very pleased with the Premier's response to the concerns that have been raised with him by housing stakeholders. I am encouraged that that conversation will happen and I see that there will be some support measures put in place to ensure that residential tenants are not left out in the cold during a pandemic.