COVID HANGOVER – Landlords who refused to negotiate COVID relief with their tenants for rent relief during the emergency response period remain at risk over demands on tenants to pay arrears or for having taken unlawful rent recovery action.

Consider this account of a Gold Coast restauranteur who leased a Paradise Point premises just days prior to the worldwide emergence of COVID. Keiran Temple took up the space on the Esplanade for a 12-month term from 27 January 2020 with 2 options of 1 year each. Base rent was $66,000.00 p.a. with the first month free for rent but not for outgoings.

During the fit-out month he fell behind and in March requested his rent payments be reduced to reflect the inevitable loss he was going to experience due to lockdown induced trade losses. The COVID Emergency Response period ran in Queensland from 29 March 2020 to 31 December 2021.

The emergency regulation applying to all leases required landlords to negotiate rent relief with tenants by way of abatements and deferrals. It also prohibited recovery action and lease terminations. In April 2020 landlord Heather Penney purported to serve a notice to remedy breach of covenant demanding outstanding rent of $5,500 from 27 February 2020 to 26 April.

Temple offered to forfeit the complete $35,0000 fit out he had constructed – which sum included $23,000 for his own labour – if the landlord allowed him to walk away from the lease and all arrears liabilities. Penney – who contended the premises had been handed over with an operational kitchen and restaurant – then entered into negotiations but rather than withdrawing the notice to remedy, she held it over him “like the Sword of Damocles”.

After she re-took possession and changed the locks, Temple filed QCAT proceedings alleging an entitlement to damages for the invalid termination and demanding the return of his goods. QCAT has jurisdiction over restaurant lease disputes because they are retail premises but its jurisdiction to determine disputes under the emergency response regulation extended to all leases, not just those of a retail nature.

The dispute was resolved in Temple’s favour but Penney appealed. When it came before the QCAT appeals tribunal, Members Robert King-Scott, Donald McBryde and Neil Judge had no hesitation in concluding the termination had been unlawful. They observed the landlord had acted in complete disregard of the emergency response regulation by failing to negotiate before precipitously serving the notice and then re-taking possession.

“We find that the landlord contravened section 11 by not attempting to negotiate any reduction in rent,” they ruled. As it happened the notice of breach was also defective for numerous other reasons. It mis described the premises. And the landlord re-entered before the period specified in the notice had expired. They also found that the landlord’s entry and change of locks was unlawful, thereby entitling Temple to damages.

Unfortunately for the hapless tenant, he hadn’t produced any evidence of what his losses had amounted to and had ignored numerous directions to provide those details, thereby preventing any order being made in his favour for damages. The landlord’s claim – in excess of $130,000 for loss of past and future rent, re-letting fees and restoration costs etc – was dismissed due to her breaches of the emergency response regulation and failure to substantiate her claims. The landlord succeeded in recovering just $630 for the cost of replacement plate glass broken by the tenant.

Temple v Penney (No 2) [2023] QCAT 182 King-Scott, McBryde and Judge 22 May 2023

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