Sneakerboy case: time is running out on rental regulations under Covid-19 Code

The Sneakerboy case reveals the impact of Covid-19, the regard a court will have to it and the National Code of Conduct Retail and Commercial Leases and any State or Territory legislation should not be underestimated.

The recent case in the New South Wales supreme court between retailer Sneakerboy and its landlord Georges Properties, found Sneakerboy had been unfairly removed from its store and had its lease terminated.

Inside Retail reported the court ruling found landlords cannot remove a tenant from premises until after a “reasonable subsequent recovery period”, which could extend up to six months.

Whilst this is a multi layered decision heard in NSW where the safety net protections introduced based on the National Cabinet’s Code of Conduct are set to be repealed late October, the references to a reasonable recovery period as set out in the Code has implications nationally.

The call to action here also implies that time is of the essence and particularly outside of NSW where the majority of Covid-19 regulations expire at the end of September.

The message from this case is, if you do not negotiate (acting in good faith) before the regulations are due to be repealed in your jurisdiction you may not benefit from further support under the term-reasonable recovery period.

When lobbying for the Code of Conduct with industry stakeholders and government the intention was to introduce some safety nets and open a pathway for the parties to a commercial lease contract to navigate through the pandemic.

But when no one knew then, or even now for that matter, how long Covid-19 restrictions will affect the industry I fought hard to include the reference ‘reasonable recovery period’.

This will support the industry for SME retailers beyond the all important and highly anticipated Christmas/holiday trading period, providing retailers the time to get their business model back on track.

There is a stronger message for retailers as well, in that if you are trying to leverage the Covid-19 rental regulations to improve a previously bad lease then you may find yourself in a very perilous position come the end of the regulations.

I am concerned there will be a retail Armageddon come October. This is not the time to be holding out – retailers and landlords need to resolve their pathway through the end of the regulations and the recovery period.

Phillip Chapman is director of Lease1, a specialist service to the retail property industry.

Phillip Chapman, Lease1  | Inside Franchise Business Executive

Phillip Chapman, Lease1 | Inside Franchise Business Executive