How a Sydney gym negotiated a rent reduction.

Andrew* was forced to shut down his Sydney gym when COVID first hit in March 2020. As gym memberships were being frozen during the lockdown period, he was also worried about a 100 per cent reduction in turnover and having to let many of his trainers and other staff go.

To mitigate this, Andrew quickly reassessed his business model and switched to an online fitness offering. But even with rapid uptake, he was still unable to meet the terms of his lease on his gym premises.

Suffering an 80 per cent fall in sales, Andrew sought to negotiate a rent reduction with the landlord, a small property owner who had substantial debts. The property owner was reluctant to help as he had not received any mortgage relief. However, he understood that both parties had to share the financial risk and cash flow impact of COVID-19, and therefore initially provided athree-month rent waiver.

After a three-month forced closure, Andrew was able to reopen, but at reduced capacity. After several months of restricted trading, the business also had to absorb the cost of having a dedicated hygiene marshal on duty at all times.

In July, Andrew approached the landlord for further relief, but was declined. Both parties agreed to mediation, understanding that it was compulsory for them to undertake mediation before pursuing claims in the civil courts.

On the day of the mediation session both parties were nervous. The mediator gave them both the opportunity to discuss the matter and air their grievances. At first,both parties refused to budge. Andrew wanted a waiver of his rent. The landlord was hesitant as he doubted the accuracy of Andrew’s financial statements.

After two hours, the mediator adjourned the mediation for two weeks to give Andrew the opportunity to obtain further evidence of his decline in turnover.

During the second mediation session, the mediator was able to help both parties understand each other’s financial position and assist in identifying options that suited them and would not have been available under the regulated guidelines. By the end of the mediation process, both parties were relieved to have resolved the dispute and have a degree of financial certainty.

* All names have been changed.