In response to COVID-19, the Australian Federal Government has announced a range of measures to help commercial tenants. This includes a:
- temporary hold on evictions; and a
- mandatory code of conduct for commercial tenancies to support small and medium sized enterprises affected by coronavirus.
If you’re an SME or not-for-profit and a tenant of the Commonwealth then your rent will be waived.
What is the Code of Conduct?
The purpose of the Code of Conduct (the Code) is to impose of set of good faith leasing principles for application to commercial tenancies (including retail, office and industrial) between owners/operators/ other landlords and their tenants.
Who does the Code of Conduct apply to?
The Code applies to small and medium sized enterprises:
- with an annual turnover of up to A$50 million;
- eligible for the JobKeeper Payment; and
- experience 30% or more reduction in revenue as a result of the pandemic.
The amount of rent reduction depends on the reduction in the business’ turnover. The tenant has to use the JobKeeper Payment to keep on its employees, and if the tenant has subtenants, then those subtenants have to be given rent relief by the tenant.
The government has said that “Australian and foreign banks, along with other financial institutions operating in Australia, are expected to support landlords and tenants with appropriate flexibility as they work to implement the mandatory Code.”
What are the conditions?
NSW stated that the code will be implemented with conditions:
- landlords must negotiate rent relief agreements with tenants in financial distress due to COVID-19 by applying the leasing principles in the Code;
- a ban on the termination of a lease for non-payment of rent; and
- a freeze in rent increases.
It’s important to know that the downturn must be due to the pandemic, and not due to other factors. Also, the code is going to be implemented by each State, so there may be some differences between them.
There’s also some associated land tax relief for owners and tenants – some States have already said that land owners may receive a three month land tax deferral, and may receive up to 25% in land tax discounts provided that they are passed on in rent relief.
What should you do?
Marshall your evidence that your business is in financial distress due to the pandemic; then, try to arm yourself with how much your landlord will receive in land tax discounts, because that’s your starting point right there, and then negotiate a rent reduction with your landlord.
We can help you
Andrew Calvin is our Associate Director and many years of experience in property law. Please contact Andrew on +61 435 093 520 or firstname.lastname@example.org if you require assistance with negotiations or further advice.
Important to note:
This communication is intended to provide commentary and general information only. It is not intended to be a comprehensive review of all aspects of the matter referred to. It should not be relied upon as legal advice as to specific issues or transactions. Liability limited by a scheme approved under Professional Standards Legislation.