Rent relief for commercial tenants

Posted 8 Apr '20

Rent relief for commercial tenants

The Federal Government has announced a Code of Conduct for commercial landlords to apply when negotiating with tenants affected by COVID-19.

The objective of the Code is to assist in the management of cashflow for both the small business tenant and the landlord on a proportionate basis.

The Code applies to all tenancies (retail, office and industrial) suffering financial stress or hardship as a result of the COVID-19 pandemic. It is intended that landlords will agree to temporary arrangements for each tenant, taking into account their circumstances on a case-by-case basis.

The code stipulates that both parties should negotiate in good faith and act in an open, honest and transparent matter, providing sufficient and accurate information to the other to achieve an outcome which fairly balances the interests of tenants and landlords.

The code is mandatory:

• where the tenant or landlord is eligible for the JobKeeper program 
• where businesses have a turnover of $50 million or less

Summary of the main points:

• Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (as outlined below) of up to 100% of the amount ordinarily payable:
  • Rental waivers must not be less than 50% of the agreed rent reduction amount (unless the tenant has agreed to waive this requirement).
  • The balance is a rental deferral which must be spread over the term of the lease or for a period of no less than 24 months, whichever is the greater (unless otherwise agreed by the parties).
• Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period and subsequent recovery period.
• No fees, interest or other charges should be applied with respect to rent waived or deferred.
• The tenant should be provided with an opportunity to extend the lease for an equivalent period of the rent waiver and/or deferral period.
• Landlords must freeze rent increases for the duration of the COVID-19 pandemic and subsequent recovery period.
• Landlords must not apply any prohibition, levy or penalties if tenants reduce opening hours or cease to trade due to the COVID-19 pandemic.
• A landlord should seek to share any benefit received due to deferral of loan payments with the tenant in a proportionate manner.

For further information, click here.