At this time the National Cabinet has advised landlords and tenants to work together to fairly resolve matters relative to rental payments and other accommodations between themselves. In his statements on 3 April 2020 the PM proposed a mandatory code of conduct guided by certain principles will be developed and subsequently legislated by State and Territory Governments, applicable to commercial tenancies only. The proposed code is to apply for commercial tenancies where the tenant is eligible for the Commonwealth Government’s JobKeeper assistance and is a small- or medium-sized enterprise (less than $50 million turnover). Under the proposed code of conduct the parties are to enter ‘good faith’ negotiations around relief and would likely impose a ‘proportionality’ concept i.e. rental relief proportional to the reduction in turnover faced by their specific tenant.
The principles that the PM refers to are those announced on 29 March 2020:
•a short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus;
•tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease;
•the reduction or waiver of rental payment for a defined period for impacted tenants;
•the ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress;
•commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by coronavirus;
•landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements; and
•cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance.
It is expected the code will allow for the part-deferral/part-waiver of commercial rents The Australian Financial Review reported last week however, it will likely it will not be prescriptive about the details of the lease, which will be a matter for negotiation in “good faith” between tenants and their landlords.
The proposed code of conduct will be discussed at the next meeting of the National Cabinet on Tuesday 7 April 2020.
In the meantime commercial tenants and landlords are encouraged to have open and frank discussions about how to proceed and consider a range of measures to fairly respond. They are also both encouraged to explore the stimulus and support measures have already been announced by federal and state government to assist landlords and businesses at this time.
Our leasing team are still working to fill vacancies. Where appropriate looking for tenants that are still operating and need tenancies that allow for social distancing such as food distribution or medical, as well as looking for solutions to suit both landlords and tenants such as different lease lengths or adjusting the size of tenancies.
For a copy of the Ministerial Statements and Transcripts issued by the PM and National Cabinet visit
ttps://www.pm.gov.au/mediah or follow this link to the Transcript from 3 April 2002 here.
The information in this note is general in nature, and before acting we recommend that you obtain specific advice to your circumstances.