On 7 April 2020, Prime Minister Scott Morrison revealed the final details of the mandatory Commercial Tenancies Code for commercial and retail leases.
The two core principles underpinning this Code will be good faith and proportionality, with landlords and tenants urged to work together on how to best manage rent relief going forward.
Who does the mandatory code apply to?
- The code will apply to tenants with a turnover of $50m or less
- Tenants that have experienced a 30% or greater loss in revenue
- Tenancies where the landlord or tenant are participating or will participate in the JobKeeper program
What does rent relief look like?
- Landlords are expected to negotiate in good faith and ‘share the pain’
- The rent relief should be proportionate to the reduction in turnover and should comprise waivers and deferrals
- Waivers must account for at least 50% of the rent reduction, while rent deferrals would be repayable over the remaining term of the lease
- Any recoupment of deferred rent will be over the duration of the lease period or a minimum of 24 months. This means if a tenant has six months left on their lease, they should be offered a 24-month period to pay any deferred rent
- Landlords cannot terminate a lease based on non-payment, nor dip into bonds to cover unpaid rent. Those who choose not to engage may forfeit themselves out of the lease
- Tenants are expected to honour their obligations under a lease (i.e. they can’t just walk away)
The Code will be legislated and managed by the States and Territories and will be subject to binding mediation. There will be additional details to come as the Code is legislated and regulated in each of the States and Territories.
It is also anticipated that there will be further announcements regarding assistance for landlords such relief on land tax, rates and other assistance.
If you are affected by these changes and would like some advice please contact us at firstname.lastname@example.org