Last week, the Federal Government released its mandatory Code of Conduct for commercial tenancies. The Code applies to commercial leases where one of the parties to the lease is eligible for participation in the JobKeeper scheme (for example, because they have suffered a 30% reduction in revenue).
The Code requires landlords and tenants to talk to each other and negotiate appropriate arrangements for things such as the payment of rent. In these negotiations, there are a number of mandatory principles that must be adhered to.
Some of the most important principles are:
- Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period and a reasonable subsequent recovery period;
- Landlords must not draw on a tenant’s bond for the non-payment of rent;
- Tenants must remain committed to the terms of their lease, subject to any amendments negotiated under the Code - a failure to abide by the important terms of their lease will forfeit any protections provided to the tenant under the Code (for example, the ban on evictions), so it is more important than ever for tenants to ensure that you are complying with all clauses in their lease;
- Landlords must offer tenants rent relief that is proportionate to the reduction in the tenant’s trade – so if the rent is $2,000 per month and the tenant has suffered a 50% downturn, then the tenant must be offered rent relief for $1,000 and the other $1,000 will be payable as usual;
- This rent relief can be in the form of a waiver of rent (meaning that rent is never payable) or a deferral of rent (meaning that rent is still payable but is deferred to be paid down the track);
- Rental waivers must constitute at least half of the total rent relief – so if the tenant is entitled to rent relief of $1,000, then at least $500 will be waived (never payable) and the remaining $500 will be deferred to be paid down the track.
Where landlords and tenants are able to reach an agreement, this should be properly documented with the help of a solicitor.
However, where they cannot reach an agreement themselves, there will then be a binding mediation.
If you are a landlord or tenant looking to document an agreement or need assistance in reaching an agreement, please call our expert Property & Commercial Team on 1800 650 656 to discuss your options. We're here to help!
Aaron Strickland | Solicitor