COVID-19 and what it means for your commercial lease
The Australian National Cabinet released a Mandatory Code of Conduct for the commercial real estate industry on April 8. This code of conduct sets out a number of guiding principles in relation to businesses facing hardship due to the Coronavirus who will require rent relief during this difficult time.
A copy of the Mandatory Code of Conduct can be found here.
In order to qualify under the mandatory code, businesses must fulfil the following criteria:
An annual turnover of less than $50m
Be eligible for the Commonwealth Governments JobKeeper programme
Be able to show financial hardship resulting from COVID-19
Information on the JobKeeper programme can be found here.
Legislation at the State level still needs to be put in place. While legislation may be retrospective, we anticipate that it is unlikely to apply before 23 April 2020.
The code will require the following:
All parties need to act in good faith
The Landlord to offer a proportionate reduction in the rent in the form of a waiver and deferral. The waiver must be at least 50% of the relief.
There are also a number of other matters the Landlord must obey, such as not terminating the lease due to non-payment of rent, etc.
We believe the key here will be acting in good faith and providing the Landlord with supporting documentation showing the impact COVID-19 has had on the business. It is important to remember that both tenants and landlords are being impacted in this unprecedented crisis.
As the Prime Minister has stated there is no one size fits all here and each business and lease will need to be considered and negotiated individually.
The team at Tenancy Matters are here and happy to give anyone some basic advice, we get that this is a very challenging and emotional time for businesses who are struggling.
We are also able to be engaged to negotiate with the Landlord on your businesses behalf should you require.