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Rent Relief Package Announced For Commercial Tenants Affected By COVID-19

8 April 2020

Scott Morrison announced yesterday, the details of the new Commercial Tenancies Mandatory Code of Conduct (the Code).  The Code includes principles that relate to rental waivers and deferrals for commercial tenants hit by the impact of the coronavirus crisis.

Under the scheme, states and territories will legislate to require landlords whose SME tenants are eligible for Job Keeper payments to reduce commercial rent payments in the same proportion that the tenant’s revenue has fallen due to the COVID-19 outbreak.

The total reduction in rent payments during this period can comprise both a waiver of rent and a deferral of rent. 

The waiver of rent will have to account for at least 50% of the reduction in the rent payments from the tenant.

Deferrals (rental payments that will need to be made, but can be put off) unless otherwise agreed must be spread over the greater period of:

  • the remaining time on a lease; and
  • 24 months

In addition, any reduction in statutory charges (eg land tax, rates) or insurance is to be passed on to the tenant.

National Cabinet noted an expectation that banks will support landlords and tenants as they work to implement the Code (although the Code will not be binding upon the banking sector).

Finally, it is important to note that tenants can agree to continue under their existing arrangements.

"This preserves the lease, it preserves the relationship, it keeps the tenant in the property." "Landlords must not terminate the lease or draw on a tenant's security. Likewise, tenants must honour the lease," Mr Morrison said.

Rent increases will be frozen under the Code.  Landlords will not be able to enforce penalties on tenants who stop trading or reduce opening hours and will not be able to charge interest on unpaid rent.  Legislative and administrative hurdles to lease extensions will also be removed.

There will be a binding mediation process run by the states and territories for the Code.

For further details on the Code, click here.

Residential tenancies will not be covered by the Code and will instead be regulated by state and territory governments, with National Cabinet focussed on the commercial sector because of its economic impact.

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