The Federal Government has now released its Mandatory Code of Conduct for SME Commercial Leasing Principles during COVID-19.
The code applies to negotiating amendments to existing leasing arrangements for all tenancies that are suffering financial hardship as a result of the COVID-19 pandemic as defined by their eligibility for the Commonwealth Government’s JobKeeper programme, with an annual turnover of up to $50 million.
In summary the major principles of the code include:
- The code will be given effect through the relevant state legislation, however it is not intended to supersede it.
- The code will apply during the pandemic period (as defined by the Australian Government) and taking into account a reasonable subsequent recovery period.
- Landlords must not terminate leases or draw on tenant’s security due to non-payment of rent.
- Tenants must remain committed to the terms of their Lease.
- Landlords must offer rent reductions, in the form of waivers or deferrals, proportionate to the reduction in tenant’s trade.
- Rental waivers must constitute no less than 50% of the total reduction in rent payable. The tenant may waive this requirement by agreement.
- Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater. The tenant may waive this requirement by agreement.
- If negotiated arrangements necessitate repayment, no repayment should commence until the earlier of the COVID-19 pandemic ending or the existing lease expiring, and taking into account a reasonable subsequent recovery period.
- No fees, interest or other charges can be applied to rental waivers or deferrals.
- Rent increases are frozen.
- Tenants should be provided with an opportunity to extend leases for an equivalent period of the rent waiver and/or deferral period.
- Where Landlords and tenants cannot reach agreement on leasing arrangements, binding mediation must be used. This is likely to be through the Small Business Commissioner
A copy of the code is available here:
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If you need help during this time, contact us. Commercial property management is what we do best.