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Mandatory Code of Conduct for SME Commercial Leasing Principles during COVID-19

By | 14/04/2020

Mandatory Code of Conduct during COVID-19

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.

Mandatory Code of Conduct during COVID-19In 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:
Click to view

If you need help during this time, contact us. Commercial property management is what we do best.

Bill DiDonna

Written by Bill DiDonna 

Bill has more than 35 years of property management experience across Melbourne’s suburban commercial property market. He is a licenced estate agent, has an Associate Diploma in Real Estate Valuations (RMIT),is currently a committee member on the Commercial and Industrial chapter of the REIV and takes a keen interest in legal issues, trends and insights affecting property.

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