Rent relief and the Commercial Tenancies Code

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Rent relief and the Commercial Tenancies Code

The Commercial Tenancies Code was revealed after the National Cabinet meeting on 7 April 2020. The final piece of the Federal Government’s hibernation strategy, this sets the tone for commercial and retail rent relief and relies on tenants, landlords, government and banks to work together and share the pain in the short term.

Now agreed upon, the Code will be legislated and managed by the States and Territories and will be subject to binding mediation. The two core principles underpinning the Code will be good faith and proportionality, with landlords and tenants urged to work together on how to best manage rent relief going forward.

Who does the mandatory code apply to?

The code will apply to tenants with a turnover of $50m or less.
Tenants that have experienced a 30% or greater loss in revenue.
Tenancies where the tenant is participating or will participate in the JobKeeper program.

What does rent relief look like?

Landlords are expected to negotiate in good faith and ‘share the pain’.
The rent relief should be proportionate to the reduction in turnover and should comprise waivers and deferrals.
Waivers must account for at least 50% of the reduction.
Any recoupment of deferred rent will be over the duration of the lease period or a minimum of 24 months. This means if a tenant has six months left on their lease, they should be offered a 24 month period to pay any deferred rent.
Landlords cannot terminate a lease on the basis of non-payment, nor dip into bonds to cover unpaid rent. Those who choose not to engage may forfeit themselves out of the lease.
Tenants are expected to honour their obligations under a lease (i.e. they can’t just walk away, which was one of the industry concerns when the initial guidelines were announced).

National Code of Conduct Implementation

It’s changing by day – but to date we have seen most of the states and territories introduce law that enables the introduction of the national principles, however whether or not we have the detail in the form of the adopted regulations is another matter.

State	Date of Assent	Link	Other state stimulus links
QLD	22 April 2020	Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Explanatory Notes)	https://www.business.qld.gov.au/starting-business/premises-location
WA	23 April 2020	Commercial Tenancies (COVID-19 Response (Early Termination)) Bill 2020 Commercial Tenancies (COVID-19 Response) Act 2020 No 19	https://www.commerce.wa.gov.au/consumer-protection/commercial-tenancies-covid-19-response
NSW	24 April 2020	Retail and Other Commercial Leases (COVID-19) Regulation 2020	https://www.service.nsw.gov.au/campaign/covid-19-help-small-businesses/commercial-lease-support
VIC	25 April 2020	COVID-19 Omnibus (Emergency Measures) Act 2020 (Commercial Leases and Licences Regulations 2020) Regulations released 1^st May	https://www.business.vic.gov.au/disputes-disasters-and-succession-planning/coronavirus-covid-19/coronavirus-business-support
TAS	7 May 2020	COVID-19 Disease Emergency (Commercial Leases) Bill 2020 Gazette Notice - Initial protection re evictions	https://www.cbos.tas.gov.au/__data/assets/pdf_file/0009/567774/Fact-Sheet-Code-conduct-commercial-leases.pdf
SA	14 May 2020	COVID-19 Emergency Response (Further Measures) Amendment Bill 2020 (Section 7) and COVID-19 Emergency Response (Commercial Leases No.2) Regulations 2020	https://www.sasbc.sa.gov.au/article/view/348
NT	24 April 2020	Tenancies Legislation Amendment Act 2020 but no notice given yet effecting national code	https://nt.gov.au/industry/support-for-business/programs-and-initiatives
ACT	7 April 2020	COVID-19 Emergency Response Act 2020 - see Schedule 1, items 1.11 and 1.18 but no code of conduct declaration as yet	https://www.covid19.act.gov.au/economic-support/economic-survival-package/supporting-local-businesses-and-the-economy#Business-Liaison-Team

Land tax relief

The States and Territories are responsible for providing any additional concessions for landlords working with their tenants. You can see all land tax relief here.