Article:

COVID-19: Commercial property tenancies update

08 April 2020

Hung Tran , Partner, Business Services |

As COVID-19 lockdowns continue across the country, commercial tenants have been provided with further guidance as to what tenants could expect in regards to concessions from landlords.

Late last month, National Cabinet advised that a temporary 6-month moratorium on eviction for non-payment of rent is expected to apply across commercial tenancies impacted by severe rental distress. 

Under the moratorium, tenants will be able to terminate their lease and/or seek mediation for conciliation on the grounds of financial distress. Property owners on the other hand are encouraged to ensure any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by COVID-19.

Yesterday, the Prime Minister announced that the States and Territories will introduce legislation to create a mandatory industry code of conduct for commercial tenancy agreements impacted by COVID-19. However, it is critical to note the industry code will not apply to residential tenancies. Instead, they will be dealt with by each of the State and Territory jurisdictions.

It is expected that the Code will only apply to commercial landlords and tenants with a turnover of less than $50m and participants in the JobKeeper measure. Both parties will be expected to negotiate according to a “proportionality principle” – that is, the reduction in tenant turnover should be reflected in any rental waiver, reduction or deferral over a longer revised tenancy agreement.

Where a landlord provides a tenant with a rent waiver, it must account for at least 50% of the rental provided to the tenant during the period. Rent deferrals must be recovered over the balance of the lease of the term and in no lease less than 24 months.

Under the Code, arrangements will be overseen by a binding mediation process. If a landlord does not engage with a tenant in accordance to the Code, they will forfeit their rights under the lease.

Clear and open communication between tenant and landlord will therefore be key to ensuring a fair outcome for both parties.

Need assistance?

To determine which COVID-19 rental assistance package option best suits your needs, please contact Hung Tran or a member of our national Real Estate and Construction team.

 

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