Mandatory Code of Conduct for Commercial Rent Relief

Posted on 8th April 2020 by Ashley Dawson

The Government has released a mandatory Code of Conduct to impose a set of good faith leasing principles applying to commercial tenancies (including retail, office and industrial) between landlords and tenants, where the tenant is an eligible business for the purposes of the Federal Government’s Jobkeeper program, meaning they have experienced a revenue decrease of at least 30% and have a turnover of less than $50 million.

As part of the latest set of measures to allow the economy to bounce back after the crisis has ended, the provisions are designed to ensure tenants can emerge at the other side of the crisis still in their premises. The new proposals will include the following:

• landlords not being able to terminate leases or draw on their tenants’ security,
• tenants honouring their leases, and
• landlords reducing rent proportionate to the trading reduction of the tenant’s business.

This can take the form of rent waivers and rent deferrals, in proportion to the reduction in business revenue and up to 100% of the amount ordinarily payable. At a minimum, at least 50% of the rent reduction must be provided as rent free/rent waiver, and the portion that is a deferral of rent must be recovered over the balance of the lease term, but for no less than 24 months.

For example, if your turnover drops by 60%, your rent ordinarily payable would reduce by 60%. This would then be split with half of the rent reduction as rent free/rent waiver, and the remaining half rent reduction as rent deferral.

You can access the full National Cabinet Mandatory Code of Conduct here

Care should be taken to ensure that any repayment of the deferred rent does not compromise the ability of the affected SME tenant to recover from the crisis. If you are either a commercial landlord or tenant impacted by this, please contact one of our Team on (08) 9316 7000 to discuss your options.

We are here to help

Trying to think of everything you need to do keep your team and customers safe and healthy right now as well as run your business is tough.

We will continue to keep you informed of all government stimulus and other measures and how they apply to your business and are here at any time of the day to give you advice on your business continuity plans and cashflow.

Please call us on (08) 9316 7000 if there is anything we can do to help you.

If you need us outside of work hours, please call one of our Directors:

Andrew Sullivan on 0407 680 698
Chris Grieve on 0417 967 539
Ashley Dawson on 0438 014 318

We are here for you and together we will all get through this.

We will all come out the other side with more resilience, more compassion and more empathy.  Until we do, please look out for each other.