Commercial Rent and COVID-19
Landlords and tenants alike have been anxiously waiting for any indication from the Government as to when, how or if the Government will assist businesses in relation to their inability to pay rent for commercial premises following a complete shutdown of their business or a significant decrease in their business as a result of the COVID-19 pandemic. A National Cabinet meeting being held today proposes to consider those concerns and an announcement is expected imminently.
Any response from the Government is anticipated to also require significant co-operation from major lenders as any relaxation of tenants’ ability to pay rent will have a flow-on effect for their landlords’ ability to make mortgage repayments.
In the meantime, many tenants have approached landlords for rent abatements, requests to mutually terminate leases and other relaxations of the tenant’s obligations under the lease. While lease terms can differ greatly and they should therefore be considered on a case by case basis, most leases will not provide for rent abatement due to a global pandemic. While we all wait for an announcement from the Government, we recommend that all parties wait to see the content of the Government announcement before concluding any discussions regarding rent abatements or early terminations. Tenants should immediately contact their insurers to make a claim on their business interruption insurance or seek advice to help them identify whether their particular policy will cover claims arising from the pandemic. Similarly, landlords should ask to see a copy of their tenants’ business interruption insurance policies before agreeing to compromise their ability to demand rent under the lease at this time.
There is no harm in opening discussions between landlords and tenants at this time and our experience indicates a general willingness on the part of landlords to assist their tenants survive these temporary circumstances caused by the COVID-19 pandemic. It is, after all, in everyone’s interests for our economy to be able to return to normal as quickly as possible after the threat of COVID-19 has passed. However, it is always better to make decisions with all available information to hand and for that reason our advice is to delay finalising any negotiations at this time.
Phone 07 4688 2188 www.cglaw.com.au