While the final details are still to be enacted in law by the State and Territory Governments (which would still seem unlikely to occur until late next week at the earliest), the Federal Government has today released some additional information as to what commercial landlords and tenants can expect from the Government measures regarding commercial tenancies:
- The changes will be implemented by way of a mandatory Code of Conduct.
- The mandatory Code will apply where a tenant is eligible for the JobKeeper subsidy and is a small or medium business with less than $50 million in turnover.
- The focus is still very much on the landlord and tenant negotiating to achieve a viable outcome. However, today the concept of proportional rent reductions based on the decline in turnover was mentioned to ensure the burden is shared between landlords and tenants in a fair and equitable manner.
- Further restrictions on landlords, in addition to prohibitions on terminating leases for non-payment of rent that were announced on 29 March, were outlined including:
- a temporary freeze on rent increases;
- not being able to penalise tenants for ceasing to trade or reducing trading hours;
- being unable to pass on land tax to tenants;
- being unable to charge interest on unpaid rent; and
- a prohibition on landlords making a claim on any bank guarantee or security deposit provided by their tenant, as a result of the tenant’s non-payment of rent.
- For landlords and tenants that sign up to the Code of Conduct, States and Territories have agreed to look at providing the equivalent of at least a three month land tax waiver and three month land tax deferral on application by eligible landlords. Landlords must pass on the benefits of any State and Territory programs to tenants.
- In cases where parties have signed up to the Code of Conduct, the ability for tenants to terminate leases for severe financial distress as mentioned in the National Cabinet Statement on 29 March 2020 will not apply. This is consistent with the Government’s approach of putting both landlords and tenants in the best position possible to return to their pre-COVID-19 status once the threat of COVID-19 has passed.
We will provide further information when it comes to hand.
We continue to urge landlords and tenants to negotiate with fairness and in good faith to come to interim arrangements, but all parties should await further information before finalising medium or long term changes in their lease arrangements.
Please contact us if you need further information and need to discuss how this may apply to your particular situation.
Phone 07 4688 2188 www.cglaw.com.au