To reduce friction between the landlords and tenants during such time of crisis, the Australian Government released a conduct code on 7th April for SME commercial tenancies. In conclusion, the principles require the tenants to keep on paying rent if they can; and in case of financial distress due to COVID-19, the tenants and landlords must negotiate for a mutually convenient agreement.
Further details on the code include the following:
- The code only applies when tenant is financially distressed, for example, they are eligible for aid through the JobKeeper program.
- Both the tenant and landlord must honor the lease terms, otherwise, they will lose their rights under the code.
- Landlord must not end lease agreement due to non-payment of rent.
- Total reduction in rent will be proportional to reduction in turnover during the COVID-19 pandemic, in terms of waivers and deferrals.
- Tenants can claim at least 50% of the total reduction in rent as rental waivers. If possible, the landlord must provide waivers of more than 50% in case of tenants failing to continue their ongoing obligations under the lease.
- Deferrals should be amortized over a period of 24 months or the lease term, whichever is greater.
- Any deduction in statutory charges and benefits offered by loan providers to the landlord must be proportionately shared with the tenant.
- Landlord should waive recovery of expenses incurred by tenant under lease terms, during the pandemic.
- Landlord must not charge any fees, interest or other charges on rent waivers and deferrals.
- Tenant must be provided with an option of lease extension. If no extension occurs, the repayments should start earlier of the end of COVID-19 pandemic or the end of lease term.
- There will be a prohibition on landlords drawing on tenant’s securities.
- There will be a prohibition on levy or penalties on reduction in opening hours or trade by the tenant.
- There will be a prohibition on rent increases during the pandemic (except retail leases depending on turnover rent), regardless of previous arrangements.
In case of disagreement, the states and territories will look over the circumstances through a binding mediation process, and come to an outcome convenient for all parties.