Mandatory Code of Conduct – SME Commercial Leasing Principles (COVID-19)
The Federal Government has introduced a mandatory code of conduct to apply between landlords and tenants where the tenant is an eligible business for the JobKeeper programme.
Principles of the Code
- Landlords and tenants will be required to work together in good faith to negotiate appropriate temporary leasing arrangements during the COVID-19 pandemic.
- Any agreed arrangements are to consider the impact of the COVID-19 pandemic on the tenant with specific regard to revenue, expenses and profitability of the tenant. Negotiations for reduced rent and are to be proportionate and allow for a reasonable recovery period.
- Landlords and tenants are to work co-operatively to assist each other in dealings with other stakeholders such as banks, governments and utility companies.
- Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period.
- Tenants to remain committed to their leases subject to any temporary amendments negotiated under the Code.
- Landlords must offer proportionate reductions in rent payable in the form of waivers or deferrals of up to 100% of the amount ordinarily payable based on a reduction in the tenant’s trade during COVID-19.
- Rental waivers must be no less than 50% of the total reduction in rent payable and should be a greater proportion where failure to do so compromises the tenant’s ability to continue fulfil their obligations under their lease.
- Rent deferrals must be amortised over balance of the lease term and for a period of no less than 24 months unless otherwise agreed.
- Any reduction in statutory charges or insurance to be passed on to the tenant in the appropriate proportion under terms of the lease.
- Landlords should share any benefit received due to loan repayment deferrals provided by a financial institution.
- Landlords are not to draw on a tenant’s security deposit for the non-payment of rent during the COVID-19 pandemic.
- Landlords agree to a freeze on rent increases during the COVID-19 pandemic.
For those people that are party to a commercial tenancy it will be necessary to abide by the code. We recommend clients seek legal advice and negotiate with their landlord or tenant based upon the above.