Rent relief for commercial tenants as PM says landlords need to share the pain

- April 7, 2020 2 MIN READ

Landlords will be forced to reduce rents on commercial properties in proportion with the loss of turnover their small business tenants have experienced under new measures announced by Prime Minister Scott Morrison on Tuesday.

The plan will be backed up by state-based legislation and a mandatory Code of Conduct, building on last Friday’s six-month ban on commercial landlords evicting tenants during the ongoing coronavirus shutdown.

“The purpose of the Code is to impose a set of good faith leasing principles for application to commercial tenancies,” Morrison said.

“This preserves the lease, it preserves the relationship, it keeps the tenant in the property.

“Landlords must not terminate the lease, and tenants must honour the lease.”

The Code will apply to retail, office and industrial properties, between owners/operators/other landlords and tenants, if the tenant is a small to medium-sized business (under $50 million annual turnover) and eligible for the government’s JobKeeper program.

“National Cabinet agreed that there would be a proportionality to rent reductions based on the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants,” Prime Minister Morrison said.

“The Code provides a proportionate and measured burden share between the two parties while still allowing tenants and landlords to agree to tailored, bespoke and appropriate temporary arrangements that take account of their particular circumstances.”

Binding mediation will help hammer out any reduction and rent waivers will have to take into account at least 50% of a tenant’s turnover fall.

Tenants will also be able to defer rental payments with the outstanding balance to be repaid over the remainder of the lease period, provided it’s at least 12 months. If the lease expires in under a year, a tenant will still have 12 months to make any deferred payments.

Morrisson said the state and federal governments expect Australian and foreign banks along with other financial institutions to support landlords and tenants as they implement the mandatory Code. The PM said the Federal Government will “as a model landlord” by waiving rents for all tenants who are small and medium, and not-for-profit enterprises in Commonwealth-owned and leased properties

The Rent Relief Policy will include a mutual obligation requirement on SMEs and NFP tenants to continue to engage their employees through the JobKeeper initiative where eligible, and if applicable, provide rent relief to their sub-tenants.

Landlords will be legally required to talk to tenants about their rent and would “forfeit their way out of the lease”, the PM said, if they refused.

The states and territories will address residential tenancies individually, Morrison said.

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