Leasing Code of Conduct – COVID19 (Landlord and Tenant) Guide
The Government and States have now agreed on their formal Leasing Code of Conduct. Importantly, this is a Code of Conduct (not law) and currently only targets Commercial Leasing arrangements. The States control the leasing laws in each State and are expected to imbed the overarching principles of this Code of Conduct into their relevant laws.
Many landlords and tenants have been waiting on this guide to begin their formal negotiations.
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You can download the information detailed on this page as a printable PDF for future reference. Click here to access the PDF document.
Key characteristics of the Code are:
- To qualify, the tenant must have turnover of under $50 million and be eligible for the JobKeeper programme.
- The tenant and landlord must negotiate a suitable, and potentially unique, solution. There are only a few prescriptions outlined below.
- The “Pandemic Period” is defined as the official pandemic period (as categorised by the Government), as well as a reasonable subsequent recovery period.
- The landlords must not terminate the lease because of non-payment of rent during the Pandemic period.
- The landlords cannot draw on the tenant’s security/bond during the pandemic or recovery period.
- Landlords must offer tenants “proportionate reductions” in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable. The proportionate reductions are linked to the decrease in tenant’s turnover as a minimum. Though they also recommend landlords consider profitability and survival of the tenant.
- Rental waivers must constitute no less than 50% of the reduction in rent over the pandemic period.
- Payment of rental deferrals by the tenant must be amortised over the balance of the lease, or a period of 24 months, whichever is greater (unless mutually agreed). No interest or fees should be charged on this deferred rent.
- The tenant should be provided with an opportunity to extend its lease for an equivalent period of the rent waived.
- Any outgoing reductions achieved by the landlord should be shared with the tenant.
- Landlords agree to freeze rent increases (except for some retail leases) during the pandemic and a reasonable recovery period.
Please contact your solicitor and/or accountant if you need any assistance with regard to your lease. If you need any assistance providing clarity around the effect of any changes in business turnover or rent received, Holmans can assist by preparing a cashflow statement for the negotiations. Please do not hesitate to contact us to discuss your options.
These stimulus programs and Government announcements are fast moving, with the legislation and guidelines are regularly changed. You should contact your accountant to discuss how this applies to you before implementing any specific strategies.
This Fact Sheet should be used as a guide only.