Commercial Tenancies

While we are yet to see the legislation (currently being drafted by the State Governments), the National Cabinet has agreed on a (in principle) mandatory code of conduct in relation to Commercial tenancies, a brief summary of which is below:

  • Applicable to tenants experiencing financial stress or hardship as a result of the Covid 19 Pandemic (applies automatically where the tenant has been accepted under the Job Keeper program);
  • Landlords should not terminate leases or evict tenants due to non-payment of rent during the pandemic period (or reasonable subsequent recovery period);
  • Tenants must remain committed to the terms of their lease;
  • Landlords should offer tenants proportionate reductions in rent payable (and outgoings) in the form of waivers and deferrals (proportion largely based on the % reduction in tenant’s business turnover), unless agreed otherwise by the Tenant, the waiver must account for at least 50% of the reduction and the deferred component must be amortised over the term of the lease (or 24 months, whichever is the greater);
  • No costs can be levied on the deferred payments; and
  • Landlords cannot draw on security, must put a freeze on rent increases and the tenant should be provided with an opportunity to extend the lease for a period equivalent to the deferral period.

Some of these “recommendations” may vary from state to state once the final details are released however, if you are a commercial landlord or tenant, you should review the code of conduct, consider what action is required, seek appropriate legal and other advice and ensure any changes are appropriately documented.

Please contact us if you would like to discuss further.

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