Date posted: 9/04/2020 2 min read

Rent relief policy – sharing the burden between landlords and business during COVID-19

National cabinet releases mandatory Code of Conduct - SME commercial leasing principles during COVID-19.

In Brief

  • National cabinet releases mandatory code of conduct aimed to impose good faith leasing principles for commercial tenancies
  • The code allows tenants and landlords to mutually agree on a proportionate and measured burden share during COVID-19

On April 3, 2020, the National Cabinet agreed to a set of principles to guide the mandatory Code of Conduct (the Code) for SME commercial leasing principles during COVID-19. The code and its principles will be implemented by the states and territories.

"These principles will apply to negotiating amendments in good faith to existing leasing arrangements – to aid the management of cashflow for SME tenants and landlords on a proportionate basis – as a result of the impact and commercial disruption caused by the economic impacts of industry and government responses to the declared Coronavirus ("COVID-19") pandemic."

The Commonwealth Government is leading by example and waiving rents for all small to medium businesses and not-for-profit tenants within its owned and leased properties across Australia.

Who does the code apply to?

Those that engage in commercial property tenancies (including retail, office and industrial) such as:

  • owners, operators and other landlords
  • tenants that are a small-medium sized business (annual turnover of up to $50 million) and are eligible for the Commonwealth Government's JobKeeper programme
  • for tenants that are a franchise - the $50 million annual turnover will be applied at the franchisee level
  • for tenants of retail corporate groups – the $50 million annual turnover will apply at the group level (rather than at the individual retail outlet level)

What are the principles?

The National cabinet has outlined 14 leasing principles that should be applied as soon as practically possible (on a case-by-case basis).

Principles include:

  • Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)
  • Tenants must remain committed to the terms of their lease
  • 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 (on a case by case basis) based on the reduction in the tenant's trade during the COVID-19 pandemic period and a subsequent reasonable recovery period
  • Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties.

Small and medium businesses and NFP tenants will have a mutual obligation under the Rent Relief Policy and its code to continue to engage their employees though the JobKeeper initiative where eligible, and if applicable, provide rent relief to their subtenants.

Code of Conduct and SME Commercial Leasing principles

More information about the Code and the SME Commercial Leasing principles during COVID-19 can be found here

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