C-19: Commercial & Retail Rent Relief

April 16th, 2020
C-19: Commercial & Retail Rent Relief

We have had countless enquiries in relation to leases on both sides of the equation, and whilst there are many examples of landlords and tenants working together in good faith, we have unfortunately seen some heartless actions taken by landlords.

The federal government has finally committed to a Code of Conduct for landlords and tenants to comply with.

The code is designed to apply to those businesses who are eligible for the JobKeeper payments and will stand in place for the same timeframe as the JobKeeper rules.  Accordingly, the code will apply to those businesses who have suffered a turnover reduction of 30% or more.  

The Code is fairly straight forward from a high level perspective.  However, we are anticipating that there will be more guidance at a practical level once the states and territories implement their own statues.

The key messages from the commercial rent relief code of conduct are:

  • The tenant must be eligible for JobKeeper
  • The tenant must have an annual revenue less than $50m
  • Tenants cannot be evicted for the next 6 months if they cannot pay their rent or outgoings
  • The rent must be reduced in proportion to their revenue reduction
  • Tenants will likely need to justify their revenue reduction by presenting financial records to the landlord
  • The rent reduction can be a waiver (rent free) or deferral (to be paid over a maximum period of 24 months)
  • If the landlord does not agree to a full waiver of rent, the reduction of rent must at the very least be a 50% mix of waiver and deferral.  Meaning that the maximum deferral amount must only be 50% of the reduction the tenant is entitled to

It’s important to note that at this stage, the code is a guideline of minimum standards to protect the tenant.  This doesn’t mean that the parties can’t come to an agreement outside of the terms of the code.  If this applies to you, make sure that the agreement is correctly recorded in writing.

Whilst the code provides relief and leniency in terms of tenant’s financial obligations, it doesn’t vary tenant’s other obligations such as cleanliness, damage and keeping the premises in a state of good repair.

For example…

  • Tenant revenue has dropped 50%
  • Tenants rent was $11,000 a month inc GST
  • $5500 must be waived or deferred
  • $5500 needs to be paid by the client
  • OF the $5,500 waived or deferred, $2750 must be WAIVED and $2750 is deferred to be paid over the remainder of the lease, or 24 months, whichever is longer

Need A Hand?

Lease negotiations can be a tricky business at the best of times, but now more than ever as tensions are high on both sides of the fence. It’s important to ensure as best we can that both tenants and landlords come to an agreement that will see both of them through this pandemic. Give us a call or make an appointment to chat through your particular agreement.