This afternoon Prime Minister Scott Morrison announced a Code of Conduct (‘the Code’) to apply to commercial leasing during the COVID-19 pandemic. The PM noted that it is still intended that tenants and landlords will negotiate in good faith to agree temporary arrangements appropriate to their individual circumstances.
The Code will apply where the tenant is an eligible business for the Government’s JobKeeper programme. In summary the Code provides that during the COVID-19 pandemic period:
1. Landlords must not terminate leases due to non-payment of rent
2. Tenants must remain committed to the terms of their lease
3. Landlords must offer tenants proportionate rent reductions in the form of waivers and deferrals based on the reduction in the tenant’s trade
4. Rental waivers must constitute at least 50% of the total reduction in rent payable
5. Payment of rental deferrals must be amortised over the balance of the lease term or 2 years (whichever is greater)
6. Reductions in statutory charges (such as land tax, council rates) or insurances are to be passed onto the tenant
7. Landlords should share any benefits received due to deferrals of loan repayments
8. Landlords should waive recovery of any expense normally payable by a tenant during any period where the tenant is unable to trade
9. Any repayment by the tenant of rent or other monies must not commence until after the end of the COVID-19 pandemic period
10. No fees, interest or other charges to be applied to rent waived or deferred
11. Landlords must not draw on a tenant’s security for the non-payment of rent
12. Tenants will be provided with an opportunity to extend their lease for an equivalent period of the rent waiver and/or deferral period
13. Freeze on most rent increases
14. Landlords must not penalise tenants for reduced trading hours or cessation of trade.
States and Territories are to give effect to the Code through specific legislation and regulation.
UPDATE | The NSW Government enacted the Code in late April 2020 meaning landlords and tenants in NSW need to adhere to the terms of the Code when re-negotiating rental arrangements during this time.