Federal Government finalises Commercial Tenancies Code- What does this mean for Landlords and Tenants?

Yesterday, the Prime Minister announced that national cabinet agreed to a mandatory Commercial Tenancies Code for commercial and retail leases. The code will be legislated and regulated in each State and Territory and will be subject to binding mediation.

Who does the mandatory code apply to?

  • Tenancies where the landlord or tenant is eligible for the JobKeeper program.
  • Tenants with business turnover of $50m or less.
  • Tenants that have experienced a 30% or greater loss in revenue.

Relief available

  • Both Landlords and Tenants will be expected to negotiate in good faith to reach a mutually agreed outcome;
  • Any relief agreed will be proportional to the reduction in turnover and could include waivers, deferrals and abatements. Waivers must account for at least 50% of the reduction and deferrals should be offered for the balance of the lease period;.
  • If a tenant has not experienced a reduction in business turnover, there should be no entitlement to rent relief – rent should be paid where it can be;
  • Landlords should where appropriate seek to waive recovery of any other expense (outgoing payable) by a tenant, under lease terms, during the period the tenant is not able to trade. Landlords reserve the right to reduce service as required in such circumstances;
  • Tenants should be provided with an opportunity to extend their leases for an equivalent period of the rent waiver and/or deferral period. This is intended to provide the tenant additional time to trade, on existing terms, during the recovery period after the COVID-19 pandemic concludes;
  • Landlords are prohibited from terminating a lease on the basis of non-payment of rent and cannot draw on tenants’ security whether a cash bond, bank guarantee or personal guarantee;
  • Rent increases will be frozen;
  • Landlords will be prohibited from passing on land tax (if chargeable) to tenants; and
  • Landlords will be prohibited from charging interest on unpaid rent.

Tenants are expected to honour their obligations under their lease.

For tenancies which do not fall within the mandatory Commercial Tenancies Code, landlords and tenants will be free to make their own commercial arrangements in relation to an appropriate level of rent abatement (if any) and the consequences which will flow from that.

You can view a copy of the mandatory Code of Conduct by clicking on the link below:

https://www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf

In the meantime, if you require any assistance, please contact Evelyn Marcou on 0409 384 025.