Struggling to pay rent due to COVID-19?

Did you qualify for JobKeeper?

Do you hold a commercial lease?

Is your annual turnover less than $50 million?

If so, you may be eligible for Rent Relief under the mandatory commercial tenancies code, the Commercial Tenancies Code (Code).

The Government has put in place further measures, in addition to JobKeeper, aimed to provide rental relief for holders of commercial tenancies. Rent Relief is designed to share the burden of the economic effect of COVID-19 between landlords and tenants according to the tenant’s decline in turnover.

To achieve a fair result, the Code will facilitate rent reductions proportionate to a tenant’s reduction in turnover and will include a mix of waivers and deferrals of rent during the COVID-19 pandemic, plus the reasonable recovery period that will follow. Waivers must be at least half of the rent reduction, while deferrals will be offered to allow rent to be repaid over time, in some cases after the term of the lease. In addition, in most instances there will be a freeze on rent review increases.

The measures are encapsulated in a mandatory code of conduct of good faith leasing principles that apply to:

• retail
• office; and
• industrial commercial properties.

The Code applies equally to:

• owners and landlords; and
• operators and tenants.

Your eligibility depends upon:

• your existing eligibility to JobKeeper; and
• your annual turnover being less than $50 million.

Principles of the Code

The Code includes a common set of 14 principles. Some of these stipulate that:

• landlords must not terminate leases for non-payment of rent during the COVID-19 pandemic (or reasonable recovery period);
• tenants must stay committed to their lease terms (subject to amendments);
• landlords must offer reductions in rent (as waivers or deferrals) based on the tenant’s reduction in trade during COVID-19; and
• benefits that owners get for their properties (e.g. reduced charges, land tax, deferred loan payments) should be passed on to the tenant (in the appropriate proportion).

Furthermore, whether you are a landlord or a tenant, you must consider:

• the provision of sufficient and accurate information, such as financial information, and evidence of eligibility for the JobKeeper program;
• that rental waivers must be no less than 50% of rental relief (although a tenant can waive this requirement);
• that arrangements will be proportionate: for example, where the tenant’s turnover is reduced by 60% the tenant will be entitled to claim rent relief of 60%;
• that a landlord cannot recoup any rent waived over the term of the lease;
• that a landlord cannot charge interest, fees or charges on rent waived or deferred;
• that a landlord must not claim on a tenant’s security (bank guarantee, security deposit or personal guarantee) for non-payment of rent; and
• the term of the lease and date of expiry deferrals must be spread over the remaining lease term or at least 2 years, whichever is greater.

What you need to be aware of

You need to be aware of your rights and obligations under the Code which is mandatory for both parties.

The Code requires that both parties act in good faith and in an open, honest and transparent manner to achieve the outcomes consistent with the Code.

Your landlord should already have approached you to commence negotiations consistent with the Code, however it is important to understand the basic principles that are encapsulated in the Code to ensure that your rights are preserved.

If you require any assistance or have any questions relating to Rent Relief please let us know!

We are always here to help.

McSweeney CA