The federal government recently released its mandatory Code of Conduct for small and medium commercial tenancies, which we have provided a summary of below.

The Code applies to commercial tenancies where the tenant:

• Has a turnover of $50 million or less (the $50 million threshold will be applied in respect of franchises at the franchisee level and in respect of retail corporate groups at the group level), and;
• The business is in financial distress & is eligible for the JobKeeper program (the business has experienced a minimum of 30 per cent drop in revenue).

Download the Code of Conduct.

The Code of Conduct key requirements include:

• Terminations: landlords must not terminate the lease due to non-payment of rent during the COVID-19 pandemic (or reasonable recovery period).
• Lease Obligations: tenants must remain committed to the terms of their lease, subject to amendments. Failure to do so will forfeit any protections provided by the Code.
• Rent Reductions: landlords must offer reductions in rent (as waivers or deferrals) based on the tenant’s reduction in trade during COVID-19
  • Waivers of rent must account for at least 50% of the reduction in the rental provided to the tenant. This is subject to the owner’s ability to be able to provide the waivers, and the tenant may agree to waive this requirement and agree to an alternate proposal.
  • Payment of deferred rent must be amortised over the balance of the lease term, or if the lease has less than 2 years remaining, the tenant must be given a minimum of 2 years for the repayment schedule.

• Sharing of Benefits: 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).
• Rent Increases: landlords must not impose rent increases during the pandemic period (except where rent paid is directly tied to tenant revenue).
• Security: landlords must not draw on a tenant’s security for non-payment of rent during the pandemic period.
• Extending Terms: tenants should be provided with the opportunity to extend their lease for an equivalent period of the rent relief period to provide them additional time to trade.

Note additional state-based requirements will apply.

If you need to talk to someone regarding the Commercial Rent Relief Update, please contact us here.