The Prime Minister announced new government protections for commercial tenants on 7 April 2020.

In recognition that commercial leases can differ greatly from one agreement to another, federal and state governments have agreed to introduce a Mandatory Code of Conduct for all landlords.

Negotiations will now have to occur between landlord and tenant in good faith, using the following (simplified) principles:

1. Landlords cannot terminate leases due to non-payment of rent during the pandemic period or reasonable subsequent recovery period.
2. Tenants must remain committed to the lease agreement subject to amendments negotiated under the new Mandatory Code of Conduct.
3. Landlords must offer proportionate reductions in rent payment in the form of waivers/deferrals of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the tenant’s reduction of trade.
4. Rental waivers must be at least 50% or more based on rule #3 above.
5. Payment of rental deferrals must be amortised over the balance of the lease period, and for a period of at least 24 months unless otherwise agreed.
6. Any reduction(s) in statutory charges (eg land tax, council rates) or insurance will be passed onto the tenant proportionately.
7. Landlords should share any benefits received due to deferral of loan repayments with the tenants in a proportionate manner.
8. Landlords should waive recovery of any other expenses (eg outgoings) by a tenant during the period where the tenant is unable to trade.
9. If negotiated arrangements necessitate repayments, this must occur over an extended period with repayments to commence after the pandemic period.
10. No fees, interest or other charges should be applied with respect to rent waived in principles #3 and #4 above and no fees, charges nor punitive interest may be charged on deferrals in principles #3, #4 and #5 above.
11. Landlords must not draw on a tenant’s security for the non-payment of rent (eg cash bond, bank guarantee or personal guarantee) during the pandemic period and/or a reasonable subsequent recovery period.
12. The tenant must be allowed to extend its lease for an equivalent period of the rent waiver and/or deferral period outlined in item #2 above.
13. Landlords must freeze on rent increases (except for retail leases based on turnover rent) for the duration of the pandemic period and a reasonable subsequent recovery period, notwithstanding any arrangements
    between the landlord and the tenant.
14. Landlords may not apply any prohibition on levy any penalties if tenants reduce opening hours or cease to trade due to the pandemic.

PUBLISHED: 8 APRIL 2020