Commercial Lease Rent Relief during COVID19

LandlordIf your business qualifies for JobKeeper support (effectively measured by your actual or forecast turnover reducing by more than 30%), then your business may qualify for commercial rent relief as provided for in the National Cabinet Mandatory Code of Conduct SME Commercial Leasing Principles during COVID-19. The key principles are as follows:

  • Where it can, rent should continue to be paid, and where there is financial distress as a result of COVID-19 (for example, the tenant is eligible for assistance through the JobKeeper program), tenants and landlords should negotiate a mutually agreed outcome;
  • There will be a proportionality to rent reductions based on the decline in turnover to ensure that the burden is shared between landlords and tenants;
  • The reduction in rent will be a blend of waiver (a permanent discount which must be at least 50% of the rent reduction) and deferrals (amortised over the greater of the balance of the lease term or 24 months, unless otherwise agreed by the parties).
  • Any reduction in statutory charges (land tax, council rates, water rates, etc) or insurance will be passed onto the tenant in the appropriate proportion applicable under the terms of the lease;
  • There will be a prohibition on termination of leases for non-payment of rent (lockouts and eviction);
  • Tenants must remain committed to the terms of the lease;
  • There will be a freeze on rent increases (except for turnover leases);
  • There will be a prohibition on penalties for tenants who stop trading or reduce opening hours;
  • There will be a prohibition on landlords passing land tax to tenants (if not already legislated);
  • There will be a prohibition on landlords charging interest on unpaid rent;
  • There will be a prohibition on landlords making a claim to a bank guarantee or security deposit for non-payment of rent; and
  • Any legislative barriers or administrative hurdles to lease extensions will be removed (so that a tenant and landlord could agree a rent waiver in return for a lease extension).

In the event that the parties are unable to agree or unwilling to engage with this process, there will be a process for Binding Mediation.

For further details, you may refer to Our expectation is that the Western Australian government will provide a guide codifying the legal application in WA, however the principles are expected to remain the same.

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