Mandatory Code for Commercial Tenancies

We are sure that most of you have now heard that the Prime Minister announced a new Code for commercial landlords and tenants which must be followed if the tenant and their business is adversely affected by COVID-19.

At Gibson Howlin Lawyers, we have looked at what has been announced and provided the following summary of what this new code means for commercial landlords and tenants.

As the Code was released by the Federal Government, it does not become law until it has been legislated and regulated in each individual State and Territory.

The key to a tenant being able to utilise the new Code and any resulting state-based legislation or regulation is that they must:

  • be eligible to receive support under the Commonwealth’s JobKeeper programme; and
  • have a turnover of less than $50 million; and
  • have a 30% or greater decrease in turnover.

The Code sets out a number of principles which are intended to assist Tenants and Landlords to reach an agreement. These principles are:

  • a prohibition on Landlords terminating leases for non-payment of Rent;
  • an obligation on Tenants to continue to comply with their obligations under their respective Lease(s);
  • an obligation on Landlords to offer rent reductions in the form of deferrals (postponement of Rent) or waivers that are proportional to the Tenant’s decrease in turnover. Rent waivers must comprise at least half of the total rent reduction;
  • a prohibition on Landlords charging fees or interest on rent or other payments being deferred;
  • a prohibition on Landlords calling on security deposits, bank guarantees and personal guarantees;
  • a requirement for Landlords to provide their Tenants with an opportunity to extend their Leases for an equivalent period of the rent waiver and/or deferral;
  • an automatic freeze on rent increases for the period of the COVID-19 pandemic and for a subsequent recovery period; and
  • an obligation on Landlords to pass on any reduction in statutory rates or charges it receives to its Tenants.
  • If Landlords and Tenants cannot agree on how to amend or vary the lease in the face of the COVID-19 pandemic, the Code allows either party to refer the matter to their respective State or Territories’ mediation service.

For those leases that do not meet the criteria set out earlier, Landlords and Tenants will be free to make their own commercial arrangements in relation to amending or varying the lease (if an agreement can be reached at all).

At Gibson Howlin Lawyers we are continuing to keep track of the NSW Government’s ratifying of the Code and are ready to assist you to negotiate an agreement with your Landlord or Tenant (as the case maybe) in accordance with the Code or to document any rent relief agreement reached.

We currently have a number of Landlords and Tenants at the moment who are already utilising our services to assist in such matters, so please do not hesitate to contact us on 9523 6111 if you require such assistance.

 

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CONTACT US

The Chambers

51 Croydon Street

Cronulla NSW 2230

chambers@gibsonhowlinlawyers.com

t 9523 6111

f 9523 0785

PO Box 61 Cronulla 2230

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