SME Commercial Leasing Principles during Covid-19
Our Prime Minister, Scott Morrison has recently announced that there will be a mandatory code for commercial tenancies for small to medium businesses. It has been agreed by the National Cabinet that this mandatory code will be legislated and regulated as appropriate in each state and territory.
- The purpose of the code is to impose a set of good faith leasing principles for commercial tenancies and the code includes the following principles;
- The code will apply to all tenancies where the landlord or tenant is eligible for the JobKeeper program and where they have a turnover of $50 million or less
- Landlords must not terminate the lease or draw on tenant security.
- Tenants must remain committed to the lease.
- Landlords must offer tenants proportionate reductions in rent payable (based on the trading reduction in the tenants business) through a combination of waivers of rent and deferrals of rent.
- Waivers of rent must account for at least 50 per cent of the reduction in the rental provided to the tenant during that period.
- Deferrals must be covered over the balance of the lease term, and in no less period than 24 months.
Consequently, landlords and tenants will be required to discuss relevant issues and to negotiate appropriate temporary arrangements.
For further information, please contact us directly.