Both the small business and property sectors play an important part in the Australian economy, and protecting them is paramount during this pandemic, to ensure that the economy can prosper once we are on the other side. Our friends at Explore Property Mackay have summarised the Mandatory Commercial Tenancy Code for us – read on for Commercial Rent Relief!
The Code will apply to retail, office and industrial properties, between owners/operators/other landlords and tenants, if the tenant is a small to medium-sized business (under $50 million annual turnover) and eligible for the government’s JobKeeper program.
MANDATORY COMMERCIAL TENANCY CODE
Who does it apply to?
- Tenants or landlords in financial distress who qualify for the JobKeeper program.
- This means a tenant or landlord who has suffered 30% loss to business.
- Turnover of less than $50 million.
Obligations on each party
- Tenant to continue to comply with lease.
- Landlord not to terminate the lease or draw on any security.
- Aims to keep lease in place for post-COVID19 period.
- Seeks to be a series of proactive, constructive and cooperative measures.
What are the rent reductions?
- Total reduction to be proportionate to decline in trading performance of business.
- To comprise waiver and deferral.
- Waiver to equate to minimum 50% of total rent reduction.
- Remainder is to be deferred, and repaid over balance of lease term, but minimum of 12 month period.
- Binding mediation process to reach agreements.
- Banks to provide support to tenant and landlord.
- To be legislated in each state and territory.
This means tenants will also be able to defer rental payments with the outstanding balance to be repaid over the remainder of the lease period, provided it’s at least 12 months. If the lease expires in under a year, a tenant will still have 12 months to make any deferred payments.
The Rent Relief Policy will include a mutual obligation requirement on SMEs and NFP tenants to continue to engage their employees through the JobKeeper initiative where eligible, and if applicable, provide rent relief to their sub-tenants.
We hope this will assist you during these trying times. We are here for you. If we can help in any way, please just reach out.