Australian Cabinet update regarding commercial leases
On 3 April 2020, the Federal Cabinet met to discuss the imposition of a mandatory coronavirus industry code of practice for commercial and retail leases. The code is likely to be released once the Cabinet has settled the balance between tenant and landlord rights and obligations. To that end, PM Scott Morrison stated that the current drafting of the code is “not where it needs to be” to provide enough security for landlords.
It is anticipated that the industry code will:
- be a mandatory code incorporated into state and territory legislation where appropriate;
- be mandatory for tenants with a turnover of less than $50 million and are participants in the JobKeeper scheme;
- incorporate a proportionality principle whereby the turnover reduction of the tenant ought to be reflected in the rental waiver provided by the landlord;
- include protections for tenants against claims on penalties, acting on guarantees and interest protection on rent;
- include protections from evictions while landlords will also be protected from the tenant terminating the lease on those grounds;
- include a requirement that both tenants and landlords enter mediation where no suitable agreement is in place;
- include provision that rent relief only be available for coronavirus-affected businesses;confirm that leasing arrangements will continue to stand for all ot
- her businesses who are not coronavirus-affected (i.e. do not have a reduction in their turnover); and
- allow States and territories to provide further exemptions, waivers and reduction to their fees and rates.
National Cabinet is scheduled to convene on in the morning of 7 April 2020 and will re consider the terms of the industry code at that time.