Mandatory code for commercial tenancies agreed

The Prime Minister announced on Tuesday that the mandatory code of conduct setting out SME commercial leasing principles during the coronavirus pandemic has been agreed.

The code, which builds on the draft codes submitted by landlord and tenant representative bodies in the commercial property sector, will be regulated by the states and territories, and will be overseen through a binding mediation process.

As set out by the PM, the purpose of the code is to impose a set of good faith leasing principles for application to commercial tenancies (including retail, office and industrial) between owners/operators/other landlords and tenants.

It applies in circumstances where the tenant is a small-medium sized business with annual turnover of up to $50 million, and is eligible for the government's JobKeeper program.

According to the code there will be a proportionality to rent reductions – via waivers or deferrals – based on the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants.

The PM Scott Morrison clarified on Tuesday that waivers of rent must account for at least 50 per cent of the total reduction in rent payable, while deferrals must be covered over the balance of the lease period and for no less than 12 months. 

While the code provides a proportionate and measured burden share between the two parties, it still allows tenants and landlords to agree to tailored, bespoke and appropriate temporary arrangements that take account of their particular circumstances.

The PM again noted that the government expects Australian and foreign banks along with other financial institutions operating in Australia, to support landlords and tenants with appropriate flexibility as they work to implement the mandatory code.

The government is also acting as a model landlord by waiving rents for all its small and medium enterprises and not-for-profit tenants within its owned and leased property across Australia.

The rent relief policy will include a mutual obligation requirement on the small and medium-sized enterprises and not-for-profit tenants to continue to engage their employees through the JobKeeper initiative where eligible, and if applicable, provide rent relief to their subtenants.

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