May 18, 2020
Expert advice

Struggling to Pay the Rent? The Government has Introduced New Commercial Rent Relief Measures

The financial impact of the COVID-19 crisis has been catastrophic for some business owners, and there are very few businesses that have been untouched by the economic crisis that coronavirus has left in its wake.

The Government continues to announce measures designed to help businesses keep their doors open, or at the very least to go into “hibernation mode” until the economy starts to pick up again. The latest involves rent relief for commercial tenants.

Govt announces rent relief measures for commercial tenants

In response to concerns from the business community, the Federal Government has introduced a mandatory code for commercial tenants and landlords. The code is designed to help commercial renters throughout the COVID-19 crisis.

Who is eligible?

The code will apply from 3 April 2020 to SMEs with an annual turnover of less than $50 million and are participating in the JobKeeper Program.

What does rent relief under the mandatory code look like?

Under the code of conduct for commercial tenancies, landlords must not terminate leases for non-payment of rent during the COVID-19 pandemic and recovery period. Tenants must also stay committed to their lease terms under the code of conduct.

Landlords must offer reductions in rent as waivers and deferrals proportionate to the tenant’s reduction in trade during COVID-19. Waivers must constitute no less than 50 per cent of the total rent reduction during that period.

Additionally, any benefits that owners get for their properties as outgoing reliefs (e.g. deferred loan payments, land tax, reduced charges) should be passed onto the tenant in the appropriate proportion.

A framework for cooperation between landlords and tenants

Once introduced, the code will be implemented nationwide, offering a framework for cooperation between tenants and landlords. The aim is to encourage both parties to reach mutually agreeable outcomes on a case by case basis.

For commercial tenants, this means negotiating rent reductions corresponding to their annual turnover reductions and being provided extended lease terms for the rent waiver and deferral period.

The mandatory code is great news for commercial tenants, and the measures it introduces can help avoid businesses being forced to shut down and close their doors throughout this challenging period.

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