Thinking | 3 April 2020

Prime Minister announces Industry Code for commercial landlords and tenants

By Kitty Vo, Natalie Bannister, Maurice Doria, Katrina Reye and Jane Baddeley

National Cabinet met today to discuss the Australian Government’s support framework regarding commercial leases.

The Prime Minister announced that they have been working on an Industry Code and are close to resolving issues regarding commercial tenancies.

The code will be made mandatory and will be implemented into State and Territory legislation, which will apply to tenants with a turnover of less than $50 million that are a participant in the JobKeeper program, ie their turnover has decreased by 30% or more.

The code will not be prescriptive about the required arrangements between landlord and tenants. However, there will be an expectation that parties negotiate in good faith and are bound by a proportionality principle, which, for example, will require the turnover reduction of tenants to be reflected in the rental waiver of the landlord.

The Prime Minister gave examples of the agreements parties may come to, such as where there is a three or six month rental waiver, the lease may be extended or the rental payments over the entire period may be changed. He emphasised that parties will be expected to formulate their own agreements within the forthcoming Industry Code with regard to the terms of the lease.

The banks will be expected to support the agreements reached; however, this may be difficult to enforce as they are not legally connected to the leases.

The tenant protections will extend to prohibiting landlord evictions, claims on penalties or acting on guarantees, or claims for interest. As part of the joint effort, States and Territories are going to offer various reductions and exemptions of their own rates but details are yet to come.

The Prime Minister stated that a further announcement on the National Cabinet’s deliberations will be made as late as Tuesday: watch this space.

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