The National Cabinet announced a Mandatory Code of Conduct for SME Commercial Leasing Principles during COVID-19 on 3 April 2020 and released the code on 7 April 2020.
The mandatory code for Commercial tenancies will be legislated and regulated as appropriate in each state and territory jurisdiction.
It will apply to tenancies where the tenant or landlord is eligible for the JobKeeper Program (essentially a tenant or a landlord who are in a position of distress), where they have a turnover of $50 million or less.
The code is designed to support those small and medium-sized enterprises, be they a tenant or a landlord.
The code brings together a set of good-faith leasing principles.
Landlords must not terminate the lease or draw on a tenant's security.
Likewise, tenants must honour the lease.
Landlords will be required to reduce rent proportionately to the trading reduction in the tenant's business, through a combination - over the course of the pandemic period - of a combination of waivers of rent and deferrals of rent.
Waivers of rent must account for 50 per cent at least, of the reduction in the rental provided to the tenant during that period and deferrals must be covered over the balance of the lease term and in no less a period than 12 months. So, if the lease term goes for three years, the rental deferral is amortised over that three year period, after the end of the pandemic period. But if the lease only has another six months to run, the tenant would have a minimum of 12 months after the pandemic period in order to catch up on the deferrals of the rental payments.
The arrangements will be overseen through a binding mediation process.
All of this will be run by the states and the territories and will be regulated & legislated in each state and jurisdiction.
See the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles during COVID-19 here
Should you need advice or need to discuss your particular requirements, please contact us, Infinite Accounting Solutions, on 02 9899 4730 or via the contact page at www.ias-ca.com.au