Rent relief for virus-affected businesses

Daniel McCulloch
Apr 07, 2020, updated Apr 07, 2020

New rules for commercial leases will protect companies with turnovers of up to $50 million, with landlords to lower their rent in line with revenue falls. Photo: AAP

Small businesses shut down because of coronavirus will soon have their rent reduced in line with their revenue falls.

The prime minister and premiers have agreed to a mandatory code of conduct for commercial tenancies to be legislated across all states and territories.

It does not apply to residential tenants.

The rules will apply to commercial tenancies where the tenant or landlord is eligible for the JobKeeper payment and has a turnover of $50 million or less.

Landlords must not evict tenants and will have to lower commercial rents in line with the company’s falling revenue.

Tenants must not break the lease under the new rules.

Residential rental agreements will be dealt with separately by individual jurisdictions.

Asked about the option of mediation, which is available for commercial tenancies, Prime Minister Scott Morrison said it was a matter for the states and territories.

“[The] mandatory code will apply to tenancies where the tenant or landlord is eligible for the JobKeeper program. So that defines a a tenant or landlord who would be in a position of distress, where they have a turnover of 50 million or less.

Earlier on Tuesday, Finance Minister Mathias Cormann indicated landlords who supported tenants in financial distress because of coronavirus would be offered land tax relief.

Political leaders largely agreed with the strategy, but industry figures proved much harder to convince.

Senator Cormann said there were a range of competing interests at play.

“Depending on whether you are the landlord or the tenant, your interests are obviously not necessarily aligned,” he told Sky News.

“We would say they should be in this context, and there should be scope for landlords and tenants to work through these issues with each other constructively, given the circumstances.

“That’s sometimes easier said than done.”

Senator Cormann said the code of conduct would include scope for landlords who “do the right thing” during the COVID-19 crisis to receive land tax relief or deferral.

“We are trying to do our bit, providing the right incentives along the way,” the minister said.

“But we do also expect that landlords will do the right thing in relation to those tenants who are in financial distress.”

The prime minister has already announced a six-month moratorium on evictions for people in financial distress and hardship.

The tenants’ union has argued governments need to step in to facilitate rent relief.

Read part of the prime minister’s announcement on Tuesday on commercial tenancies:

“So the code is designed to support those small and medium sized enterprises, be they a tenant or indeed 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 risk proportionate to the trading reduction in the tenant’s business over the course of the pandemic period through a combination of waivers of rent and deferrals of rent.

“Waivers of rent must account for 50% at least of the reduction in the rent provided to the tenant during that period. And deferrals must be covered over the balance of the lease term, and in no less period than 12 months…

“[So] 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 cover 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”: Source: ABC

-AAP