Relief for tenants: latest government announcements at 16 April 2020.
Since the National Cabinet announced the Mandatory Code of Conduct (the Code) for eligible SME commercial tenancies on 7 April 2020, the State and Territory Governments have made various announcements on measures to support tenants and landlords. These announcements outline a range of support measures that are being implemented under the Code, as well as a number of additional measures (including measures applying to residential tenancies).
KPMG analysis of the relief for tenants and landlord announcements as of 16 April 2020 covers:
- Legal analysis of tenancy relief
- Industry analysis of tenancy relief
- Relief for tenants and landlords – overview of announcements
8 April 2020
Prime Minister Scott Morrison announced on 7 April a mandatory code of conduct for commercial tenancies to support small and medium sized businesses affected by the coronavirus (COVID-19). The Prime Minister announced further details that are designed to assist commercial tenants and landlords impacted by the economic fallout of the COVID-19 crisis.
The mandatory code of conduct (PDF 235KB) will be legislated in each state and territory and will apply during the COVID-19 pandemic period, as defined by the period during which the JobKeeper program is operational. A summary of the principles outlined in the code are as follows: where it can, rent should continue to be paid, and where there is financial distress as a result of COVID-19 (for example, the tenant is eligible for assistance through the JobKeeper program), tenants and landlords should negotiate a mutually agreed outcome.
There will be a proportionality to rent reductions based on the decline in turnover to ensure that the burden is shared between landlords and tenants – for example if a business is seeing a 50 percent reduction in turnover then a 50 percent reduction in rent, supported by a land tax reduction, should be offered. These terms are to be negotiated depending on a business’ turnover decline.
Further details that the Prime Minister released include:
- There will be a prohibition on termination (lockouts and eviction) of leases for non-payment of rent by landlords, and tenants must continue to honour leases.
- Deferrals must be covered over the life of lease and be no less than 24 months.
- A binding mediation process will govern the code which will be administered by states and territories.
- Landlords must comply with code or they forfeit their rights under the lease.
- There will be a prohibition on penalties for tenants who stop trading or reduce opening hours.
- There will be a prohibition on landlords passing land tax to tenants (if not already legislated).
- There will be a prohibition on landlords charging interest on unpaid rent.
- There will be a prohibition on landlords from making a claim to a bank guarantee or security deposit for non-payment of rent.
- Ensure that any legislative barriers or administrative hurdles to lease extensions are removed (so that a tenant and landlord could agree a rent waiver in return for a lease extension).
These measures recognises the contribution that commercial landlords have and continue to make to supporting the Australian economy and provides the support and protection affected tenants need during this crisis.
This balanced approach doesn’t significantly disadvantage landlords with the financial obligations whilst ensuring the needs of tenants with genuine financial hardship.
For landlords and tenants that sign up to the code of conduct, states and territories have agreed to look at providing land tax waivers and deferrals on applications for eligible landowners, with jurisdictions to continue to monitor the situation.
Information accurate at the date and time published.
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