The Federal Government have announced a rent relief package for commercial tenants affected by COVID-19. A Mandatory Code of Practice will be legislated in each State and landlords and tenants are required to comply with the terms of this Mandatory Code. Mandatory Code of Conduct

How will this affect me?

The code will require Landlords and Tenants to negotiate in good faith. Landlords aren't going to be able to terminate a Lease and Tenants are going to have to comply with the remaining terms of the lease.

The Code will apply where the business of the Tenant has suffered as a result of the COVID-19 Pandemic and the business is an eligible business under the governments recently announced Commonwealth JobKeeper program and has a turnover of less than $50 Million.

The parties are required to negotiate an agreement whereby the Landlord will reduce the Tenant's rent in proportion to the reduction in the Tenant's turnover (for example if a business's turnover has reduced by 50%, that business will see a 50% reduction in the rental for the period of the Pandemic). This rent reduction can be made up of "rental waiver" and "rent deferral".

In respect of those proportions the "rent free" (waiver) proportion must make up at least 50% of the rental relief. The "rent deferral" component can be deferred and paid back over a period of not less than 12 months, but usually will be paid back over the remaining term of the lease (for example if the remaining term of the lease is longer than 12 months it would be paid back over the entire term, however if the lease term is shorter than 12 months that tenant will still have 12 months to repay those rent monies).

Rental increases under a lease will be frozen and penalties and interest charges will not be able to be charged, nor can guarantees or bonds be called upon.

It is very important that any agreements reached between Landlords and Tenants must be documented as the potential disputes in the future will be greater than the problem itself.

As always if you have any questions regarding this announcement please contact Dickfos Dunn.