Commercial and Retail Leases – the National Cabinet Mandatory Code of Conduct COVID-19 Response
The last few weeks have been a harrowing experience for many landlords and tenants due to the uncertainty around how to overcome the economic shock caused by the COVID-19 pandemic.
The Federal Government in consultation with the states and territories has finally released the National Cabinet Mandatory Code of Conduct.
The purpose of this Code is to encourage good faith relationships between landlords and tenants under retail, commercial and industrial leasing arrangements. The Code will assist landlords and tenants in coming to some form of resolution in the midst of the disruption to tenancies as a result of the COVID-19 outbreak.
In order to have the benefit of the Code’s framework, a tenant needs to satisfy the following criteria:
- have turnover of less than $50 million
- be eligible for the JobKeeper program
The tone of the Code is all about looking at each lease on a case-by-case basis and co-operation between landlords and tenants.
Some key arrangements that will emerge as a result of the Code are as follows:
- prohibition on termination of leases due to non-payment of rent;
- proportionate reductions in rent in the form of waivers and deferrals based on reduction in trade during the COVID-19 pandemic period;
- amortisation periods for repayment of deferred rent;
- passing on of reductions in statutory outgoings;
- sharing by landlords of any other relief that they receive;
- waiver of any other expenses;
- no interest charges on arrears;
- no calling on security;
- extension of terms of leases to reflect any period of relief;
- freezes on rent increases;
- no penalties for reductions in trading hours; and,
- deadlocks in negotiations being resolved by mediation.
Whether you are a landlord or tenant, you may require the assistance of experienced leasing lawyers who have acted for landlords and tenants across all asset classes and jurisdictions over many years to guide you through the Code and your negotiations including documenting any arrangements you make.
Our Commerical Property team, headed by Andrew Grima and Dean Claughton, is ready to assist you by offering the following special packages:
- Initial Consultation to explain the application of the Code to your lease and assist you in formulating a negotiation position
- Formalising Your Agreement - draft, review and advise you on any documentation that may be required to formalise any settlement that parties may reach following their negotiations
- Bespoke Advice - we can advise you in certain cases where a new lease or surrender of lease might be required.
We encourage you to contact us now to ensure you expedite your negotiations and put in place appropriate arrangements to ensure a clear agreement is reached by both parties to avoid any disputes at a later date.
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