Code of conduct for commercial tenancies in development
The National Cabinate has agreed to a mandatory code of conduct for commercial tenancies. The code will be guided by a set of principles, developed and legislated by State and Territory governments.
Tenants who participate in the federal government’s JobKeeper assistance and have a turnover of less than $50 million will be protected by the code.
The principles that guide the code will be 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
- There will be a prohibition on termination of leases for non-payment of rent (lockouts and eviction)
- There will be a freeze on rent increases (except for turnover leases)
- 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)
“What is important as part of this code is that both parties negotiate in good faith, that there is a proportionality principle that needs to be in this code,” said Prime Minister Scott Morrison. “And that proportionality principle is simply this, that the turnover reduction of the tenant needs to be reflected in the rental waiver of the landlord.”
States and Territories will consider offering the equivalent of at least a three month land tax waiver and three month land tax deferral for eligible landowners, with landlords required to pass any benefits on to tenants.
If two parties have signed the code of conduct, tenants will not be able to terminate their leases on the grounds of financial stress as per the federal government’s announcement on 29 March.
The code of conduct is set to be discussed further at the National Cabinet meeting on Tuesday 7 April.
More to come.