Commercial Leasing Principles during COVID-19

This blog is provided to you as a general summary of your rights as a commercial property owner and tenant. Here is a link to an article by WMD Law SME Commercial Leasing Principles during COVID-19  setting out the Mandatory Code of Conduct applicable to SME commercial leasing principles.  You can read the full version of the code here National Cabinet Mandatory Code of Conduct SME Commercial Leasing Principles. The code is applicable where the tenant is an eligible business for the purpose of the Commonwealth Government’s JobKeeper program, meaning that the tenant must be suffering from a reduction of income of more than 30% and have an annual turnover of less than $50 million. The key requirement is that Landlords must offer tenants a reduction in rent by way of a combination of waiver and deferral of rent payable, proportionate to the reduction of the tenants business.

  • The waiver does not have to be paid and represents as a minimum 50% of the total reduction of rent payable. The tenant may waive this requirement by agreement.

  • The deferral will need to be paid after the conclusion of the pandemic and recovery period, over the remaining period of the lease or over a minimum of 24 months, whichever is the greatest. Both parties can agree to extend this period.

Please ensure that whatever you agree to do with your tenant is in writing.  Examples: 1. A tenant eligible for JobKeeper suffers a reduction of revenue of 40% and is paying $4,000 per month in rent. The rent must be reduced by $1,600 per month, of which $800 is waived and $800 is deferred. Let’s say the pandemic and recovery period goes for 6 months, that means that $4,800 is deferred which is then repayable over 24 months, being $200 per month. 2. A tenant eligible for JobKeeper suffers a reduction of revenue of 100% and is paying $8,000 per month in rent. The rent must be reduced by $8,000 per month, of which $4,000 is waived and $4,000 is deferred. Let’s say the pandemic and recovery period goes for 6 months, that means that $24,000 is deferred which is then repayable over 24 months, being $1,000 per month. As always, the Sullivan Dewing Team are here to assist you.  We recommend that you seek legal advice in respect of any lease amendments in order to ensure that your rights are protected. Kind Regards, Jeni, Terry & the Sullivan Dewing team

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