I’M A LANDLORD, WHAT DOES THE CODE OF CONDUCT MEAN FOR ME?
We are currently facing unprecedented times full of uncertainty. De Marco Lawyers will monitor closely the ever-evolving COVID-19 pandemic and provide our clients with updates on some of the resulting changes affecting leases.
One major change that has come about due to the COVID-19 pandemic already is the implementation of the Mandatory Code of Conduct regarding leases.
On 8 April 2020, the National Cabinet passed a mandatory Code of Conduct with respect to Commercial Tenancies. Commercial Tenancies include retail tenancies under the Retail Leases Act. The Code applies to all such tenancies that are suffering financial stress as a result of the COVID-19 pandemic. This means that a tenant will only be eligible for rent relief under the Code if they are eligible for the Commonwealth Government’s JobKeeper program.
To meet this eligibility criteria for the Jobkeeper program, a tenant must have:
a) A turnover of less than $50 million; and
b) A loss in revenue of 30% or greater.
The Code will be in effect for the duration of the COVID-19 pandemic period. This means the Code will apply to leases for the period in which the JobKeeper program is operational. This probably will be for a maximum period of 6 months, ending on 1 September 2020 but may be extended. Tenants applying for this Federal Government hand-out need to remember it is being overseen by the ATO. Tenants should expect to have to provide, sooner or later, TFNs, ACN/ABN, PAYG/SCG/BAS returns and proof of filing of Income Tax Returns. If these are missing or in arrears, the fact that the Tenants are now emerging on to the ATO’s radar will have long term consequences. If any Tenant has any questions in this regard, they should contact our Restructuring & Financing Principal, Michael Tourkakes, as soon as possible.
The Code still requires Tenants and Landlords to negotiate alternative arrangements for their Lease, the outcomes of which, will differ on a case by case basis.
Under the Code, the following Lease principles should be applied as soon as practicable:
Landlords must not terminate Leases due to non-payment of rent during the COVID-19 pandemic period;
Tenants must not breach any other terms of their Lease;
Landlords must offer their tenants proportionate reductions in rent payable in the form of waivers and deferrals. Rental waivers must constitute no less than 50% of the total reduction in rent payable;
Landlords must not charge fees or interest on rent or deferred payments;
Landlords must not draw on the Tenant’s security deposit;
Landlords must freeze rent increases for the duration of the COVID-19 period even if such an increase is mandated in the exercise of a new option which falls within the six-month moratorium period; and
Landlords should allow Tenants to extend the Lease for a period equal to the rent deferral.
The above leasing principles provide an outline to the negotiations landlords and tenants are encouraged to undertake. Furthermore, by reasonably discussing each of the above principles, Landlords and Tenants should be able to reach an agreement on arrangements to suite their particular circumstances, which will cover all financial liabilities under the Lease. If a Landlord has commenced negotiations with your Tenant, we stress the importance of having these negotiated arrangements documented to protect the interests of both parties. We urge you to contact Miss Bronte Strong of De Marco Lawyers Leasing Department to discuss any arrangements you may have entered into.
If you have Landlords Property Insurance or Landlords Rent Default Insurance and are unsure of your rights to lodge a claim, please refer to our website, https://demarco.com.au/de-marco-thinks/my-tenant-cannot-pay-me-rent-because-of-covid-19-can-i-claim-under-my-landlords
Finally, if you are unsure as to your rights as a Landlord in the negotiation process, or you are confused by the Code of Conduct, please do not hesitate to contact our office and we will be happy to explain this process to you.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from De Marco Lawyers and other relevant experts.