National Cabinet Code of Conduct - SME Commercial Leasing Principles

Over the last 24 hours, the Federal Government has announced the introduction of its mandatory Code of Conduct for Commercial Landlords & Tenants.

The formation of the Code stands to enact a set of good faith leasing principles relating to tenancy agreements between landlords & tenants of SME businesses (up to $50 million turnover) – with aims at ‘sharing the burden’ of financial & cash-flow impacts resulting from COVID-19.

Additionally, the Code will seek to appropriately balance the interests of both tenants & landlords, and will apply where either are eligible for the Federal Government’s JobKeeper program.

Access to the full Code of Conduct can be found (www.pm.gov.au), however please see below a number of key principles outlined:

• Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recover period).

• Tenants must remain committed to the terms of their lease.
  • Any failure to abide by the substantive terms of their lease will forfeit any protections provided under the Code.

• Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable, based on the reduction in the tenant’s trade during the COVID-19 period.
  • E.g. A 40% reduction in a tenants turnover would warrant a 40% reduction in rent.

• Rental waivers must constitute no less than 50% of the total reduction in rent payable over the pandemic period.

• Payment of rental deferrals by the tenant must be amortized over the balance of the lease term and for a period of no less than 24 months – whichever is the greater.

• Any reduction in statutory charges (e.g. land tax, council rates) or insurance will be passed on to the tenant in the appropriate proportion applicable under the terms of the lease.

• Landlords must not draw on a tenant’s security for the non-payment of rent during the COVID-19 period, or a reasonable subsequent recovery period.

• If landlords do not enter into negotiations with their tenant, their rights under the lease will be forfeited.

Furthermore, as advised during the previous ‘six-month eviction moratorium’ announcement, Prime Minister Morrison has reiterated that banks must do all they can to support tenants & landlords – urging international banks to provide the same level of support as their National counterparts.

For More Information

For more information on the announced mandatory Code of Conduct for Commercial Landlords & Tenants, please contact the Archer Gowland office on (07) 3002 2699.