COVID-19 Update - The impact on commercial and retail tenancies

The Prime Minister has announced that the National Cabinet will formalise a mandatory code for commercial landlords and tenants that will apply to businesses with a turnover of less than $50M per annum and which are signed up to the JobKeeper program.

The Prime Minister noted that the Code would be based on a ‘proportionality principle’ with turnover reduction of the tenant needing to be reflected in the rental waiver of the landlord. While the Prime Minister indicated that the Code would not be prescriptive, the Prime Minister did flag the potential for lease terms to be extended and/or lease payments to be increased for the remainder of the lease term, to make up for revenue lost by the landlord.

However, the Prime Minister also made it clear that tenants not significantly affected by COVID-19 are expected to honour their lease agreements.

While details of the Code are yet to be confirmed, it is expected that the Code will include the following items:

Leases to which the Code does not apply
Because of the non-application of the Code to businesses with turnover of more than $50M per annum or which are not signed up to the JobKeeper program, there will be landlords and tenants which will remain governed by the terms of their individual leases and the relevant legal principles which apply to those leases. The following legal principles will apply to most commercial and retail leases:

Each lease needs to be individually assessed to determine whether the Code applies to that lease, what are the practical and legal implications if the Code does / does not apply, and what actions are available to landlords and tenants to achieve appropriate outcomes.  For further information please seek legal help from your lawyer or solicitor or click on the link for the Mandatory Code of Conduct. 

The Money Edge | Bundaberg

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