A mandatory Commercial Tenancy Code announced by the Federal Government paves the way for small businesses to negotiate some rent relief with their landlords, according to Australian Small Business Ombudsman Kate Carnel. Eligible small businesses who have seen a reduction in trade will be able to negotiate a rent reduction with their landlord.
Small businesses will be eligible to negotiate under the Code if they are: experiencing financial distress; eligible to receive support from the JobKeeper program; have a turnover of $50 million or less
“The Code is based on principles of good faith and will be a critical guide for small businesses and landlords at the negotiating table during this COVID-19 crisis,” Carnell says. “There’s give and take here, so small businesses can’t just stop paying rent and equally landlords cannot evict or terminate the lease.
“Importantly, eligible small businesses who have seen a reduction in trade, will be able to negotiate a proportional rent reduction with their landlord. This can be achieved through a combination of waivers and deferrals of rent.
The National Cabinet agreed on Tuesday that states and territories would implement the mandatory Code of Conduct on Friday 3 April.
“The purpose of the Code is to impose a set of good faith leasing principles for application to commercial tenancies (including retail, office and industrial) between owners/operators/other landlords and tenants, in circumstances where the tenant is a small-medium sized business (annual turnover of up to $50 million) and is an eligible business for the purpose of the Commonwealth Government’s JobKeeper programme,” said a statement from Prime Minister’s office.
“National Cabinet agreed that there would be a proportionality to rent reductions based on the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants. The Code provides a proportionate and measured burden share between the two parties while still allowing tenants and landlords to agree to tailored, bespoke and appropriate temporary arrangements that take account of their particular circumstances.
“National Cabinet again noted that it expects Australian and foreign banks along with other financial institutions operating in Australia, to support landlords and tenants with appropriate flexibility as they work to implement the mandatory Code.
“The Commonwealth Government is also acting as a model landlord by waiving rents for all its small and medium enterprises and not-for-profit tenants within its owned and leased property across Australia.
“The Rent Relief Policy will include a mutual obligation requirement on the small and medium sized enterprises and not-for-profit tenants to continue to engage their employees through the JobKeeper initiative where eligible, and if applicable, provide rent relief to their subtenants.”
Carnell added: “There are no easy solutions to this problem, but if all parties involved can come to these negotiations in the spirit of co-operation, there’s a good chance of reaching an agreement.
“COVID-19 affects us all, which is why it’s so important we work together to get through this difficult time.”
More details here: National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles during COVID-19
