Relief is on the way for SME tenants impacted by the corona pandemic as new rental waivers and deferrals were announced by Prime Minister, Scott Morrison this week.
While the South Australian Business Chamber welcomes the new Code as a positive step forward on this issue, there are still costs landlords face which need to be considered for.
Under the new arrangements which are still to be mandated via State legislation, if a 30% reduction in the tenant’s turnover occurs (in line with JobKeeper eligibility requirements), landlords are required to proportionately reduce their lease payments, with a rental waiver to account for at least 50 per cent of the reduction in rent payable.
Deferred rental obligations may be spread over the remainder of the lease for a minimum of 24 months, unless otherwise agreed by the parties. Furthermore, any reduction in statutory charges or insurance should be passed onto the tenant in the appropriate proportion under the lease terms. Landlords should also seek to waive, where appropriate, recovery of any other outgoing payable by a tenant during the time they are unable to trade.
These conditions will apply to tenancies where businesses are eligible for JobKeeper payments with a turnover of $50 million or less. As part of the announcement, the Prime Minister also declared that landlords will be legally required to discuss rental arrangements with their tenants. Further, landlords will be banned from terminating leases or drawing on tenants’ security bonds during the pandemic period. Conversely, tenants must remain committed to the terms of their lease, subject to any amendments to their rent payable.
Landlords will also be prohibited from increasing the cost of rent for tenants and for enforcing penalties on those that stop trading or reduce their opening hours. Furthermore, no interest will be charged on unpaid rent with legislative and administrative costs for lease extensions removed.
The Code is yet to become law and will be legislated by State Governments in coming weeks. The South Australian Business Chamber will be working to ensure that this occurs in a timely manner and the ultimate structure of the code enables practicable outcomes for both tenants and landlords and is conducive to agreements being reached in good faith – with appropriate mechanisms in place to solve stalled negotiations.
