The government has unveiled its previously announced commercial leasing code of conduct, which aims to protect tenants and landlords facing financial hardship amid COVID-19.
The federal government has announced the release of its mandatory code of conduct for commercial leasing principles, in order to protect the interests of both tenants and landlords navigating the economic downturn resulting from COVID-19.
According to the code itself, its purpose is to “impose a set of good faith leasing principles” to be applied temporarily, for the duration of the pandemic period, and assist in balancing the interests of both landlords and tenants.
As announced by Prime Minister Scott Morrison, the mandatory code will be legislated and regulated “as appropriate” by each state and territory individually and is “not intended to supersede” state legislation on leasing matters, but complement it for the duration of the crisis.
The mandatory code will apply to tenancies whereby the tenant or landlord is eligible for the JobKeeper program, according to Mr Morrison, being a commercial business in a position of distress, with an annual turnover of $50 million or less.
Key aspects of the new code include making it ineligible for the landlord to terminate a tenancy or draw on a tenant’s security should that tenant’s revenue take a hit during the pandemic, as well as reasonable rental waivers and deferrals that are proportionate to the loss in revenue seen by the tenant.
Further, landlords will be expected to pass on any benefits or reductions they are offered, including mortgage freezes, while reduced statutory charges, including land tax or insurance premiums, should also be passed on in appropriate proportion to the tenant.
Rental reductions and waivers should exceed 50 per cent of the total rental amount and be proportionate to the revenue loss of the tenant, and no fees, interest or other charges should be imposed on tenants requiring rental waivers or deferrals, it has been revealed.
As previously announced, the new code includes the provision of mediation services under the relevant state and territory jurisdictions, for cases in which the landlord and tenant cannot meet an appropriate agreement under the code.
Any decision made on matters under official mediation will be binding, and interested parties are also discouraged by the government from utilising the mediation process in order to drag out dispute proceedings.
“The point here is simple: It’s the same request we made of landlords and tenants about 10 days when I stood up on this issue, and that is that they sit down and they work it out,” Mr Morrison stated.
He continued: “What this does is it preserves the lease – it preserves the relationship.
“It keeps the tenant in their property, and it keeps a tenant on the lease, which is also good for the landlord, and it preserves the lease that is in place that underpins the value of those assets.
“And so this is seen as a proactive and constructive and cooperative mechanism for landlords and tenants to see this through together.”
Mr Morrison also again reiterated that the banks “must come to the table” and provide support to landlords holding mortgages, who may have tenants facing financial hardship.
He particularly called on international banks that operate in Australia, stating: “We will expect those banks to be providing the same levels of support and cooperation, as we are seeing from the Australian banks who are aware of these arrangements.”
The Prime Minister noted that residential tenancies, which are not covered under the code, will also be subject to regulation by the states individually, and that the national moratorium of evictions will be the only protection offered to residential tenants at the federal level.
The leasing principles of the code are as follows:
The code of conduct comes into effect immediately.