All about the mandatory code of conduct for commercial tenants

The Government has introduced a mandatory code of conduct to help commercial tenants with rent relief during the COVID-19 pandemic.

Under the code of conduct for commercial tenancies:

• Landlords must not terminate leases for non-payment of rent during the COVID-19 pandemic and recovery period.
• Tenants must stay committed to their lease terms.
• Landlords must offer reductions in rent as waivers and deferrals proportionate to the tenant’s reduction in trade during COVID-19. Waivers must constitute no less than 50% of the total rent reduction during that period.
• Benefits that owners get for their properties as outgoing reliefs (e.g. deferred loan payments, land tax, reduced charges) should be passed onto the tenant in the appropriate proportion.

The code will be implemented nationwide and aims to encourage parties to reach agreeable outcomes on a case by case basis. For commercial tenants, this means negotiating rent reductions corresponding to their annual turnover reductions and being provided extended lease terms for the rent waiver and deferral period.

From 3 April 2020, the code will apply to SMEs with an annual turnover of less than $50 million and are participating in the JobKeeper program. Take note of how these measures may affect your business and how they may help you plan ahead for the upcoming financial year.