Mandatory Code of Conduct for Commercial Tenancies

Small and medium businesses will now be granted rental waivers and deferrals under a mandatory Code of Conduct unveiled by Prime Minister Scott Morrison.

Under the Code of Conduct, Landlords will be required to reduce rent proportionate to the trading reduction in the tenant’s business, where caused by the coronavirus pandemic, through a combination of waivers of rent and deferrals of rents.

The code will cover small and medium business tenants with an annual turnover of up to $50 million who hold commercial tenancies, including retail, office and industrial premises. These SME tenants must also qualify for the government’s JobKeeper program.

Landlords must offer:

  • Rent waivers of no less than 50%
  • The balance of the rent must deferred
  • The payment of the rental deferrals must be amortized over the balance of the lease term, and for a period of no less than 24 months.

The code will come into effect in all states and territories from 3 April 2020 and will run for the period the JobKeeper program remains operational.

The Prime Minister said the arrangements would be overseen through a binding mediation process run by the states and territories.

“The point here is simple: it’s the same request we made of landlords and tenants about 10 days or so ago when I stood up on this issue, and that is that they sit down and they work it out,” the Prime Minister said.

“Landlords must not terminate the lease or draw on a tenant’s security. Likewise, tenants must honor the lease.

“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.

“This is seen as a proactive, a constructive and co-operative mechanism for landlords and tenants to see this through together.”

You can access the full Code of Conduct here.

If you have any questions or need advice and clarity specific to your business, feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.

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Mark Semmens

Mark is a Chartered Accountant with a wealth of experience in accounting and taxation. Mark is a Member of Chartered Accountants Australia and New Zealand, the Tax Practitioners Board and the National Tax and Accountants Association.

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Daniela Semmens

Daniela Semmens is a Co-Director of Semmens & Co. and joined the company as General Manager in 2017. Daniela is an Affiliate Member of Chartered Accountants Australia and New Zealand and also a Member of the Australian Institute of Project Management.

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