PM’s press release on the commercial tenancies

The Prime Minister’s press release from today is available here: https://www.pm.gov.au/media/update-coronavirus-measures-070420

The paragraphs relevant to commercial tenants are as follows:

The National Cabinet agreed that states and territories would implement the attached mandatory Code of Conduct (the Code), including via legislation or regulation as appropriate, to implement the principles agreed on Friday 3 April. The Code builds on the draft codes submitted by landlord and tenant representative bodies in the commercial property sector.

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.

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.

A copy of the Code is also available here: https://www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf

I’ll have more to say about the Code in the next few days, but for now it is worth noting that:

1. the Code sets a series of guidelines for negotiated solutions to financial distress caused by the COVID-19 crisis.  These are similar to those outlined in the Prime Minister’s speech earlier today (summarised in an earlier post on this blog), but give much more detail;
2. the Code will be given effect through relevant state and territory legislation or regulation as appropriate;
3. where landlords and tenants cannot reach agreement on leasing arrangements (as a direct result of the COVID-19 pandemic), the matter should be referred and subjected (by either party) to applicable state or territory retail/commercial leasing dispute resolution processes for binding mediation, including Small Business Commissioners/Champions/Ombudsmen where applicable.  This suggests that in Victoria mediation will be conducted by the Office of the Small Business Commission;  and
4. emergency legislation has been passed in other states (NSW and Tasmania that I am aware of) allowing Regulations to be created to give effect to the moratorium period (ie preventing landlords from terminating leases), I am not aware of any legislation having been passed in Victoria or Bills before Victorian Parliament at this stage to give effect to the Code.