Federal Cabinet Code of Conduct - Commercial and Retail Leases

On 7 April 2020, after meeting with the National Cabinet, the Prime Minister announced the inauguration of a Mandatory Industry Code of Conduct for Commercial and Retail leases across Australia. The Media Statement from the Prime Minister’s Office outlined the following leasing principals which should be applied as soon as practicable:

“1. Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period).

2. Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. Material failure to abide by substantive

terms of their lease will forfeit any protections provided to the tenant under this Code.

3. Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (as outlined under “definitions,” below) of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period.

4. Rental waivers must constitute no less than 50% of the total reduction in rent payable under principle #3 above over the COVID-19 pandemic period and should constitute a greater proportion of the total reduction in rent payable in cases where failure to do so would compromise the tenant’s capacity to fulfil their ongoing obligations under the lease agreement. Regard must also be had to the Landlord’s financial ability to provide such additional waivers. Tenants may waive the requirement for a 50% minimum waiver by agreement.

5. Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties.

6. Any reduction in statutory charges (e.g. land tax, council rates), or insurance will be passed on to the tenant in the appropriate proportion applicable under the terms of the lease.

For a better understanding of the Commercial and Retail Leases Industry Code of Conduct contact Intercommercial Property Group. This will give you peace of mind, and the confidence to make an informed decision.

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