Landlords required to engage in ‘good faith’ mandatory leasing code

The federal parliament is holding an emergency sitting on Wednesday to pass a number of coronavirus stimulus measures including the $1500 a fortnight JobKeeper subsidy and mandatory code to protect commercial tenants with $50 million a year and less revenues from eviction.

The code applies to landlords and tenants that have applied for the JobKeeper wage subsidy and states that rent must be reduced in proportion with the losses a commercial tenant has sustained due to the coronavirus pandemic.

Businesses with a turnover of less than $1b a year need to have lost at least 30 per cent of revenue due to coronavirus to apply for JobKeeper while those over $1b need to have lost 50 per cent of revenue.

Prime Minister Scott Morrison says the code is based on “good faith” leasing principles whereby landlords must not terminate a lease or draw on a tenant’s security and likewise tenants must honour the lease during the coronavirus period.

The relief for tenants will be provided through a combination of waivers and payment deferrals.

“Waivers of rent must account for 50 per cent at least of the reduction in the rent provided to the tenant during that period. And deferrals must be covered over the balance of the lease term, and in no less period than 12 months,” Prime Minister Scott Morrison told a press conference on Tuesday.
“[So] if the lease only has another six months to run, the tenant would have a minimum of 12 months after the pandemic period in order to cover the deferrals of the rental payments. The arrangements will be overseen through a binding mediation process, all of this will be run by the states and the territories.”

The $130b JobKeeper scheme is also expected to be passed into law tomorrow.

“It is agreed by National Cabinet today that a mandatory code will be legislated in each state and territory jurisdiction. The code will apply to any tenancies where the landlord or tenant applies for JobKeeper and where they have a turnover of $50 million or less,” Morrison said.

“The code brings together a set of good faith leasing principles. Landlords must not terminate the lease, and tenants must honour the lease.”

In questions after the press conference, Morrison confirmed landlords will be required to engage in the code.

“The code is designed to support those small and medium sized enterprises, be they a tenant or indeed a landlord. The code brings together a set of good faith leasing principles. Landlords must not terminate the lease or draw on a tenant’s security. Likewise, tenants must honour the lease. Landlords will be required to reduce risk proportionate to the trading reduction in the tenant’s business over the course of the pandemic period through a combination of waivers of rent and deferrals of rent,” Morrison said.

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