The Federal Cabinet has recently announced the implementation of a mandatory Code of Conduct for Commercial Leases. Each State and Territory is currently in the process of passing legislation to give legal effect to the Code.
The Code’s purpose is to impose a set of leasing principles on landlords and tenants for the COVID-19 crisis. These will set out how parties negotiate rent reductions and deferrals, how benefits received by landlords (eg concessions on mortgage repayments by their bank) are to be shared with tenants, and requirements around disclosure in negotiations.
Because the Code needs to be legislated by State and Territory governments, there may be variations in its operation between jurisdictions. It will be important that you obtain legal advice before negotiating your lease, to ensure your negotiation abides by the Code as enacted in your jurisdiction.
Suffice to say, the Code is going to complicate leasing arrangements during the COVID-19 pandemic. It may be necessary for landlords (and potentially tenants) to consider engaging lawyers for these negotiations, notwithstanding rent discussions would usually be left with agents.
Importantly, landlords will need to give serious thought to how the Code, and any arrangements, will impact their cashflow. Landlords should consider contacting their accountants to explore ways to reduce costs or access government concessions, if available.
Elringtons Lawyers’ property and commercial law team are able to assist you in negotiating with your tenants or landlords under the Code during this difficult period.