How small to medium-sized business and retailers can benefit from recent Codes of Conduct

Coronavirus updates seem to be coming fast and frequently, and it can be hard to keep up. To help those of you worried about upcoming rent obligations, we've compiled the latest information on rent relief packages for commercial tenants in the form of a new Code of Conduct.

The SME Commercial Leasing Principles during COVID-19 have been introduced from 7 April 2020.

What is the purpose of the Code of Conduct?

The mandatory code is designed to support small and medium-sized enterprises with a set of good-faith leasing principles.

The Code provides a proportionate and measured burden share between landlords and tenants while still allowing the two parties to agree to mutually beneficial temporary outcomes.

What are the key principles of the Code?

• Landlords and tenants will be required to negotiate appropriate temporary leasing arrangements and to work towards achieving mutually satisfactory outcomes
• Any agreements will take into account the impact of the coronavirus pandemic on the tenant, including its revenue, expenses and profitability
• Arrangements will be proportionate based on the impact of the pandemic plus a reasonable recovery period
• Both parties will take into account whether the tenant has suffered financial hardship due to the pandemic, if the tenant's lease has expired or is soon to expire and whether the tenant is in administration or receivership
• The Code will be legislated and enforced by state and territory governments

For the full details, review the National Cabinet Mandatory Code of Conduct here.

Who is eligible for rent relief?

Businesses with less than $50 million in annual turnover that are eligible for the JobKeeper Payment Program are also eligible for rent relief.

While the JobKeeper Payment Program has a variety of criteria that businesses need to meet, the main point is that they must have suffered a downturn of at least 30% in the previous month compared to the same month in 2019.

Will I receive a rent reduction from my landlord?

The Code includes a provision that will force landlords to accept reductions in rent in proportion to a tenant's decline in turnover. This can be achieved with a combination of rent waivers and deferrals.

Landlords are required to offer tenants at least half of their rent relief as waivers and the remainder in deferrals which will need to be covered over the balance of the lease term.

To enable negotiations, tenants are encouraged to share turnover information with landlords to help decide how big rent reductions should be.

Can my landlord evict me?

The National Cabinet has previously agreed to a nationwide eviction moratorium, which means tenants cannot be evicted from their premises for a period of six months.

The Code also includes a provision that will prohibit landlords from terminating a lease or padlocking stores for non-payment of rent.

What about rent increases?

The Code includes a provision to freeze rent increases and to prohibit landlords from passing on land tax to tenants or charging interest on unpaid rent. This will apply until the pandemic period ends.

How will retailers be treated?

On top of the SME Commercial Leasing Principles during COVID-19 Code of Conduct, the Australian Competition and Consumer Commission (ACCC) has granted interim authorisation that is both temporary and voluntary to enable retailers to do the following:

• Collectively bargain with landlords about rent relief
• Share information relevant to the negotiations in the context of COVID-19

Where can I get more information?

The ACCCs latest media release on rent relief for retailers can be found here. Head to the Prime Minister of Australia's website for regular updates on COVID-19 related measures.