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The Nation­al Cab­i­net Manda­to­ry Code of Con­duct regard­ing com­mer­cial leas­es aims to sup­port small and medi­um sized enter­pris­es (SME) affect­ed by COVID-19 dur­ing the government’s busi­ness hiber­na­tion peri­od.

In nego­ti­at­ing and enact­ing appro­pri­ate tem­po­rary arrange­ments under this Code, the fol­low­ing leas­ing prin­ci­ples should be applied as soon as prac­ti­ca­ble on a case-by-case basis.

  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. 
  7. A land­lord should seek to share any ben­e­fit it receives due to defer­ral of loan pay­ments, pro­vid­ed by a finan­cial insti­tu­tion as part of the Aus­tralian Bankers Association’s COVID-19 response, or any oth­er case-by-case defer­ral of loan repay­ments offered to oth­er Land­lords, with the ten­ant in a pro­por­tion­ate man­ner. 
  8. Land­lords should where appro­pri­ate seek to waive recov­ery of any oth­er expense (or out­go­ing payable) by a ten­ant, under lease terms, dur­ing the peri­od the ten­ant is not able to trade. Land­lords reserve the right to reduce ser­vices as required in such cir­cum­stances. 
  9. If nego­ti­at­ed arrange­ments under this Code neces­si­tate repay­ment, this should occur over an extend­ed peri­od in order to avoid plac­ing an undue finan­cial bur­den on the ten­ant. No repay­ment should com­mence until the ear­li­er of the COVID-19 pan­dem­ic end­ing (as defined by the Aus­tralian Gov­ern­ment) or the exist­ing lease expir­ing and tak­ing into account a rea­son­able sub­se­quent recov­ery peri­od. 
  10. No fees, inter­est or oth­er charges should be applied with respect to rent waived in prin­ci­ples #3 and #4 above and no fees, charges nor puni­tive inter­est may be charged on defer­rals in prin­ci­ples #3, #4 and #5 above. 
  11. Land­lords must not draw on a tenant’s secu­ri­ty for the non-pay­ment of rent (be this a cash bond, bank guar­an­tee or per­son­al guar­an­tee) dur­ing the peri­od of the COVID-19 pan­dem­ic and/or a rea­son­able sub­se­quent recov­ery peri­od. 
  12. The ten­ant should be pro­vid­ed with an oppor­tu­ni­ty to extend its lease for an equiv­a­lent peri­od of the rent waiv­er and/or defer­ral peri­od out­lined in item #2 above. This is intend­ed to pro­vide the ten­ant addi­tion­al time to trade, on exist­ing lease terms, dur­ing the recov­ery peri­od after the COVID-19 pan­dem­ic con­cludes. 
  13. Land­lords agree to a freeze on rent increas­es (except for retail leas­es based on turnover rent) for the dura­tion of the COVID-19 pan­dem­ic and a rea­son­able sub­se­quent recov­ery peri­od, notwith­stand­ing any arrange­ments between the land­lord and the ten­ant. 
  14. Land­lords may not apply any pro­hi­bi­tion on levy any penal­ties if ten­ants reduce open­ing hours or cease to trade due to the COVID-19 pan­dem­ic.

Where land­lords and ten­ants can­not reach agree­ment on mutu­al­ly accept­able amend­ed 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.

Land­lords and ten­ants must not use medi­a­tion process­es to pro­long or frus­trate the facil­i­ta­tion of ami­ca­ble res­o­lu­tion out­comes.

For assis­tance or advice in rela­tion to your com­mer­cial lease please call us on 02 6583 0400 or send an email to info@dohlaw.com.au.

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