In April, the National Cabinet announced the Mandatory Code of Conduct for leases affected by the COVID-19 crisis, particularly small and medium sized commercial tenants.
The Code aims to create an environment where landlords and tenants can negotiate in good faith and reach agreements about rent during the crisis. It covers tenancies that are currently struggling with the impact of COVID-19 on businesses.
In response to the Code, the Queensland Government introduced regulations under the COVID-19 Emergency Response Act 2020. The regulation defines the response period from 29 March to 30 September 2020.
When will the Code apply?
Under the Queensland regulation, the Code will apply to tenants who are eligible JobKeeper participants, though not necessarily enrolled in the programme, and with an annual turnover of up to $50 million. To qualify as an “affected” lease, the lease would also have to be premises where the tenant conducts business or is a non-profit body in the current financial year.
What are the commercial leasing principles under the Code?
If your lease is an “affected” lease, here are some of the principles that should be applied as negotiated with your landlord.
- The lease will not be terminated nor will you be evicted by the landlord due to non-payment of rent during the COVID-19 crisis.
- The landlord shall offer a proportional reduction in rent payable in the form of waivers or deferrals.
- Rental waivers shall constitute no less than 50% of the total reduction in rent payable under the above principle.
- Payment of deferred rentals 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 both parties reached a different agreement.
- The landlord shall not increase your rent.
- The landlord shall not penalise you for reducing trading hours or not opening.
- As a tenant, you shall remain committed to the terms of the lease, subject to any amendments as negotiated under the Code. Material failure to abide by the substantive terms of the lease will forfeit any protections afforded under the Code.
Negotiating with your landlord
It is important to inform your landlord that you are facing cash flow problems due to the pandemic. If you fail to bring them up to speed, they are less likely to offer the support you need. Your landlord may also be eligible for land tax relief. If your landlord receives this benefit, they must pass it on to you in the form of rent relief.
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