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Mandatory Commercial Tenancies Code

The Federal Government has today announced that a mandatory Commercial Tenancies Code (“the Code”) will be legislated by each State and Territory to assist Landlords and Tenants during the Covid-19 pandemic.

To be eligible to negotiate under the Code either the Landlord or the Tenant must:
•    be a business that is in a position of financial distress; 
•    have annual turnover of $50 million or less;
•    be eligible to receive support under the JobKeeper program (meaning the business has experienced at least a 30 per cent drop in revenue due to Covid-19 restrictions).

Under the Code, Landlords must not terminate the Lease or draw on a Tenant’s security. Tenants must also honour the Lease. Landlords will be required to reduce rent in proportion to the trading reduction suffered by the tenant. This will be achieved by a combination of both rent abatement and deferrals of rent (i.e. postponement of rent payment).

Abatements of rent must account for at least 50 per cent of the reduction in the rental provided to the Tenant during that period.  Deferrals must be covered over the balance of the Lease term and for no less than 12 months. For example, if the Lease term has three years left the cost can be amortised over the balance of the three year period. However, if the Lease only has another six months left to run then the tenant would still have a minimum of 12 months after the pandemic period to cover the deferrals of the rental payments.

When the Code is legislated and released, we will provide further details as to how this Code will affect you and how we can assist you utilise and comply with the Code.

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