Mandatory tenancy code to help with rent negotiations

The federal government’s new mandatory Commercial Tenancy Code that will allow small businesses affected by the COVID-19 pandemic to negotiate some rent relief with their landlords.

The measure will be of particular benefit to small businesses who are:

  • are experiencing financial distress
  • are eligible to receive support from the JobKeeper program
  • have a turnover of $50 million or less.

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, broadly welcomed the scheme.

“The Code is based on principles of good faith and will be a critical guide for small businesses and landlords at the negotiating table during this COVID-19 crisis,” Carnell said. “There’s give and take here, so small businesses can’t just stop paying rent and equally landlords cannot evict or terminate the lease. Tenants must honour their lease agreement and landlords are prohibited from drawing on a tenant’s security.

“Importantly, eligible small businesses who have seen a reduction in trade, will be able to negotiate a proportional rent reduction with their landlord,” Carnell added. “This can be achieved through a combination of waivers and deferrals of rent.”

The ASBFEO also noted that Australian banks have already indicated they will support landlords that support their tenants. International banks are also being urged to take the same approach.

“There are no easy solutions to this problem, but if all parties involved can come to these negotiations in the spirit of co-operation, there’s a good chance of reaching an agreement,” Carnell said. “COVID-19 affects us all, which is why it’s so important we work together to get through this difficult time.”

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