Scott Morrison is forcing commercial landlords to share more pain and cut rents

- April 7, 2020 3 MIN READ
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Landlords will be forced to reduce rents on commercial properties in proportion with the loss of turnover their small business tenants have experienced under new measures announced by Prime Minister Scott Morrison on Tuesday.

The plan will be backed up by state-based legislation and a mandatory Code of Conduct, building on last Friday’s six-month ban on commercial landlords evicting tenants during the ongoing coronavirus shutdown.

“The purpose of the Code is to impose a set of good faith leasing principles for application to commercial tenancies,” Morrison said.

“This preserves the lease, it preserves the relationship, it keeps the tenant in the property.

“Landlords must not terminate the lease, and tenants must honour the lease.”

The Code will apply to retail, office and industrial properties, between owners/operators/other landlords and tenants, if the tenant is a small to medium-sized business (under $50 million annual turnover) and eligible for the government’s JobKeeper program.

“National Cabinet agreed that there would be a proportionality to rent reductions based on the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants,” Prime Minister Morrison said.

“The Code provides a proportionate and measured burden share between the two parties while still allowing tenants and landlords to agree to tailored, bespoke and appropriate temporary arrangements that take account of their particular circumstances.”

Binding mediation will help hammer out any reduction and rent waivers will have to take into account at least 50% of a tenant’s turnover fall.

Tenants will also be able to defer rental payments with the outstanding balance to be repaid over the remainder of the lease period, provided it’s at least 12 months. If the lease expires in under a year, a tenant will still have 12 months to make any deferred payments.

Morrisson said the state and federal governments expect Australian and foreign banks along with other financial institutions  to support landlords and tenants as they implement the mandatory Code. The PM said the federal Government will “as a model landlord” by waiving rents for all tenants who are small and medium, and not-for-profit enterprises in Commonwealth-owned and leased properties

The Rent Relief Policy will include a mutual obligation requirement on SMEs and NFP tenants to continue to engage their employees through the JobKeeper initiative where eligible, and if applicable, provide rent relief to their sub-tenants.

Landlords will be legally required to talk to tenants about their rent and would “forfeit their way out of the lease”, the PM said, if they refused.

The states and territories will address residential tenancies individually, Morrison said.


Stay home for Easter

Prime Minister Morrison said social distancing will continue for at least six months to slow the spread of coronavirus.

“Many Australians have been looking forward to an Easter holiday. National Cabinet reiterated previous advice that social distancing must continue and that Australians should stay at home and not undertake unnecessary holiday travel,” he said.

There are more than 5,800 confirmed cases in Australia, and more than 2,400 people have recovered from the virus. 44 people have died and more than 304,000 tests have been done.

The PM said that while the epidemiology curve is beginning to flatten “it is still too early to determine whether such movements will be significant or sustained” and it was important that social distancing measures stayed in place.

New modelling on the spread of COVID-19 by the University of Melbourne (Doherty Institute) Pandemic Modelling Team, released today, looked at two levels of social distancing. With a 25% reduction in transmission due to social distancing, the proportion of people infected would be 38% with 16% requiring some medical care.

“With a 33% reduction in transmission due to social distancing, the proportion of people infected is 12% and only 5% require some medical care,” the Prime Minister said.

Without the social distancing measures, hospitals would have been overwhelmed within weeks, the modelling shows.