Commercial Leasing – “Code” announced for Rent Payments
A week and a half ago, in response to the coronavirus crisis which is gripping our economy and society more generally, the Prime Minister announced that the National Cabinet had agreed to a “moratorium on rental evictions”. The Queensland Government has not yet enacted the legislation to make that announcement legally effective at this stage, but we understand that legislation will be introduced shortly.
The moratorium
It effectively means that a landlord will not be legally able to terminate a lease and evict a tenant due to unpaid rent, for a period of 6 months. As to when that 6-month period will commence is yet to be seen, but the Queensland Government have stated that the commencement of the moratorium will be backdated.
The Prime Minister also urged landlords and tenants to negotiate their rent payment arrangements in light of the social distancing, forced business closures (such as restaurants and beauty salons), and ‘stay at home’ requirements which have been introduced to combat the spread of coronavirus.
We here at ABKJ have been working closely with all of our landlord and tenant clients to negotiate reasonable and appropriate rent payment arrangements to ensure that business can ‘bounce back’ once the coronavirus crisis has passed.
Waiver & rent deferral
On Tuesday, 7 April 2020, the Prime Minister announced that the National Cabinet had agreed to a mandatory “code” with respect to the waiver and deferral of rent.
The details of the code are still emerging, but we understand the announcement to date to mean:-
- If a tenant can prove it is eligible to obtain the JobKeeper payments, then the code will apply. Eligibility for JobKeeper payments includes a reduction of turnover/sales of 30% or more, year-on-year. For instance, a tenant’s March 2020 turnover has reduced by 30% or more as compared with March 2019. The tenant must also employ staff.
- A tenant will need to provide the landlord with turnover figures (presumably monthly) to prove the Tenant’s downturn in trade.
- If the tenant proves that their downturn is (say) 50%, the code will apply to require as a minimum that:-
- Rent payable by the tenant to the landlord will reduce proportionately by 50%;
- 50% of that reduction (i.e. 25% of the total rent payable) must be rent which is waived by the landlord (that is, not able to be recovered); and
- The balance rent that is not waived is deferred, and is payable by the tenant over the balance of the lease term. For instance, if the lease still has 22 months left, then the deferred rent is payable over 22 months. If the lease term remaining is less than 12 months, then the deferred rent is payable over a minimum timeframe of 12 months (even if the tenant vacates during that period).
Please note that the above summary is based upon the Prime Minister’s announcement on Tuesday. We are monitoring all announcements and details, and will update you as further details emerge.
Contact us
Commercial property leasing is a complex matter. If you want assistance with respect to your lease rent payments, whether you are a landlord or a tenant, please do not hesitate to contact our experienced Property Lawyers who are ready to help you.
To make an enquiry, please use the contact page or call us on 07 5532 3199.
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