9 March 2020 | Reading time: 3 minutes
The National Cabinet’s mandatory Code of Conduct for commercial tenancies (Code) was released on 7 April 2020. Targeted at SMEs impacted by the COVID-19 pandemic, the Code will be given effect through state and territory legislation.
All commercial landlords and tenants will need to familiarise themselves with the Code to ensure they act in accordance with the key principles.
Purpose of the Code.
The purpose of the Code is to impose a set of good faith principles applicable to office, industrial and retail tenancies. These principles should guide landlords and tenants to negotiate amendments to existing leasing arrangements with the objective of sharing the financial risk and cashflow impact during the COVID-19 period.
Who does the Code apply to?
The Code is mandatory where the tenant:
The principles in the Code are also designed to apply ‘in spirit’ to all leasing arrangements affected by COVID-19, regardless of whether they meet the eligibility criteria.
Duration of the Code.
The commencement date will be determined by each state or territory in their own legislation giving effect to the Code. Despite this, the Code is designed to apply for the same duration as the Commonwealth JobKeeper program which commenced on 30 March 2020 and will run until 27 September 2020.
What are the Code’s principles?
The Code includes overarching principles relating to negotiations, in addition to leasing principles to guide landlords and tenants. These principles are set out below.
(a) Landlords and tenants to work together
The overarching principles seek to promote flexibility and allow for temporary arrangements to be tailored to each individual tenancy. They include:
(b) Specific lease terms
Whilst the leasing principles are to be applied on a case-by-case basis, the Code contemplates several positive and negative obligations imposed upon landlords and tenants as follows:
Where a tenant and landlord cannot agree upon an arrangement, the matter will be handled by a binding mediation service coordinated by each state and territory.
We can help.
For landlords, we can help you to review and consider information provided by your tenants in negotiating and reflecting temporary arrangements under the Code. For tenants, we can assist you to compile the required information to support a proposal for rent relief that is in good faith, transparent, and a proportionate solution in accordance with the Code.
For details of all of our COVID-19 tips and updates, visit the Bespoke COVID-19 Hub.