Posted by Allison Anthony | 09 April 2020 | COVID-19
This alert is current as at 11 April 2020 and will be updated when more information becomes available. It is provided as general information only and not intended as legal advice.
On 3 April 2020, the National Cabinet agreed to a ‘Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19’ (Code) – and released the Code on 7 April 2020.
The Code creates a set of ‘good faith’ leasing principles for to apply to landlords and tenants of ‘commercial tenancies’ (being retail, office and industrial leases) ONLY WHERE the tenant is an eligible business (with annual turnover of up to $50M) for the Commonwealth Government’s JobKeeper programme (see Nexus Covid Alert #3) (SME Tenant).
The Code requires that Landlords and SME Tenants must negotiate amendments to existing lease arrangements with a view to ‘aid the management of cashflow for SME Tenants and landlords on a proportionate basis’ in light of the disruption caused by COVID-19.
For a copy of the Code click here.
There are two sets of ‘principles’ in the Code as follows:
The Code is due to come into effect for each respective state and territory when prescribed by that jurisdiction – and for as long as the Commonwealth JobKeeper programme remains operational. Of course, arrangements agreed under the Code will more than likely have effect long beyond the expiry of the programme.
As at 11 April 2020, no state or territory had issued any regulations to apply concerning the Code.
Irrespective of when states and territories enact legislation to apply the Code, Landlords and SME Tenants should enter into discussions using the Code as a basis for negotiations as soon as possible.
The Code requires Landlords and Tenants to meet with a view to negotiating and agreement ‘in good faith’ based on the particular circumstances of each lease arrangement. It is provided for guidance – and relies on the parties using ‘good faith’ to arrive at a mutually agreed outcome.
Where the parties fail to reach agreement – the Code requires that the matter be referred to a leasing dispute resolution process for binding mediation.
This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before acting in relation to any specific issues.
In our COVID-19 NEXUS Alerts #2 and #3, we looked at the Commonwealth and NSW legislative measures which had been introduced to mitigate the impact of COVID-19 pandemic on certain commercial and retail leases – with detail being proposed to follow via specific state and territory regulations being adopted. NSW has now enacted its regulations.