Mandatory Code released banning evictions for Commercial leases

The Federal Government has released the Code that will deal with how commercial landlords and tenants must deal with rent payments and evictions during Covid-19.

The Code applies where the tenant is eligible for the JobKeeper wage subsidy program and has a turnover of $50M or less. To rejig your memory, the JobKeeper program applies where the business income has reduced by 30% or more due to Covid-19.

The Code mandates that:

• Landlords are banned from evicting the tenant or using the security deposit to cover rental payments
• Tenants must still honour their lease
• Landlords must reduce the tenant’s rent payments in a way that is proportionate to the reduced income
• The proportionate reduction will be done through ha formula that involves rent waivers and rent deferrals
• Rent waivers must be at least 50% of the rent reductions
• Rent deferrals must be spread over the balance of the lease term, or a minimum of 12 months if the lease has less than 12 months remaining.
• If the Landlord and Tenant disagree, they must go through a binding mediation process to resolve the disagreement.

At this stage, the Code will be in place while the JobKeeper program is operational, which at 9 April 2020, is until 27 September 2020. The Code has not become legislation in Victoria yet.

While it sounds like a great solution for pubs, clubs and cafes which have been forced to shut down, what about landlord’s who have mortgages?

The big four banks have announced moratoriums on loan repayments where the tenant cannot pay the rent but the lease continues. My advice is to landlords is to speak to your lender about payment arrangements that suit your financial situation.

We can help you with understanding your business legal obligations under the new Code. Contact our business lawyers Lachlan Edwards on 0427 916 442 or Siobhan Liston on 03 5445 1067 for assistance.