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Mandatory code of conduct for Commercial Tenancies announced by Cabinet

The National Cabinet has agreed that states and territories will implement a mandatory Code of Conduct in the commercial property sector.

The Code is intended to provide 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.

The overriding principle is that rent reductions are to be based on the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants.

National Cabinet again noted that it expects Australian and foreign banks, along with other financial institutions operating in Australia, to support landlords and tenants with appropriate flexibility as they work to implement the mandatory Code.

The Commonwealth Government is also acting as a model landlord by waiving rents for all its small and medium enterprises and not-for-profit tenants within its owned and leased property across Australia.

The Rent Relief Policy will include a mutual obligation requirement on the small and medium sized enterprises and not-for-profit tenants to continue to engage their employees through the JobKeeper initiative where eligible, and if applicable, provide rent relief to their subtenants.

While this provides some clarity for commercial tenants, residential tenancies have been passed back to each state and territory to deal with, meaning there is no uniform approach for residential tenants.

REIA president Adrian Kelly said he understands the complexity of the issue encountered by the Federal Government, dealing with eight jurisdictions in the realm of residential real estate.

“Nevertheless, I am disappointed that a uniform approach could not have been agreed to for all Australians,” Mr Kelly said.

“We now face the potential situation where Australians will be treated differently depending on where they reside.

“This will add to the confusion and most likely there will be the misinterpretation of messaging.”

Mr Kelly said the rationale that commercial tenancies have a wide national impact, in this case economic, applies also to residential tenancies.

“For residential, it is a social as well as economic impact – after all we all live in dwellings and not all of us either own or lease commercial property,” he noted.

The resolution has been achieved for commercial tenancy agreements after the Federal Government announced a mandatory code, which will apply if a tenant is eligible for JobKeeper payments and has a turnover of less than $50 million.

Over in WA, REIWA President Damian Collins noted over 250,000 rental properties in Western Australia and thousands of West Australian residents have lost their jobs since the pandemic started.

“We need to see emergency residential rent relief for tenants who lose their jobs as a result of coronavirus, to allow them to keep paying rent for the next six months,” Mr Collins said.

“While the State Government clearly has an enormous amount to deal with, the issue of residential tenancies is vital to hundreds of thousands of West Australians and needs to be resolved soon.

“It’s your mum and dad investors and their tenants that may feel the brunt if the landlord can no longer afford to pay their mortgages.

“Most property owners are already willing to help tenants who find themselves in financial stress because of coronavirus, but the burden should not fall back entirely on the owner.”

The REIA has requested that further consideration be given to a national approach to residential real estate.

National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles during COVID-19

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