SMEs given two years to defer rent payments

Small and medium-sized businesses (SMEs) that are adversely impacted by the coronavirus will have up to two years to pay deferred rent under a federal government mandatory code of conduct.

The code, which was developed as a standard national approach to mitigate “a rapid and severe commercial impact” to coronavirus, will apply to all relevant state and territory legislation as a “complement” measure to existing laws.

Tenants have the right to break a lease if the landlord does not abide by the code or fails to negotiate a timely rent reduction.

Commercial tenants who qualify will be provided with cash flow relief that is proportionate to their loss of income.

Businesses with a turnover of less than $50 million are eligible to apply for relief under the National Cabinet’s code of conduct.

The $50 million threshold applies to franchisees at the franchise level and to retail groups at a group level.

Under leasing principles stated in the code of conduct, landlords must not terminate a lease because a tenant has failed to pay rent, offer tenants rent reductions that are proportionate as a form of a waiver or deferral, and have the right to reduce services.

Cases should be referred to the relevant state or territory dispute processes to resolve where a landlord and tenant cannot reach an agreement.

For more details of the report, please refer to the National Cabinet Mandatory Code of Conduct released by the Prime Minister’s office.