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As a result of the National Cabinet Meeting on 7 April there have been numerous changes relating to commercial leases.
The Prime Minister said as follows:
- The Code which is to legislated will be mandatory.
- It will apply to tenancies where either the tenant or the landlord are eligible for the Job Keeper Program.
- Landlords must not terminate a lease or draw on a tenant’s security.
- Tenants must honour their leases.
- There is a moratorium on evictions.
Rent is to be reduced proportionate to a trading reduction in the tenant’s business through a combination of:
- Waivers of rent:
- Waivers of rent must account for at least 50% of the reduction.
- Deferral of rent.
- Deferrals must be covered of over the balance of the lease term and are to be no less than a period of 12 months.
- If the lease term goes for three (3) years the costs of the rent deferment can be amortized over that three (3) year period.
- If a lease only has another 6 months to run a tenant would have a minimum of twelve (12) months after the pandemic period to cover the deferrals of rental payments.
- Arrangements will be overseen through a binding mediation process.
In question time, the Prime Minister was asked what happens if a landlord does not want to engage with their tenant in the process.
The Prime Minister answered that landlords are legally required to do so and by not following the legal requirements they will forgo their rights under the lease.
The Prime Minister also urged Banks to come to the table and provide support to landlords.
The Code is designed to preserve the lease, preserve the landlord/tenant relationship, to keep tenants in their properties and preserve the value of the assets that underpin the lease.
We are yet to see the actual Code and there will of course be more detail in it.
If you have any queries, please do not hesitate to contact South Geldard Lawyers.
It is important to seek specific advice regarding your circumstances as this fact sheet provides general information only and does not constitute legal advice.
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