Prime Minister Scott Morrison announced on April 3 that the national cabinet was working on a mandatory code of practice for commercial tenancies. The details were released on April 7.
Under the new code, landlords will be compelled to reduce rent for coronavirus-affected businesses with a revenue of less than $50 million. To qualify, businesses must be signed up to the government’s Jobkeeper scheme and have seen a 30 per cent reduction in revenue over the past 12 months.
The national cabinet, which was formed specifically to coordinate the response to the coronavirus, includes Prime Minister Scott Morrison, his chief ministers and the state and territory premiers.
The prime minister said the code, which will be legislated at the state level where required, focuses on a “proportionality principle”. If a business’s revenue is down 50 per cent, the landlord must offer a 50 per cent rent reduction, and so on. Restaurateur Paul Schulte suggested something similar should be implemented in his recent op-ed for Broadsheet.
“Now, how that is done inside the lease is up to the landlord and the tenant,” the prime minister said. “There are many different ways you can achieve this.”
One way is for a landlord to waive rent for a specified period – the next three or six months, say – but extend the overall length of the tenant’s contract. Another would be to discount the usual monthly rent, as some landlords have already done.
“These are things that we do not wish to be prescriptive about,” Morrison said. “What we want to do is have landlords and tenants in the room to ensure that they can work these issues out between them, so they can have an arrangement which enables them to get through this period and to get to the other side.
“And we would expect banks to be very supportive of the agreements reached by landlords and tenants who would be working under this mandatory code,” he said, implying that banks may have to reduce or waive mortgage payments for affected landlords.
This article was updated on April 8 to reflect the code’s announcement.