Leases & COVID-19

As you are likely aware, there have recently been a number of changes announced in relation to business closures which has had a significant impact on how we as a society function and created enormous financial impacts on the commercial/business sector. In an effort to aid as many businesses as possible, the Federal Government has announced a moratorium on evictions over the next 6 months for commercial and residential tenancies in financial distress who are unable to meet their commitments due to the impact of COVID-19.

In view of this recent announcement, the National Cabinet are encouraging landlords and tenants to work together to achieve a resolution in relation to rental payments for those who are impacted by COVID-19 with a view to ensuring that businesses can continue after the COVID-19 pandemic has ended. Generally speaking, until there are changes to the current legislation, the legal position is that rent is still payable by tenants in accordance with any commercial lease, unless there are provisions in your lease agreement that state otherwise. Although this is the general legal position, the National Cabinet have advised that if there are any benefits available (either existing or announced in any future stimulus packages) to a landlord and a landlord has not been open to assisting tenants by, for example, discussing reduced rental arrangements or waiving rent for a period of time, those benefits will no longer be available to the landlord. As part of this, the National Cabinet have agreed to a common set of principles, endorsed by the State Treasurers, to underpin and govern those discussions with tenants as follows:

  • a short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus;
  • tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease;
  • the reduction or waiver of rental payment for a defined period for impacted tenants;
  • the ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress;
  • commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by coronavirus;
  • landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements; and
  • cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance.

There are likely to be changes to the relevant legislation governing commercial leases in the coming days and weeks. As more information becomes available further updates will be given.

In the meantime, if you would like to discuss the terms of your lease or commercial tenancy agreement and how the above impacts on you, please contact your preferred solicitor at our office on 4153 0000.

Danielle Britton