A mandatory code for the provision of rent relief – but who ultimately pays?

Prime Minister Scott Morrison’s announcement of the new mandatory rent relief code emphasises that the lease has become sacrosanct in Australian business. So, keeping the lease, keeping tenants in their place of business and preserving the tenant/landlord relationship look like the goals of this code.

The JobKeeper program forms the eligibility to the code with landlord or tenant having under $50m turnover.

The rent relief code proposes:

  • Rent waivers for 50% of the rental reduction provided to the tenant
  • Deferrals of rent to be paid over the balance of the lease term or within 12 months after the pandemic has passed – whichever is the greater
  • Landlords will reduce rents proportionate to the trading reduction in the tenant’s business. This is to be achieved through rent waivers or deferrals.

Prime Minister Morrison wants the code (to) “bring together a set of good faith leasing principles. Landlords must not terminate the lease or draw on a tenant’s security. Likewise, tenants must honour the lease.” The request has also gone out to international banks operating in Australia to play their part in backing this code.

It is hard to not praise the Federal Government for the wide range of support mechanisms being developed to support the economy during the COVID-19 pandemic.

This relief does seem to put the onus on the landlord to bear the brunt of the tenants reduced rental payment or take their case to their own financial institution. Banks are typically hard houses to plead for relief from financial plights.

The Honourable Mr Morrison rounds off by saying “This is seen as a proactive, constructive and co-operative mechanism for landlords and tenants to see this through together.”

So whilst the motives are pure, undoubtedly, the devil is in the detail. In this case, the practical detail.

How does a landlord become satisfied that the tenant is fair dinkum? Who will attest to that?

Most small businesses don’t prepare audited financial statements, so who knows whether they have applied relevant accounting standards or say, switched from accruals accounting to cash?

Who knows if they have sold a part of their business, or restructured to split income with a sibling business?

Will they even have up to date financials to support their claim?

It will be interesting to see how this one plays out in the coming weeks.

If you need any further information around this initiative or other Federal or State Government stimulus packages please reach out to BridgePoint Group on 1300 656 141 or email us –  info@bridgepointgroup.com.au.


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Neil Parker
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