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COVID-19 Business Continuity – 3rd April

Hi, it’s Ashley Thomson with the COVID-19 Business Continuity update for Friday 3rd April.

In today’s update:
1. Commercial tenancy arrangements for businesses affected by COVID-19
2. Register for JobKeeper

1. Commercial tenancy arrangements for businesses affected by COVID-19

COVID19 plan for commercial rental arrangements was discussed by PM Scott Morrison in today’s press conference.
The plan is still to be finalised (due early next week) but he did advise that the national cabinet had agreed to a mandatory code for commercial landlords and tenants in financial distress. The mandatory code will apply to business tenants with a turnover of less than $50 million and are part of the JobKeeper program.

The principles that guide the code will be:

  • Where it can, rent should continue to be paid, and where there is financial distress as a result of COVID19 (for example, the tenant is eligible for assistance through the JobKeeper program), tenants and landlords should negotiate a mutually agreed outcome
  • There will be a proportionality to rent reductions based on the decline in turnover to ensure that the burden is shared between landlords and tenants
  • A prohibition on termination of leases for non-payment of rent (lockouts and eviction)
  • There will be a freeze on rent increases (except for turnover leases)
  • There will be a prohibition on penalties for tenants who stop trading or reduce opening hours
  • There will be a prohibition on landlords passing land tax to tenants (if not already legislated) by states or territories
  • There will be a prohibition on landlords charging interest on unpaid rent
  • There will be a prohibition on landlords from making a claim to a bank guarantee or security deposit for non-payment of rent
  • Ensure that any legislative barriers or administrative hurdles to lease extensions are removed (so that a tenant and landlord could agree a rent waiver in return for a lease extension)

To incentivise landlords to get on board, the national cabinet has also agreed to consider a three-month land tax waiver for landlords that sign up to the code.

I think a key point to note here is item 2 – it gives us an indication of what might be in store.  We’ll find out more details next week when the finalised measures are released.

An example of a negotiated outcome provided by the PM was that tenants and landlords could agree to extend the overall lease by six months on the other side. He was careful to say that the government is not going to be prescriptive about arrangements.

Where you can’t reach an agreement with your landlord, mediation will be available to facilitate discussion and keep the matter out of the court system.
From my experience in dealing with commercial leases, the smartest strategy is to hold off negotiations until you have mapped out your plan, including counterpoints to the response you anticipate from your landlord. Clear heads win out.
The best thing you can do at this time is work with your coach to plan an approach to your landlord. If you can send a copy of your lease contract to your coach, that will help us understand the options and start to develop strategies.
2. Register for JobKeeper
If you haven’t already done so, register for the JobKeeper payment now – here: https://www.ato.gov.au/Job-keeper-payment/.
Don’t wait until you’re sure you’ll be eligible – you can always withdraw your application at a later date.
That’s the end of another big week. I go into the weekend buoyed by the resilience of Tenfold clients and your ability to weather the storm with integrity.

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