Insights

Rent Relief - Commercial Tenancies

Written by BLG Business Advisers | 7/04/20 7:26 AM

Contents


What Can I Expect From the Measure?
The rent relief measure is currently being legislated, however we can expect to see the following:

  • Landlords will have to reduce leases in proportion to the reduction in the tenant's business
  • Any rent waivers will have to account for at least 50% of the reduction in business
  • Deferrals on rent payments will need to be made, but can be put off
  • The repayment of the deferred rental payments must be spread over the remaining time on a lease and for no less than 24 months, whichever is the greater, unless otherwise agreed by the parties

How Does This Measure Work?

The National Cabinet Mandatory Code includes an example of how this measure will work in practice. See below:

"Qualifying tenants would be provided with cash flow relief in proportion to the loss of turnover they have experienced from the COVID-19 crisis

  • ie. a 60% loss in turnover would result in a guaranteed 60% cash
    flow relief.
  • At a minimum, half is provided as rent free/rent waiver for the
    proportion of which the qualifying tenant’s revenue has fallen.
    o Up to half could be through a deferral of rent, with this to be
    recouped over at least 24 months in a manner that is negotiated
    by the parties
    • So if the tenant’s revenue has fallen by 100%, then at least
      50% of total cash flow relief is rent free/rent waiver and the
      remainder is a rent deferral. If the qualifying tenant’s
      revenue has fallen by 30%, then at least 15% of total cash
      flow relief is rent free/rent waiver and the remainder is rent
      deferral.
    • Care should be taken to ensure that any repayment of the
      deferred rent does not compromise the ability of the
      affected SME tenant to recover from the crisis.
  • The parties would be free to make an alternative commercial
    arrangement to this formula if that is their wish."

Who Is Eligible?

The code will apply to any tenancies where the landlord or tenant applies for the JobKeeper Payment and their turnover is $50 million or less. This code is for commercial tenancies only.

What Is My Obligation?

Prime Minister Scott Morrison in his press release on Tuesday 7 April 2020 claimed that landlords were legally required to speak with tenants about rental arrangements and if they refused they would "forfeit their way out of the lease".

We suggest you seek legal advice to ensure you are complying with the current legislation and regulations surrounding tenancies.

What About Residential Rental Agreements?

Prime Minister Scott Morrison in his press release on Tuesday 7 April 2020 stated that residential tenancies will be dealt with by state and territory governments.

What If I Have a SMSF?

Per the Australian Taxation Office (ATO), if you have a Self-Managed Superannuation Fund there are specific regulations and guidelines available. To ensure you are complying with these, visit the ATO's website here. 

We expect further information on the rent relief package to be made available in the near future. We will keep you up to date as information becomes available.

If you would like to discuss the rent relief measure and what it could mean for you and your business, our team is available to assist you. Please don't hesitate to talk with us on (02) 4229 2211 or you can send your enquiry online.

*The above information was correct at the time of printing and subject to change*
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