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COVID-19 And Your Commercial Lease

COVID-19 and your Commercial Lease

Keep up to date with the latest Government announcements affecting commercial tenancy agreements.

The Australian Government has introduced a range of measures to slow the spread of COVID-19, necessitating the closure or partial shutdown of thousands of Australian businesses. As a direct result, many affected businesses will find it difficult to meet their obligations under their commercial lease agreements.

Most typical commercial lease agreements simply do not contain adequate contractual provisions to fairly regulate the rights and responsibilities of both landlord and tenant, in what is an unprecedented global event. To address that, and to provide affected businesses with an opportunity to quickly re-open when the COVID-19 threat eases, the Government has announced a common set of principles to assist commercial tenants.

What are the changes?

  1. A short term, temporary moratorium on eviction on commercial tenants for non-payment of rent for businesses severely impacted by COVID-19;
  2. A direction that landlords and tenants confer to agree on temporary rent relief. Rent relief can take many forms, including a waiver or deferral of rent (with the deferred sum to be paid back in instalments over time once trading conditions improve), or other temporary amendments to the tenant’s obligations under the lease;
  3. Commercial property owners are to ensure that any benefits they receive through other forms of Government relief are also passed on to their tenants in proportion to the economic impact suffered by them as a result of COVID-19;
  4. The Australian Banking Association has announced options for borrowers with loans of up to $10 million who are affected by COVID-19 (including landlords) to apply to defer loan payments for 6 months;
  5. Tenants unaffected by the COVID-19 crisis are expected to honour their lease commitments as normal.

These measures are in addition to the previously announced temporary moratoriums affecting personal bankruptcies and liquidation of companies.

The National Cabinet is taking advice from the State and Federal treasurers on how best to implement these principles. Further announcements are expected following their next meeting on 3 April 2020.

What does this mean for you?

If you are a party to a commercial tenancy agreement, and the business has been adversely affected by COVID-19 and the associated economic downturn, you should proactively discuss what temporary measures will be required to keep the lease on-foot. It will be important that any agreement reached is documented in clear and certain terms, and takes into account the relevant provisions of the lease to avoid a dispute arising down the track.

We can help

Plastiras Lawyers are experienced in advising both landlords and tenants, and negotiating agreements to provide temporary rent relief. For most matters, we can offer you an initial fixed fee for the first stage of work. For advice on your rights and obligations, or for assistance to negotiate with your landlord or tenant, contact Con Plastiras (07 3220 2929).

About Kathleen Anderson

Kathleen Anderson is a Senior Associate in the Dispute Resolution team at Plastiras Lawyers. Kathleen helps SMEs prevent and resolve disputes arising in their day to day businesses. Her expertise includes advising businesses on contract breaches, partnership disagreements, debt disputes and negligence claims.

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