Today the Government announced the rent relief package which, as expected will be implemented under a mandatory Code of Conduct (the Code.) The Code will be legislated through each State and Territory.
The purpose of the Code will be to impose a set of measures for application to commercial tenancies (which includes retail, office and industrial) between the landlord and the tenant for circumstances where the tenant has an annual turnover up of up $50m and is eligible for JobKeeper (set to be legislated tomorrow.)
The Code is 7 pages long and mostly legal speak and I think again, we will need to wait until the relevant legislation arises from the states and territories. However, some (but not all of the) temporary arrangements and leasing principles from the Code are as follows:
- The reduction in rent will be done by waivers and deferrals in a proportionate approach which will be shared by both the landlord and the tenant up to 100% of the ordinary amount payable. The proportionate calculation is based on the reduction in the tenants trade during COVID-19 and a subsequent reasonable recovery period.
- Rental waivers must constitute no less than 50% of the total reduction in rent under the proportionate approach during COVID-19 pandemic period. Tenants may waive the requirement for a 50% minimum waiver by agreement.
- Payment of rental deferrals by the tenant must be done over the balance of the lease term or for a period of less than 2 years (which ever is the greatest time) unless otherwise agreed.
- Landlords will not be able to terminate leases due to non payment of the rent during the COVID-19 pandemic period.
- Landlords will not be able to draw on a tenants security (bond) for the non-payment of rent during the COVID-19 pandemic and/or a reasonable recovery period.
There is still a lot of uncertainty in this area but across my client base I know that mostly, Landlords and tenants alike have been waiting for an announcement such as this. This clearly indicates the requirement for financial information sharing between the tenant and the Landlord, something we generally only see in the retail environment and this will not only require a level of honesty but also a practical level of the information required being available.
Now is not the time for anyone to be behind in any bookkeeping work, no matter what the status of the business is – some of these stimulus options and relief availability options depend on the business figures. If you require any assistance with your bookkeeping, please let us know and we can offer some training or the full bookkeeping service if required.