Commercial Leasing and COVID-19 Mandatory Code of Conduct - UPDATED 15 April 2020

On 7 April 2020, the Federal Government released its much-anticipated Mandatory Code of Conduct - SME Commercial Leasing Principles during COVID-19 (Code). 

The Code adopts and builds on principles emanating from National Cabinet Meeting discussions concerning commercial tenancies and is to be implemented by states and territories through legislation or regulation. It imposes a set of leasing principles to apply to commercial tenancies (retail, office and industrial) between owners / operators / other landlords and tenants, in circumstances where the tenant is an eligible business - a small-medium sized business (with annual turnover of up to $50 million) that, due to financial stress as a result of the COVID-19 pandemic is eligible for the Commonwealth Government's JobKeeper Payment. 

The Code is intended to apply for the period during which the Commonwealth JobKeeper Payment remains operational. 

The Objectives of the Code 

The Code's purpose is 'to share, in a proportionate, measured manner, the financial risk and cashflow impact during the COVID-19 period whilst seeking to appropriately balance the interests of tenants and landlords.' The mutual benefit of landlords and tenants implementing measures to foster business continuity is acknowledged, and it is anticipated they will negotiate transparently and in good faith to reach tailored solutions. Agreed outcomes should consider the financial impact of the COVID-19 pandemic on the tenant (its revenue, expenses and profitability) with appropriate arrangements having regard to the present impact and a reasonable recovery period. 

The Code enables eligible commercial tenants to receive rent relief in the form of waivers or deferrals (proportionate to trading reduction of their business) to help them survive the pandemic and beyond. The Rent Relief Policy requires eligible tenants to continue to engage their employees through the JobKeeper program and uphold the substantive terms of their leases. 

The Key Leasing Principles include: 

  • Landlords are prohibited from terminating leases for non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period). 
  • Subject to negotiated amendments, tenants must otherwise commit to and fulfill the substantive terms of the lease. Failure to do so will forfeit protection under the Code. 
  • Landlords must offer proportionate rent reductions in the form of waivers and deferrals of up to 100% of the amount ordinarily payable, based on the reduction in tenant's trade during the COVID-19 pandemic period and subsequent reasonable recovery period. 
  • A rental waiver must be no less than 50% of the total reduction in rent payable over the COVID-19 pandemic period, or greater in cases where the tenant's capacity to fulfill their obligations under the lease would otherwise be compromised. The landlord's financial ability to provide such additional waivers must be taken into consideration. 
  • Unless otherwise agreed, payment of deferrals must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is greater. 
  • Landlords may not apply fees, interest or other charges with respect to rent waivers and deferrals. 
  • Reductions in statutory charges (land tax, council rates) or insurance should be passed onto tenants reflective of how these are proportioned in the lease. 
  • Landlords are prohibited from calling in a bank guarantee, personal guarantee or security deposit for non-payment of rent during the COVID-19 pandemic period and / or a reasonable subsequent recovery period. 
  • Apart for retail leases based on turnover rent, rental increases are to be frozen for the duration of the COVID-19 pandemic and a reasonable subsequent recovery period. 
  • Tenants should be provided an opportunity to extend a lease for the equivalent period of a rent waiver and / or deferral period. 
  • Where agreement cannot be reached, matters should be referred, and subject to, relevant state and territory resolution processes. 

Tenants and landlords are commercially reliant on each other and should negotiate in good faith to reach practical solutions that will sustain both, not only during the pandemic, but into the future. Many negotiations will be challenging and complex.

Negotiations, on a case-by-case basis, should consider: 

  • The Code and relevant state / territory legislation and regulations; 
  • The terms of the current leasing arrangements, including headlease / sublease arrangements 
  • Government financial assistance such as Commonwealth Government JobKeeper assistance for eligible tenants; 
  • Any loan repayment holidays provided by lending institutions to the landlord; 
  • The documentation required to show actual losses / decreases in turnover suffered by a tenant due to COVID-19 (bank statements, accounting records); 
  • Realistic timeframes for recovery with possible extensions to moratorium periods; 
  • Any variations / extensions to the term of the lease. 

The Western Australian Government has indicated that landlords should not be asking tenants to provide evidence of existing savings to prove financial hardship but the position in Western Australia is expected to become clearer as the Commercial Tenancies (Covid19 Response) Bill 2020  is introduced to State Parliament. It will introduce:

  • A moratorium on eviction for 6 months except in limited circumstances;
  • A prohibition on rent increases during the emergency;
  • Fixed term tenancies due to expire during the emergency will continue as periodic agreements;
  • Relieving lessors of the obligation to conduct ordinary repairs in certain circumstances;
  • Enabling a tenant to end a fixed term tenancy prior to its end without incurring break lease fees (tenants will still be liable for damage and rent arrears).

Updated information is available on the Consumer Protection website, as below:

Residential Tenancy >
Commercial Tenancy >

Negotiations can be facilitated with the assistance of a commercial lawyer and agreed variations documented in writing and, where relevant, registered on the title of the leased premises. 

We encourage NECA members who are tenants or landlords and financially impacted by the COVID-19 pandemic to seek legal advice and assistance. 

Disclaimer: This summary is a guide only and is not legal advice. For more information on employers’ obligations, call NECA Legal (WA) Pty Ltd on (08) 6241 6129 or email