Mandatory Code for Commercial and Retail Leases

8th April 2020

Now agreed upon, the Code will be legislated and managed by the States and Territories and will be subject to binding mediation. Information regarding how the States will manage the mediation process, will hopefully be available before Easter. The two core principles underpinning the Code will be good faith and proportionality, with landlords and tenants urged to work together on how to best manage rent relief going forward.


Who does the mandatory code apply to?

–  The code will apply to tenants with a turnover of $50m or less.

–  Tenants that have experienced a 30% or greater loss in revenue.

–  Tenancies where the landlord or tenant are participating or will participate in the JobKeeper program.


What does rent relief look like?

–  Landlords are expected to negotiate in good faith and ‘share the pain’.

–  The rent relief should be proportionate to the reduction in turnover and should comprise waivers and deferrals.

–  Waivers must account for at least 50% of the reduction.

–  Any recoupment of deferred rent will be over the duration of the lease period or a minimum of 24 months. This means if a tenant has six months left on their lease, they should be offered a 24  month period to pay any deferred rent.

–  Landlords cannot terminate a lease on the basis of non-payment, nor dip into bonds to cover unpaid rent. Those who choose not to engage may forfeit themselves out of the lease.

–  Tenants are expected to honour their obligations under a lease (i.e. they can’t just walk away, which was one of the industry concerns when the initial guidelines were announced).

We anticipate there will be additional information to come from the States and Territories about how this will be applied in each jurisdiction, as well as announcements of additional relief on land tax and rates – on the proviso this is passed on to the tenants.