How commercial tenants can get support in risky times
COVID-19 has shaken the world and commercial property owners and their tenants have not been immune.
With many businesses forced to shut their doors, and the retail and hospitality industries among the hardest hit, how will tenants continue to pay their rent?
In response, the Commonwealth Government established a Mandatory Code of Conduct with commercial leasing principles to help landlords and tenants through the COVID-19 downturn.
Under the code, landlords will be required to reduce rent proportionate to the trading reduction in the tenant’s business - through a combination of waivers and deferrals of rent - over the course of the pandemic period.
Landlords are also not allowed to evict commercial tenants in financial distress as a direct result of COVID-19 for at least the next six months. In return, tenants must honour their lease agreements.
The code will apply for small to medium sized businesses with a turnover of $50 million or less and where the tenant is eligible for the JobKeeper program.
While this code provides short-term rent relief for tenants, it isn’t ‘rent free’. Tenants will need to come to an arrangement with landlords to cover any deferred rent beyond the COVID-19 period, typically over a 24 month period or balance of lease term.
Prime Minister Scott Morrison has told commercial tenants and their landlords to negotiate. The Code is designed to facilitate good faith negotiations and amendments to existing leasing arrangements. This is important, because the circumstances around every lease agreement are unique.
Both parties should be open and honest in their communication and offer as much flexibility as possible.
Tenants should also work closely with an experienced tenant representative, who understands the current market conditions and can handle negotiations efficiently, effectively and respectfully ensuring the appropriate outcomes.
Even in tough times there are opportunities in the leasing market for tenants.
If you are looking for a tenancy in a new commercial property, now could be the perfect time to negotiate a new lease with favourable terms before your occupancy begins. This could allow you to push out your occupancy and lease commencement to later in the year, while ensuring all provisions required are established prior.
Early planning for a relocation is a great to achieve good value and outcomes on your next commercial lease.
The decisions you make in the midst of crisis will have a long term impact, so it is more important than ever to get professional support.
Working with a tenant representative and getting timely advice is key as your property strategy evolves. Leveraging a tenant representative’s knowledge and experience will not only save your business time and money, but ensure you survive these tough times and prosper in the long term.
This can also include commercial lease restructure advice, no matter what stage you are at in your current lease. Restructuring your lease terms gives you the ability to achieve or bring forward financial savings on your lease occupancy costs. A tenant representative can renegotiate your lease and ensure you navigate through any complexities in this process with minimal risk.
If you’re looking to renew or end your lease, a tenant representative will help you identify the best leasing opportunities and whether or not that lies with your current tenancy or not.
How we can help.
We want to give you a hand, in any way we can. Get in touch as soon as possible, and we’ll quickly tell you what your opportunities are. No obligations.
Managing Director, Broadway Property
Director, Broadway Property