COVID-19 “A TENANTS SHIELD”: Protection for commercial tenants COMMERCIAL TENANTS

No time to understand what protection is available to you as a business owner??? The national commercial and retail Code of Conduct or the state legislation makes you want to roll your eyes with the thought of “where will I find the time to get on top of that?”…. You’re not alone.

Any business owner that has been, or is currently COVID impacted, is flat out making sure the business is going to be OK for now and over the next 24 months+.

Here are 12 points to know regarding the protection available to tenants…

1. How much rent should I be paying? My revenue is significantly down on the same period last year and I qualify for Jobkeeper. My turnover is less than $50m.
   Your COVID impacted rent should be calculated and reduced by applying the percentage of reduction in your year on year sales as a percentage. This applies from April 2020 until now and while you are impacted. If you have a business that has been forced to close, your revenue is $0.00 which is a 100% reduction on the previous year and the rent you will pay is $0.00 for that month or period of closure.
2. I am open, but my income is restricted by the 4sqm rule. A large segment of businesses such as restaurants, hair, beauty, fitness studios, massage and allied health service providers will be restricted in how many clients they can see due to time required to sanitise between appointments and the physical number of clients they can have through the business. This will have a significant negative impact on revenue for some time to come. It is important to address the protections available under the code to ensure the long term security of the business. These types of businesses will be COVID impacted for the entire pandemic period which could be another 18 to 24 months.
3. How much rent will be waived by my landlord? Under the code the landlord is required to write off half of the unpaid rent. In the case where a business is forced to close and 100% of the rent is unpaid, 50% will be written off by the landlord as a minimum.
4. Will I carry forward a lease liability? In the case above, you will carry forward 50% of the unpaid rent. This will be accumulated each month and at the end of the pandemic period you will start to pay this balance back over 24 months. When things return to “normal” you will pay your regular rent, plus a special rent, 1/24^th of the carried forward balance.
5. Can I reach a commercial outcome with my landlord with respect to the deferred rent? Yes, some landlords will be open to reaching an agreement where you pay them a lump sum now at a discount. If your cashflow will allow it, this is something you can discuss with your landlord.
6. Can my landlord take legal action against me for not paying rent during the pandemic period? No, this is unlawful, provided that you are doing all the things required under the code.
7. Can my landlord apply interest or other collection fees? No, this is unlawful, provided that you are doing all the things required under the code.
8. Can my landlord put my rent up during the pandemic period? No, all contracted rent increases set out in your lease are on hold during the pandemic period.
9. My landlord won’t communicate with me. That’s ok, this pandemic has hit landlords as well and they’re in the same boat as tenants in having to invest time to understand how to work with the code and how to respond to tenants. It’s important for you to communicate in writing, this will leave an audit trail and show that you are acting with the best of intentions.
10. My landlords’ lawyer has sent me a long questionnaire with all sorts of financial questions relating to profit and expenses. You don’t have to answer this questionnaire. You can provide evidence that you qualify for Jobkeeper and the sales information that you have used in completing your BAS.  You can also have your accountant write a letter on your behalf setting this information out for your landlord.
11. What can I do if I am swamped and need someone to help me understand what I need to do? You should talk to someone that you can trust and who will understand the code and how to apply the code correctly for your situation.
12. Is it too late to go back to April and re-calculate how much rent I should have paid? No, this is perfectly fine. A lot of landlords and tenants are still just coming to grips with how the code is meant to work.

How can we help?

Your Leasing Co. is helping many business owners from all industries and professions in understanding their obligations, calculating how much rent they should be paying, the rent to be waived and deferred. We are communicating with landlords on behalf of tenants and managing the process of reconciling rent accounts to ensure that what gets agreed, makes its way onto the statements.