Re-negotiating your commercial lease due to covid-19? You must consider the leasing principles!

Most people will be aware of the various relief packages offered by the Federal and State Governments to assist businesses affected by the coronavirus pandemic.

One of the areas the Government found most difficult to address is the question as to who should bear the risk of rental default? Tenants or landlords? Despite speculation that a relief package would be forthcoming, the National Cabinet instead issued a Mandatory Code of Conduct which they have directed be given effect to by each of the States.

The legislation is to provide that the 14 leasing principles set down in the Code are to apply to those businesses eligible for the JobKeeper programme.

The Code directs that all landlords must negotiate with eligible tenants to vary the lease terms on a temporary basis and that such negotiations must take into account each individual parties’ particular circumstances. All negotiations must, however, be conducted in accordance with the leasing principles set down in the Code.

There is no hard and fixed rule as to what variation or arrangements can or cannot be agreed between the landlord and the tenant provided that the leasing principles are complied with.

The team at Maddens Lawyers has significant experience in negotiating commercial outcomes for clients and can advise you in respect to these matters and your rights and obligations under the Code.

It is essential that any variation be recorded in writing through either an appropriate Deed of Variation or, if agreed, a Deed of Surrender. This will ensure that any variation is enforceable and will assist in preventing any later dispute as the details of decisions made hastily and and under stress can often be forgotten.

Author: Fiona Giblin