Commercial and residential tenancies

As part of its work on helping businesses hibernate, National Cabinet agreed that short-term intervention is needed for commercial tenancies. Work on this has begun, but there is more to do, including for residential tenancies.

On 29 March the National Cabinet agreed to a moratorium on evictions over the next six months for commercial and residential tenancies in financial distress who are unable to meet their commitments due to the impact of coronavirus.

Commercial tenants, landlords and financial institutions are encouraged to sit down together to find a way through to ensure that businesses can survive and be there on the other side. As part of this, National Cabinet agreed to a common set of principles, endorsed by Treasurers, to underpin and govern intervention to aid commercial tenancies as follows:

• a short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus;
• tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease;
• the reduction or waiver of rental payment for a defined period for impacted tenants;
• the ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress;
• commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by coronavirus;
• landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements; and
• cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance.

In this statement there are some interesting hints about commercial tenancy arrangements and potential relief.  This could be helpful to a lot of us who are now facing tenancy bills for premises we cannot use.

The reality is each lease is different, so you will need to approach your landlord or agent to discuss a solution that is agreed by both parties. Comments from the statement that could be useful here are:

• the reduction or waiver of rental payment for a defined period for impacted tenants;
• the ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress;

The Victorian Small Business Commission has some advice on how to approach this:

“If a landlord and tenant are dealing with a situation where the tenant is having difficulty paying rent as a result of COVID-19, we encourage both the landlord or their agent and tenant to communicate as early as possible. This is really important, as it helps to make sure both parties are aware of and understand each other’s position.

If tenants intend to request rent relief, they might need to provide records to the landlord or agent. This is why we recommend that tenants in this situation keep accurate business records to help show how trade has been affected.

We also recommend that the landlord or agent and the tenant arrange a meeting to discuss the situation or send an email or letter to the other party detailing the issue and their request.”

 

A note from Robyn Rix, PAA Treasurer on her personal experience:

I called the agent who manages my rental property to discuss a reduction in my rent. He asked that I put this request in writing. This is a copy of my email:

Further to our conversation this morning, could you please approach the landlord to see if he would agree to a one month rent holiday for my business? This would mean that I would not make my normal payment of rent & outgoings on the 1^st of April.

We were required by the government to close on Monday 23^rd March at midday. I currently have no income from my business.

I have every intention of remaining in business when this lock down lifts. I want to be able to offer ongoing employment to my staff, as well as providing a valuable service to my extremely loyal clientele. In order for me to remain financially viable, I need to cut costs as much as I can in the interim.

I believe that many businesses will go to the wall & commercial property will be adversely impacted.

I have been a reliable tenant & I would like to think this short term measure will provide a longer term benefit for all parties involved.

Thanks so much.

Kind regards,

Robyn.

If people are renting their homes, it may also be worthwhile to approach your managing agent to ask if the owners might reduce your rent if you are experiencing financial hardship. If you are an employee/contractor, you will probably need a letter from your employer saying you are no longer employed.

I spoke to a real estate agent yesterday & they said that they have had a massive number of people terminating their residential leases & they were asking landlords to consider reducing the rents to keep tenants. The agents believe landlords are better to keep existing tenants than potentially have their properties vacant for a considerable amount of time. Be careful, though, that they do not expect you to repay the rent shortfall in the future. Seek legal advice if in doubt.