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  • Rent concessions under the mandatory code of conduct

    To help small and medium businesses, the Federal Government announced a code of conduct for commercial leasing as part of the COVID-19 stimulus package.

    The code applied:

    • through relevant state and territory legislation or regulation as appropriate
    • for the duration of the JobKeeper program – which was from 3 April 2020, depending on the state or territory, and ended on 28 March 2021.

    The code contained 14 principles that applied to negotiating amendments to leasing arrangements for eligible tenants who suffered financial stress due to COVID-19.

    Under the code, landlords and tenants were expected to negotiate temporary leasing arrangements in good faith to support business continuity.

    Principle 3 of the code specified that landlords must offer tenants a proportionate reduction in rent payable, of up to 100%, of the amount the business would normally pay. The amount of this rent concession was based on the reduction in the tenant's trade during the COVID-19 period. A reasonable recovery period should also have been included.

    The rent concession may have been:

    • a waiver – the tenant no longer needed to pay the amount of rent that was waived. Under the code, the waived amount must have been at least 50% of the reduced rent, unless otherwise agreed
    • a deferral – the tenant still needed to pay the amount of rent deferred but they could pay later. Under the code, deferred rent should have been proportionately added to future rent payments over the remaining lease term or 24 months, whichever duration was greater, unless otherwise agreed.

    When rent concessions were formalised in an agreement between the landlord and tenant, it changed the previous rental agreement.

    Landlord and tenant relationships are governed by state law. The code’s principles were implemented by each state and territory's COVID-19 tenancy laws.

    See also:

    Last modified: 21 Jun 2021QC 66004