30 March 2020

Relief proposed for commercial and residential tenants – what can you do?

With the rapidly changing landscape and restrictions being imposed because of the coronavirus, we have been seeing an increase in queries about tenants being unable to pay their lease payments as their businesses are effectively placed into hibernation or as jobs are lost.

The Prime Minister of Australia last night announced that, as part of helping businesses to hibernate, the National Cabinet had agreed that short-term intervention is needed for commercial tenancies. This includes a moratorium on evictions over the next 6 months for commercial and residential tenancies where the tenant is in financial distress due to the impact of the coronavirus.

Although this moratorium is yet to be legislated in each of the States, the clear message is that landlords and tenants need to work together to find a way through this unprecedented period, so that businesses can emerge on the other side of the coronavirus and be able to begin/continue operating and employing people in the future. This is much more preferable to alternative where the business ceases to exist because it is weighed down by excessive debts, such as rental arrears. Banks have been encouraged to help to achieve this outcome.

It is expected that there will be further cost-sharing or deferral of losses between landlords and tenants, with the Commonwealth, State and Territory Governments, local government and financial institutions considering further mechanisms to provide assistance to those genuinely affected by the coronavirus.

Commercial property owners are being encouraged to ensure that any benefits they receive from such measures are also shared with their tenants in proportion to the economic impact caused by the coronavirus.

It is also expected that if rent relief or temporary amendments to leases cannot be agreed, that there will be an ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress.

Businesses and individuals are being asked to adapt to what is an unusual set of circumstances, in a situation where strictly speaking from a legal perspective landlords have a right to demand payment of amounts due under any lease from tenants and to enforce the terms of any lease.

It goes without saying that landlords and tenants who are not significantly affected by the coronavirus are expected to honour their lease and rental agreements and not use this situation to gain a financial advantage.

There will be more news on this to follow as the treasurers of all the States and Territories, led by the Federal Treasurer continue to work through the details of this over the coming days.

So what should I do:

  • Talk to your landlord/tenant to try and reach an agreement on some temporary rent relief measures.
  • Talk to your bank about what temporary relief your bank is prepared to provide

We know these are conversations can be hard- the power imbalance can make negotiating with a landlord or bank uncomfortable and unpleasant even during the best of times.

But we are here to help. If you need assistance in negotiating call us, we can do the heavy lifting for you.

But whatever you do, if you are in difficulty, do it sooner rather than later.

Craig Hollett is a highly regarded and well-versed commercial litigator with over 20 years’ experience. Craig’s extensive experience includes commercial and contractual disputes, building and construction, general commercial litigation, debt recovery, bankruptcy and insolvency, insurance law, professional indemnity and liability, defamation, mortgage enforcement, vocational disciplinary proceedings, OH&S prosecutions and public liability.