Further to our updates on 26 March 2020 and earlier today, the Prime Minister announced that 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.
Today, the Australian Banking Association (ABA) has announced proposed measures by banks to support commercial landlords who assist tenants during this COVID-19 pandemic. The two key measures (subject to the meeting the conditions below) are:
(1) Businesses with total business loan facilities of up to $10 million (increased from the $3 million small business threshold) to be able to defer loan repayments for six months (facilities above $10 million will be considered on a case by case basis); and
(2) Banks will not enforce business loans for non-financial breaches of the loan contract (such as changes in valuations)
These new measures of relief will apply to all sectors of the economy, on an opt-in basis, provided that:
(1) For commercial property landlords, they provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears as a result of COVID19;
(2) the customer has advised that its business is affected by COVID-19;
(3) the customer was current in terms of existing facilities 90 days prior to applying for this relief; and
(4) interest is capitalised - that is, the term of the loan is extended by the deferral period payments are increased after the deferral period.
These proposed measures have not yet been implemented, and are subject to authorisation from the Australian Competition and Consumer Commission (ACCC).
Commercial landlords should consider whether they are eligible for the above relief and whether to apply for such relief, if and when it becomes available (which is currently subject to approval from the ACCC). A good starting point for commercial landlords is to review current banking facilities, to ascertain eligibility.
The National Cabinet is expected to meet again today, and we will provide further updates as we work out this situation, together with you.
Swaab Property Team
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