Further to our update on 26 March 2020 regarding the COVID-19 Legislation Amendment (Emergency Measures) Bill 2020 (Bill), on Sunday 29 March 2020, the Prime Minister announced that the National Cabinet agrees that short term intervention is needed for commercial tenancies.
At this stage, there is nothing more than a set of overarching principles agreed by the National Cabinet and announced by the Prime Minister in a press conference.
It is assumed from the language used, and the examples provided by the Prime Minister, that the reference to "commercial tenancies" includes commercial, retail and industrial leases.
The National Cabinet's desired outcome is that, at the other side of this COVD-19 crisis, a landlord has a tenant in the premises who is paying rent and the tenant has a viable business.
We summarise the key principles agreed by the National Cabinet as follows:
(1) A six month, temporary moratorium on the eviction of commercial and residential tenants for non payment of rent is to apply to tenancies impacted by rental distress due to the COVID-19 crisis.
(2) Commercial tenants and landlords are encouraged to sit down together and talk to each other, to find a way through to the other side of this COVID-19 crisis. This includes to agree on rent relief (rent waiver or reductions) for a defined period of time for tenants impacted by the COVID-19 crisis.
(3) Tenants should be able to terminate leases or seek mediation and/or conciliation on the grounds of financial distress.
(4) Commercial landlords should ensure any benefits received in respect of their properties are passed onto tenants in proportion to the economic impact caused by the COVID-19 crisis.
(5) Landlords and tenants not significantly impacted by the COVID-19 crisis are expected to honour their lease and rental arrangements.
(6) There is to be a cost sharing or deferral of losses between landlords and tenants-with Commonwealth, State and Territory governments, Local governments and financial institutions to consider mechanisms to provide assistance.
The key principles need for more detail from State and Territory Treasurers, who have been given carriage of this issue. The Property Council of Australia has flagged its early concerns with some of the key principles.
The Property Council of Australia has indicated that the role of the financial sector is crucial in these arrangements and more detail from the banking sector is expected imminently.
A copy of the Prime Minister's statement delivered in the evening of Sunday 29 March 2020 is available here.
More to follow as it comes to hand.
Swaab Property Team
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