The COVID-19 pandemic has caused a substantial decline in turnover for businesses, including those in Sydney. Many businesses have been compelled to close their doors temporarily, exacerbating the issue of tenants struggling to fulfil their commercial rent obligations. This financial predicament has created a ripple effect, impacting landlords who depend on rental income to meet their own mortgage commitments. Accountants in Sydney can provide valuable assistance in navigating these challenging circumstances.
- Leases must not be terminated due to non-payment of rent during COVID-19.
- SME tenants must continue to abide by the substantive terms of their lease (subject to amendments under the Code). Otherwise, they risk forfeiting any protections provided to them under the Code.
- Landlords must offer SME tenants reductions in their rent through waivers or deferrals of up to 100% in line with the decrease the tenant has experienced in their trading for COVID-19 and a reasonable recovery period afterwards.
- Rental waivers must constitute no less than 50% of the total reduction in rent payable over the COVID-19 period, with a more significant proportion in cases where failure to do so may compromise the tenant’s capacity to fulfil their ongoing obligations under the lease agreement. Regarding whether landlords have the financial ability to allow such additional waivers must also be had. Tenants, by agreement, may waive the 50% minimum rent waiver requirement.
- If a rent deferral is agreed to, the deferral must be amortised over the balance of the lease term or for a term of no less than 24 months, whichever is greater (unless otherwise agreed by both parties)
- Landlords should seek to share any benefit, in a proportionate manner, that they receive from any deferred loan repayments.
- They should also look to pass on savings to the tenants on land tax or council rate decreases received.
- Landlords should not draw on tenants’ security during COVID-19 and a reasonable recovery period afterwards.
- The tenant should be allowed to extend the lease terms in the recovery period after COVID-19, even if receiving a rent waiver or deferral.
- Landlords are to agree to a freeze on rent increases during the COVID-19 period and recovery period, notwithstanding any previous arrangements between the landlord and tenant.
- Landlords are not to impose penalties if the tenant reduces opening hours or ceases trading during COVID-19.
- No fees, charges or interest are to be charged by the landlord on rent waived or deferred.
- There will be a need to provide sufficient and accurate financial information and evidence of eligibility for the JobKeeper programme to help confirm your entitlement as a tenant for such waivers and deferrals.