Government reveals more details on rent relief measures
Prime Minister Scott Morrison has revealed further details around the provision of rent relief to commercial tenants as the SMSF industry seeks further clarity on the issue.
In a media briefing in Canberra on Friday, Mr Morrison said the national cabinet has been working on an industry code of practice for commercial tenancies.
However, Mr Morrison said that the code has not got to the point the national cabinet believes it needs to be to ensure a sufficient security for tenants and landlords that are affected by these arrangements.
“What we are seeking to have happen is for the industry to complete their code, and that code will be made a mandatory code incorporated into state and territory legislation where appropriate, where it will be mandatory for tenancies — that is, the tenant and the landlord where they have a turnover of less than $50 million and they are a participant in the JobKeeper program,” Mr Morrison said.
Commercial tenants need to have demonstrated at least a 30 per cent loss of revenue as a result of COVID-19 in order to be eligible for the government’s JobKeeper program.
Under those arrangements, Mr Morrison said states would also be looking to provide various exemptions and waivers and reductions to some of the fees and rates.
Mr Morrison said the national cabinet will further consider the details around the industry code on Tuesday morning at the latest and, if it’s able to reach an arrangement before then, it would convene to make the code possible.
Industry code built on ‘proportionality’ and ‘good faith’
Mr Morrison said an important part of the industry code would be that both the landlord and tenant negotiate in good faith and that it adheres to a “proportionality principle” whereby the turnover reduction of the tenant needs to be reflected in the rental waiver of the landlord.
He also said how that agreement is reached inside the lease is up to the landlord and the tenant.
“If, for example, there was a three- or six-month rental waiver because a tenant would’ve had to close their doors and there’s simply no money coming in, then one way to achieve that is to extend the overall lease by six months on the other side if they’re going to give a rental waiver,” Mr Morrison said.
“Similarly, they could agree to a different level of rent over the entire term of the lease, and that was shared over a longer period of time.
“These are things which we do not wish to be prescriptive about. What we want to do is have landlords and tenants in the room to ensure that they can work these issues out between them so they can have an arrangement which enables them to get through this period and to get to the other side.”
Mr Morrison also said that the banks will need to “come to the party as well”. He recognised that while banks are not parties to the landlord/tenant arrangements, making it legally more difficult, he added that banks are already moving to providing new facilities and arrangements to their customers and would expect banks to be very supportive of the agreements reached by landlords and tenants who have already been working under the mandatory code proposed by the national cabinet.
“We would like, as a national cabinet, for this to be done by industry and for them to finalise a code with this proportionality principle as quickly as possible so we can move to have that adopted into state and territory regulation as a matter of a mandatory arrangement,” Mr Morrison said.
“If you’re in that arrangement, which you would be required to enter into if you’re in the terms that I said, then you would have that protection of issues around evictions. You would have the protections around claims on penalties or acting on guarantees of interest protection on rent or all of these matters. You would be protected.
“Also, the landlord would be protected in that the lease would not be able to be terminated on those grounds, so there’s give and take on this.
“Those tenants and landlords are being encourage to sit around that table and get that done now. The mandatory code would require it, and if you sit outside the mandatory code, then you’re leaving yourselves out in the cold.”
Adrian Flores is the deputy editor of SMSF Adviser. Before that, he was the features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.