A mandatory code of conduct will regulate the complex arrangements between commercial landlords and tenants affected by Covid-19, the prime minister said on Friday.
Scott Morrison said that National Cabinet is finalising the details of the code with stakeholder groups and the states and territories—who will shoulder most of the legislative and financial burden of its implementation—before Tuesday this week.
The code will be mandatory for tenancies that have a turnover of less than $50 million and meet the 30 per cent loss of revenue threshold.
It will prescribe a proportionality principle, which Scott Morrison said is “simply [t]hat the turnover reduction of the tenant needs to be reflected in the rental waiver of the landlord”.
“What is important as part of this code is that both parties negotiate in good faith,” Scott Morrison said on Friday.
“If you sit outside the mandatory code, you are leaving yourself out in the cold.”
It is expected the code will allow for the part-deferral and part-waiver of commercial rents.
The economic impact of Covid-19 has created a fraught state of affairs between tenants and their landlords as they look to renegotiate terms or terminate leases.
“It is clear that some tenants are just trying to ‘push the envelope’,” one asset manager said.
The code will not be prescriptive about the details of the lease, which will be a matter for negotiation in “good faith” between tenants and their landlords.
Property Council chief executive Ken Morrison said that meaningful relief on land tax and other costs incurred by commercial property owners is necessary.
“Commercial landlords build, manage and fund the property assets which support the Australian economy and are here for the long haul with their tenants,” Morrison said.
“Our industry will approach this task with good will and commensurate with its role as one of the pillars of the Australian economy.”
The property industry and lobby group has said it is “engaging closely” with the Commonwealth, state and territory governments to provide some certainty for landlords and tenants.