(Covid 19) Leasing Package for Landlords

 

The National Cabinet Mandatory Code Of Conduct came into effect on 7 April 2020.  Landlords and tenants are being asked to come to their own agreement regarding rent and shutdowns due to the coronavirus. There is no established law governing payment of rent during the current economic shutdowns. Evictions have been outlawed for the time being, and payment of rent is a matter of negotiation between landlord and tenant on a case by case basis. Commercial leases do not normally have abatement clauses that allow rent to be suspended in the event of a pandemic. So how do you respond to a tenant who approaches you for a rent reduction? What happens once you have negotiated an arrangement with your tenant? The agreement should be put in writing for two reasons:

  1. Landlords will want to record precisely when rent payments can be suspended, to what extent and when they may be resumed. Some landlords will allow rent to be waived entirely, granting the tenant a rent free period. Others will simply allow the rent to accumulate and go unpaid for a period, with the back rent to be paid back eventually.
  2. The tenant wants to be sure that they will not be held to be in breach of their lease if they suspend payment of rent. The government’s Mandatory Code Of Conduct will eventually expire. Once this occurs, tenants may be evicted or locked out immediately if they fall behind in their rent as was the case before the coroavirus. Being behind two weeks in your rent is normally enough for a commercial tenant to be locked out in New South Wales. A written agreement that the landlord will not do this gives the tenant some comfort that they will have time to get themselves up to date in payment of rent.

Any rent concessions should be documented precisely to protect both the landlord and the tenant. Further, they should be done in the form of a Deed. Legislation governing real estate says that agreements concerning real estate must be in the form of a deed in order to be binding. Most of the arrangements being put in place as the result of the coronavirus are temporary. Any agreement should specify that once conditions return to normal the original terms of the lease are resumed.

We have created a precedent set that gives you precedents for a letter to send to the tenant and one to the landlord to begin negotiation. A precedent Deed for the Temporary Variation of a Lease is included for recording agreements in writing. A concise Practice Guide and a copy of the code is also included.

(Covid 19) Leasing Package for Landlords  Practice Guide will answer such questions as:

What is the difference between a waiver and a deferral?

What rules apply to deferrals and waivers which one should I implement?

What rules apply to deferrals and waivers and when should I implement?

Must a tenant still pay outgoings?

Outgoings must be paid unless a tenant is unable to trade.

What happens if a landlord and tenant cannot agree?

When do these obligations start and when do they finish?

 

(Covid 19) Leasing Package for Landlords

Author:  Kalde Legal

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