Leasing

A hotline has been set up for clients to contact us and talk through the challenges you may be facing. If you are in a financial bind, we will provide some initial guidance in relation to credit & finance, supply chain, insurance, restructuring, real estate and construction related matters so together we can work out what your best options are. The number is (02) 8281 7980. You can also visit our online COVID-19 resource page.

 

3 April 2020 - Melissa Potter, Kristie Carlile and Julia Yassa

Can the terms of your lease assist you in these uncertain times?

 

2 April 2020 - Melissa Potter, Kristie Carlile and Julia Yassa

Moratorium on evictions under both commercial and residential leases

 

31 March 2020 - Craig Munter

Moratorium on Evicting Tenants   

The Prime Minister has announced that States and Territories will be implementing a moratorium on the eviction of commercial and residential tenants who are unable to pay their rental as a result of the COVID-19 crisis.

The National Cabinet has agreed on a common set of principals as follows:

  1. A short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to COVID-19.

  2. Tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease.

  3. The ability for tenants to terminate leases and / or seek mediation and / or conciliation on the grounds of financial distress.

  4. Commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by COVID-19.

  5. Landlords and tenants not significantly affected by COVID-19 are expected to honour their lease and rental agreements.

  6. 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.

Further details of the moratorium and key principals have not yet been released but it is expected that it will be in place for the next six months.

The Government has stressed that renters, landlords and banks must try and negotiate ways to survive the pandemic.

The Banking Sector to Assist

The financial sector has a key role to play in implementing these proposals. The Australian Banking Association has released a statement confirming that banks propose to help commercial landlords who help tenants through COVID-19 specifically by:

  1. Enabling businesses with total business loan facilities of up to $10 million (up from the $3 million small business threshold) to defer repayments for loans attached to their business for six months; and

  2. Agreeing that during this period, banks will not enforce business loans for non-financial breaches of the loan contract (such as changes in valuations).

These new measures will apply in all sectors of the economy, on an opt-in basis, on condition that:

  1. for commercial property landlords, they provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears as a result of COVID-19;

  2. the customer has advised that its business is affected by COVID-19;

  3. the customer was current in terms of existing facilities 90 days prior to applying; and

  4. interest is capitalised – meaning either the term of the loan is extended or payments are increased after the deferral period.

The measures are subject to authorisation from the Australian Competition and Consumer Commission and have not yet commenced.

What should Tenant’s Do?

  • Start discussions with your Landlord as soon as possible.

  • Let them know the issues you are facing and the impact of COVID-19 on your business.

  • Present a plan for their consideration supported by financial data.

What should Landlord’s do?

  • Start discussions with your Tenants as soon as possible.

  • Consider how lease arrangements, existing incentives, term and options may be able to be restructured to provide some immediate relief.

  • Contact your bank and find out what assistance is available.

  • Review existing loan facilities and determine eligibility for the proposed schemes of assistance. What do you need to do to take up these offers?

There are numerous complex issues arising from these proposed changes. We will provide further information once the details of the moratorium have been released.

 

20 March 2020 - Craig Munter

The COVID-19 crisis is rapidly evolving and its impact on business is likely to be catastrophic.

An interrupted supply chain, depleted work force, inability for some businesses to operate remotely and decline in consumer demand are already affecting many businesses throughout Australia.

The ability to continue to meet commercial contractual obligations is going to become increasingly difficult and this is going to have an impact on both tenants and their landlords.

For Tenants

  • Failure to pay rent and outgoings on time may give landlords an immediate right to terminate the lease.

  • Force majeure clauses will need to be reviewed carefully to determine whether or not they can provide relief for tenants, although most clauses would not extend to events such as a pandemic.

  • If a tenant is prevented from occupying premises due to a forced closure as a result of COVID-19 do they have rights under quiet enjoyment or damage and destruction provisions to seek relief from paying rent whilst they cannot occupy the premises?

For Landlords

  • Terminating the lease may not be the best option. In such uncertain times, will a landlord be able to find a suitable tenant willing to take on a new lease?

  • Consideration will need to be made as to whether some payment terms can be entered into to assist tenants during this period of uncertainty.

  • What impact will all of this have on landlords own obligations with their mortgagees? Vacancies could trigger review rights under existing funding facilities.

What should you do?

We strongly recommend that both landlords and tenants start discussions now to explore what can be done to reduce the impact on their respective businesses.

Some things to consider:

  • Can incentive arrangements be re-arranged to provide more rent relief up front?

  • Can security deposits / bank guarantees be drawn down now to make rental payments until such time as business conditions improve?

  • Perhaps this might be an opportunity for a landlord to take back space that it might have earmarked for other purposes?    

There are many challenges ahead and each case will need to be considered in light of its own particular circumstances.

The property team at Bartier Perry have significant experience in commercial leasing and are ready to assist any clients that may need help navigating these difficult times.