What a relief – WA’s COVID-19 Code of Conduct is finally released
April 19, 2023
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In my previous article, ‘New Laws Supporting Tenancies Through COVID-19’, I explored the provisions of the then proposed Residential Tenancies (COVID-19 Response) Bill 2020 and Commercial Tenancies (COVID-19 Response) Bill 2020. These bills have since been passed as the Residential Tenancies (COVID-19 Response) Act 2020 and Commercial Tenancies (COVID-19 Response) Act 2020 respectively.
The Commercial Tenancies (COVID-19 Response) Act 2020
enabled the government to prescribe a code of conduct to ensure negotiations between landlords and tenants are carried out in good faith so agreements can be reached on temporary changes to small commercial leases during the moratorium period.
After much anticipation, today (29 May 2020) the government has released WA’s code of conduct (“Code”) under Schedule 1 of the Commercial Tenancies (COVID-19 Response) Regulation 2020.
What are the overarching obligations of landlords and tenants under the Code?
In negotiations for the purposes of the Code, landlords and tenants must:
- Cooperate;
- Act reasonably and in good faith;
- Act in an open, honest and transparent manner;
- Provide each other with sufficient and accurate information that is reasonable for them to provide in the circumstances for the purposes of negotiations; and
- Not make onerous demands for information from each other.
Who does the Code apply to?
The Code applies to eligible tenants with:
- an annual turnover in the financial year ending 30 June 2019 of less than $50 million; and
- which qualify for the JobKeeper scheme or have experienced a decline in turnover of 30 per cent or more during the emergency period (30 March 2020 to 29 September 2020).
What does this mean for tenants?
The Code outlines a process for tenants to request rent relief from landlords. The request must be in writing and be accompanied by the following:
- a statement by the tenant that:
1) the tenant’s lease is a small commercial lease; and
2) the tenant is an eligible tenant in relation to the small commercial lease; - sufficient and accurate information that evidences that the tenant is an eligible tenant in relation to the small commercial lease; and
- sufficient and accurate information that evidences the reduction in the tenant’s turnover that:
- is associated with the business conducted at the land or premises that are subject of the small commercial lease; and
- the tenant has experienced during the emergency period.
What does this mean for landlords?
Landlords are required to respond within 14 days of receiving a request for rent relief with an offer of rent relief. The following principles are to be taken into account when determining the offer of rent relief (unless the landlord and tenant agree otherwise in writing):
- an offer of rent relief must apply to the emergency period;
- the offer of rent relief must be at least proportionate to the reduction in the tenant’s turnover that is associated with the business conducted at the land or premises that are the subject of the small commercial lease and the tenant has experienced during the emergency period; and
- not less than 50% of the rent relief is to be in the form of a waiver of rent, unless the landlord has the financial capacity to provide more than 50% and the tenant’s capacity to fulfil the tenant’s ongoing obligations under the small commercial lease would be compromised otherwise then more than 50% of the rent relief is to be in the form of a waiver of rent.
When will deferred payments be due?
Unless otherwise agreed between the parties, any deferred rental amount must be repaid in equal installments over the greater of:
- The balance of the lease term; or
- A period of not less than 24 months.
Tenants should be given the opportunity to extend their leases for an equivalent period of the rent waiver and/or deferral period, unless the extension would be inconsistent with any written agreement or contract, such as any head lease.
What if an agreement cannot be reached?
If an agreement cannot be reached under the Code, the Small Business Commissioner can mediate or conciliate. If disputes cannot be resolved through conciliation, they can be taken to the State Administrative Tribunal.
What should you do?
In light of the release of the Code, it is crucial that tenants and landlords know their rights and obligations prior to entering into negotiations for rental or other relief. We recommend parties seek advice as to the Code’s application to their specific circumstances before negotiating and agreeing to revised lease terms.
If you would like further information or assistance in relation to the above, please contact us on (08) 9321 5451 or by email at danielle@bailiwicklegal.com.au.
By Danielle Williams (Solicitor)
The above information is a summary and overview of the matters discussed. This publication does not constitute legal advice and you should seek legal or other professional advice before acting or relying on any of the content.
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