Concern experienced by commercial landlords and their SME tenants who operate in more than one jurisdiction in Australia over the Federal Government’s Mandatory Code of Conduct (the Code), to deal with COVID-19 related hardship suffered by tenants, will be alleviated by a new Code of Conduct compendium published today by MinterEllison.
The compendium explains how the Code is applied by each State and Territory Government and offers guidance for landlords and tenants in each jurisdiction to assist them in navigating these differences. The compendium will be updated as any remaining jurisdictions move to pass regulations dealing with the Code.
The disruption faced by landlords and tenants has impacted their commercial leases, affecting offices, retail and logistics. The Federal Government responded with a Mandatory Code of Conduct, outlining a set of good faith leasing principles to support negotiations between landlords and their tenants.
“We believe landlords are genuinely trying to apply a spirit of good faith approach and look after their SME tenants but they are challenged by complexities that arise due to the differences in how the various states and territories have separately legislated the Code,” said Virginia Briggs, Managing Partner for infrastructure, construction and property at MinterEllison.
While the Code aims to balance the interests of landlords and tenants, each State and Territory has been tasked to legislate as appropriate. This scenario has resulted in uncertainty across the industry as each State and Territory applies regulations in slightly different ways. This ambiguity creates complications for landlords who either have operations in multiple states or who negotiate agreements with tenants whose leasing footprint spans multiple jurisdictions.
The most obvious differences appear upfront in the various regulations, namely the duration of the regulations in each State and Territory. “The Code allows for protections to apply during the pandemic period and recovery,” Ms Briggs noted, “but the recovery period has not been defined by the Federal Government and the pandemic period and any recovery period has been inconsistently applied by the States/Territories.”
There are also differences in eligibility for protection under the Code in the way that SME's are defined, differences in the way the Code is imported and applied and considerable practical differences in the way in which negotiations between the parties are to occur.
MinterEllison hopes the compendium will assist landlords and tenants navigate their position in the spirit in which the Code was introduced. “The pathway through uncertainty is mutual trust between the parties and a focus on good-faith principles,” said Ms Briggs.
