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National Cabinet Mandatory Code of Conduct (Code) for Commercial Tenants and Landlords released on 7 April, 2020

How can we assist you?

The Code for Commercial Tenants and Landlords released on April 7th by the National Cabinet contains complex provisions that if not properly understood by you, could lead to an outcome for you that is sub-optimal and which could penalise your business financially for many months to come.

In this article we have provided a summary of the main provisions contained within the Code however, we encourage you to seek assistance. Our Commercial Leasing Team is ready to assist you to negotiate with your Landlord/Tenant.

Recommendations

If you are unsure of your rights and obligations as an eligible Tenant or a Landlord during this period of uncertainty, please take a moment to consider the points below as well as read the  Code to ensure you understand the full extent of your entitlements and obligations under the Code as well as your lease during this period.

If you engage us we can guide you through the Code and your negotiations including documenting any arrangements you make.  We can explain the application of the Code to you and assist you in formulating a negotiation position.
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Code of Conduct for Commercial Tenancies – Released

By Anica Cunanan, Law Clerk at Matthews Folbigg Lawyers

Undeniably, the financial impact of COVID-19 has triggered a myriad of changes to the laws. The National Cabinet has released a mandatory Code of Conduct in relation to the commercial property sector. This sets out the principles to be applied to adjustments to rent during the COVID-19 pandemic.

The Code is based upon a series of good faith principles to be applied to commercial tenancies during this unprecedented time. It will apply to those tenants who are eligible for the JobKeeper programme, with annual turnover of up to $50 million (“SME Tenants”).

The Code of Conduct includes the following:

  • Landlords should not terminate due to non-payment of rent during the COVID-19 pandemic period;
  • Proportionality to rent reductions based on the tenant’s decline of turnover;
  • ‘Tailored’ and ‘bespoke’ solutions to be negotiates between landlords and SME Tenants; and
  • A mix of at least 50% waivers and the balance of deferrals in respect of rent obligations.
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COVID-19: Critical Matters for Commercial & Retail Tenants and Landlords

COVID-19: Critical Matters for Commercial & Retail Tenants and Landlords

New Laws

The NSW Government now has the power to set new rules for retail landlords and tenants, the details of which will be known in coming days.

Although the new laws (currently) only relate to retail leases, nevertheless there are substantial challenges for both commercial and retail tenants and landlords to consider as set out below arising from the COVID-19 situation.

What is expected?

For retail tenants and landlords it is expected that the new laws will address such matters as evictions, bank guarantees/bonds, tenant defaults, rent abatements, and mandatory/core trading hours.

Caution must therefore be exercised when purporting to rely upon a lease term as it may be modified or prohibited under the new regime.

What about force majeure and rent abatement clauses?

Contractual force majeure provisions (ie, events beyond the reasonable control of a party) and rent abatement clauses will have important significance and need to be carefully considered in terms of the rights, remedies and obligations they create for both landlords and tenants.
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COVID-19: Leases

For our property clients, these are challenging times and we are here to make sure that you receive appropriate support. We have outlined below an area of immediate concern which we encourage you to review and contact us if you require further advice.

Leases

We have already seen landlords and tenants suffering from the negative impact of Covid-19. Some tenants are not able to pay rent and have asked for a reduction/abatement and some landlords have had trouble keeping up with their mortgage and loan repayment.

It is a good time now to review your lease and/or loan agreement to understand your current position and what you can do to keep your business afloat (if you are a landlord) or to remain in your rental property (if you are a tenant).

Although all agreements should be considered on their own merit, there are generally helpful covenants in your leases or loan agreement that will offer relief during unexpected circumstances occurring through neither party’s fault.
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Obtaining access to a neighbouring property

If there is a close boundary between your property and your neighbour’s property, temporary access to your neighbour’s property may be required if you intend to carry out works to your property, such as renovations.

Obtaining access

If you and you neighbour agree to terms of access, it is beneficial for both parties to enter into a licence agreement to set out the terms of the access including, the length of time and any agreed compensation. However, if initial negotiations between yourself and your neighbour fail, you make need to seek a statutory order to permit access.

Access orders

Access orders are more appropriate if the access sought is temporary. In the event the access required is long term (for example a right of way) an easement may be more suitable. Under the Neighbouring Land Act 2000 (Act), the Local Court can grant an order permitting access for the purposes of carrying out work. Section 12 of the Act outlines the type of work and includes constructions, repairs, maintenance, alteration, renewal or demolitions of buildings.
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Tax Sting – Living/Moving Overseas

If you are living and conducting a business outside of Australia, you may still be liable to pay tax to the Australian Government if you are considered to be a “resident” for tax purposes.

Who is a Resident?

Essentially a “resident of Australia” or “resident” for the purposes of the Income Tax Assessment Act 1936 (1936 Act) is a person whose domicile is in Australia unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia.

What is a Permanent Place of Abode?

In the recent Federal Court of Australia decision of Harding v Commissioner of Taxation the concept of “permanent place of abode” was discussed at length.

The key features of that case were:

  • ✔ the appellant was an Australian citizen who had lived outside of Australia for 17 years of the previous 20 years (specifically in Bahrain to commute to his work in Saudi Arabia)
  • ✔ in the prior court decision, the primary judge:
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Purchasing off-the plan: is it the right way to go?

Purchasing off the plan

An off the plan contract refers to a contract for the sale of a residential lot (the subject lot) that has not been created at the time the contract is entered into. Essentially, a purchaser is buying a house or apartment before construction has finished. New laws set to commence on 1 December 2019 aim to provide stronger protection for purchasers in response to a number of concerns arising from recent off the plan developments. Whilst the process of buying a brand new property (as is the case with off the plan) can be exciting, it is prudent for purchasers to consider a number of matters and obtain legal advice before committing to the contract.

Contract terms and safeguards for purchaser

Firstly, purchasers should mindful that they are purchasing from a developer and that contracts (often lengthy), have been tailored to benefit the developer and protect their interests. For example, the contract may contain a clause permitting the developer to terminate the contract if a certain numbers of sales are reached. The clauses are often complex and lengthy making it harder to identify unfair contract terms.
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Changes to Property Transactions

IMPORTANT CHANGES TO PROPERTY TRANSACTIONS
The Conveyancing (Legislation) Amendment Act 2018 introduces changes that will provide better protection for purchasers buying property off the plan and more flexibility to those using electronic land contracts and deeds.

Off the plan Contracts:
An off the plan contract is used to sell a property such as a strata unit without its own separate title, given the property does not exist at the time contracts are exchanged.

Off the plan contracts can be beneficial to both property developers and purchasers. For property developers, finance is generally dependent on the percentage of lots that have been pre-sold.

For purchasers, these off the plan contracts are a popular way to enter the property market. This is because the construction and settlement periods can take years, providing extra time for buyers to save funds required for settlement.

However, due to the very nature of the transactions, off the plan purchasers are particularly vulnerable to the actions of developers. The new laws aim to address this vulnerability.
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