The economic impact of COVID-19 is hitting hard. If your business has been impacted, or you cannot access your premises, it is likely you will need to seek a rent reduction or even a rent suspension for your lease. Most landlords are willing to negotiate, but what do you do if your landlord refuses to? This article outlines your options, including the Federal Government’s new rent relief Code of Conduct.
Follow Your State’s Lease Updates
The Federal Government announced a mandatory national Code of Conduct (the Code) for commercial leases. The Code now requires landlords to enter into negotiations in good faith with tenants and work with them to reach suitable arrangements. It will apply to businesses who are eligible for the JobKeeper program and have a turnover of less than $50 million. States and territories are legislating the Code.
Under the Code, landlords are prohibited from:
- evicting tenants;
- calling on your security (ie. your bank guarantee, security deposit or personal guarantee);
- charging interest or fees on missed rent payments or deferred rent; or
- increasing the rent (except where the rent is based on turnover).
Landlords are required to provide rent reductions to tenants in the form of waivers and deferrals, with waivers making up at least 50% of the total rent reduction. It is important to note that rent reductions will be proportionate to the percentage decrease in your trade.
If you are an eligible business, it is likely you will be able to use this as a strong starting point for negotiations.
Keep Lines of Communication Open and Make a Commercial Offer
It is important to keep the lines of communication between you and the landlord open. Try to persist with negotiations with the landlord. In an email, clearly set out:
- what you are asking from the landlord;
- your ability to pay the rent; and
- the time period for which your ability will be impacted.
Be reasonable in your requests to the landlord, as the code requires proportionality. If you are not in a position to make a commercial offer to the landlord, you could offer your security deposit or bank guarantee as payment. Alternatively, if you are having issues with your lease (ie. damage to the premises the landlord is supposed to be repairing), use this as leverage to negotiate.
Continue reading this article below the formFind Other Tenants For The Lease
It is a good idea to talk to other tenants in your building. If the landlord is refusing to negotiate with you, it is likely they are refusing to negotiate with the other tenant in the building. Speaking to other tenants and working with them to negotiate as a team can be a very effective way to get the landlord to negotiate.
Keep Meeting your Lease Obligations
Where you can, it is essential that you continue to meet your obligations under the lease including paying your rent. Continuing to pay your rent will also help to foster good relations between you and the landlord.
If All Else Fails
If you have:
- been in contact with the landlord and they are refusing to negotiate; or,
- if you cannot get in contact with your landlord at all,
it may be time to involve a lawyer. A lawyer can help you draft a formal letter requesting a reduction or suspension of your rent. A lawyer will also be able to review your lease if needed to look for any provisions which may help you abate your rent or terminate your lease.
Key Takeaways
If your landlord will not negotiate your lease, it is important to consider the following:
- the new, national Code of Conduct requires landlords to negotiate;
- follow your state’s leasing updates;
- keep lines of communication open;
- make a commercial offer or leverage any existing issue with the lease;
- contact other tenants in the building and negotiate as a team;
- keep meeting your lease obligations; and
- if all else fails, contact a lawyer.
If you need assistance with negotiating your lease, our experienced COVID-19 legal team can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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