Extension of COVID-19 Relief for Commercial Leases

Extension of COVID-19 Relief for Commercial Leases

Following the recent announcement by Victorian Treasurer Tim Pallas that the relief provisions for commercial leases in that state will no longer cease next month but will rather continue until the end of the year, local focus has turned to the WA’s Labor Government and their plans for our state which has so far avoided the second wave that has devastated Victoria.

There are many in the industry who fear our state Attorney General, John Quigley will extend the high contentious and ambiguous Commercial Tenancies (COVID-19 Response) Act 2020 past its current expiry at the end of September.

According to a report by Deloitte Access Economics, the relief provided by landlords for the initial April to September 2020 period is likely to equate to approximately $6.8 billion across Australia.  To put that figure into perspective, it equates to 15% of the $45 billion state and territory governments have committed.  The report goes on the say that if relief is extended to March next year in line with the JobKeeper extensions, this figure will increase to $14.9 billion.

Property Council chief executive Ken Morrison said no other sector of the Australian economy has disproportionately shouldered the cost of recovery. “No other sector of the Australian economy has faced a similar demand to waive legally incurred obligations. By contrast, the only other sector asked to assist through this time, the banking sector, has provided loan deferrals to SME businesses, but not loan waivers or interest free periods,” Mr Morrison said.

“While the code may have been justified during the extraordinary time in which it was conceived, it involves one part of the business community, many of them small owners, being legally obligated to give money to another part of the business community,” he added.

Mr Morrison said if the intention of the commercial leasing code was to support small to medium sized businesses through the lockdowns, governments must give equal weight to the interests of SME property owners and investors who have been hit hardest by the mandating of rent waivers and reductions.

He added that commercial property owners are not just major listed real estate investment trusts and institutional investors, many are mid-tier and small private groups including self-managed super funds (SMSFs) and ‘mum and dad’ investors.

“The sanctity of the lease covenant has been a fundamental tenet of the Australian legal system and its primacy should be restored as soon as reasonably practicable to restore confidence in the market.”

“The code is unlike any government measure enacted on one sector of the economy in modern Australian history. No other advanced economies around the world have made a single sector disproportionately shoulder the cost of recovery.”

Recent years have seen a substantial decline in rents across all classes of commercial property in WA and we can only hope that our state government has the good sense to realise that commercial landlords have well and truly done their bit to help Australia through these difficult times and any further support required for the small business community beyond September should come from the government itself, not the small commercial landlord.

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