Clarity sought for commercial landlords and SME tenants

Virginia Briggs, managing partner for infrastructure, construction and property at MinterEllison, noted that 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, she noted.

“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,” Ms Briggs said.

While the code aims to balance the interests of landlords and tenants, Ms Briggs said each state and territory has been tasked to legislate as appropriate, creating uncertainty as regulations are applied in slightly different ways. 

The ambiguity, Ms Briggs said, creates complications for landlords who either have operations in multiple states or who negotiate agreements with tenants whose leasing footprint spans multiple jurisdictions.

“The code allows for protections to apply during the pandemic period and recovery, 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,” she said.

In conclusion, 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.

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