News - A nervous wait for Tenants and Landlords

Many of our clients and tenants nationwide await the implementation of the model rules for tenants that are intended to provide relief to families and businesses which experience hardship during the next 6 months due to COVID-19.  Likewise, a large proportion of landlords are anxiously standing by to find out the impact upon them of the further relief measures. 

Many commercial and retail tenants are presently trying to negotiate with landlords to retain or exit premises at a reduced amount or at no cost.  Amendments to leases can be effected by a deed of variation to lease, executed by the parties.  However, in the circumstances, the parties may wish to wait for the implementation of the model rules before making any concrete decisions about the future.  Hardship relief for loan commitments is being offered by banks.

Alternatively, it may be beneficial for tenants to seek advice regarding frustration (in the legal sense!) and explore whether any force majeure clause in their lease/s can be relied upon.  Given the drastic changes in recent days including border closures, force majeure clauses and frustration may apply. 

The nation already experienced the devastating impact of the Australian bushfires earlier this year, which had a significant effect on the tourism industry, particularly in regional areas like Cairns.  This was felt during a time which included the off-peak season, hitting businesses hard.  On the back of this and before a resurgence of activity expected due to Easter and school holidays, the same businesses and their employees have been shell-shocked by the recent turn of events due to coronavirus.  Some tenants have already gone out of business, leaving premises in financial distress and employees have lost their jobs (currently in the tens of thousands).  Landlords are faced with the difficult decision as to whether to pursue their legal rights, and former employees are wondering about the future and how they will make ends meet, despite the doubled job seeker income payment.   

State and Territory leaders and Scott Morrison are scheduled to discuss the model rules on Tuesday, the 31st of March 2020.  Other considerations are also being discussed, such as land tax and further cooperation from banks.

Should you require any legal assistance, we are here to help.

Written by Kim Cousins, Associate, Commercial Law Division