29 March 2020
*Update* – While not announcing any substantive changes to commercial leases, the Prime Minister in his briefing this evening strongly encouraged landlords and tenants to engage in constructive discussions about the lease and arrangements during this period.
26 March 2020
The global coronavirus pandemic is likely to severely impact all sectors of the economy. Still in the early stages of governmental responses, it is small to medium enterprises, and particularly those in hospitality and related industries, that are feeling the immediate effects.
One of the biggest issues these businesses face is their ability to meet their monthly rent costs during a period of limited (or no) income.
It is unclear what, if any, relief will be offered by state or federal government in relation to commercial or retail rent, and at this stage it appears that for many businesses to survive, they will need to come to a suitable arrangement with their landlord.
What is the solution to rental distress?
The national response to this crisis must be a communal one, and it is going to require all groups to work together to find solutions – whether that be through everyone observing social distancing, governments providing individual and business stimulus or businesses working together to find sensible solutions to this unprecedented climate.
Landlords have holding costs and interests and must protect their investments, but in many cases, it is likely that assisting an existing tenant to keep their business alive will result in a better commercial outcome than terminating the lease, pursuing guarantors and finding new tenants in an uncertain economy. With the recently announced changes to insolvency and bankruptcy processes, this choice becomes more stark.
Possible concessions that might be considered by landlords include temporary relief, rental reductions, moving to outgoings only arrangements, rent deferrals and other incentives.
What should tenants do?
Landlords should approach these matters on a case by case basis, having regard to their own circumstances and the tenants.
To assist landlords in making commercial and compassionate decisions, tenants should make polite and reasonable approaches to their landlords, and be prepared to provide supporting material about their requests – including financial statements, cashflow forecasts, operational information and comparative rental relief and information.
There may also be some other legal princples that may result in the termination of the lease – again this must be dealt with on a case by case basis, and may not be the commercial outcome that many tenants need.
How can Ballantyne Law Group help?
We are offering a reduced rate initial consultation of up to an hour to meet with (by video or teleconference) distressed tenants to provide preliminary advice and assistance with approaching and dealing with landlords on this issue. After the initial consultation, we can provide cost effective and fixed fee solutions depending on the circumstances of our client. Our reduced rate initial consultation by videconference or telephone is $250.00 plus GST.