On 14 May 2020, the South Australian Parliament passed legislation governing the Code of Conduct for Commercial Leases in South Australia. The Code sets out the parameters for landlords negotiating rent relief for COVID-19 impacted tenants.
The Code considers a landlord's ability to grant relief and honours all existing deals already agreed.
The proportionality principle, referred to in the Mandatory Code issued by the National Cabinet on 7 April 2020, does not appear in South Australia’s Code. This could hardly be described as a win for tenants!
Any rental repayment period will have a maximum period of 24 months, rather than the minimum 24 month period, as referred to in the Mandatory Code issued by the National Cabinet. Again, this could hardly be described as a win for tenants!
• A landlord’s ability to grant relief is a factor to be taken into consideration.
• A landlord will need to have regard to the revenue downturn and the provisions of the National Code generally, however, will not be required to give exact proportionate relief.
• A tenant must be able to establish that it is suffering financial hardship as a result of the COVID-19 pandemic.
• Any rent repayment period will have a maximum of 24 months, rather than the minimum 24 month period (as referred to in the Mandatory Code issued by the National Cabinet on 7 April 2020).
• The regulations cover the six-month ‘prescribed period’ from 30 March 2020 to 30 September 2020.
• If parties to a commercial lease have already agreed to rent relief, this will not be affected as it operates during the designated period (30 March 2020 to the day the regulations come into operation).
• An ‘affected lessee’ must have an annual turnover of less than $50 million, so subsidiary companies of larger corporate entities may not qualify for relief.
• Whilst the reduction in turnover of the business of a lessee is a factor to be taken into consideration, the concept of 'proportionality' is not present in the Regulations.
• Where there is a dispute, a party may seek mediation by the Small Business Commissioner and then proceed to the Magistrates Court for a determination if this fails.