LEASE CODE DISASTER ON THE CARDS

THE Property Council of Australia has warned of a looming disaster if Australian governments extend the mandatory Code of Conduct for commercial leasing.

The code, imposed in the wake of the coronavirus pandemic, requires a landlord to grant rental reductions and suspends contractual rights to evict tenants according to lease agreements.

Property Council National President Stephen Conry said the current code, which expires soon, has provided $4 billion in rental relief to eligible tenants and $6.8bn once rent relief for non-eligible businesses was included.

“If this was extended for a further six months to March 2021, these costs would rise to $8.8bn and $14.9bn respectively, representing a fall in rental income of up to 17 per cent for landlords,” he said.

“You have large landlords who have obligations to their investors who earn their income from that investment and will be severely affected.

“Then you have smaller landlords who might be mum and dad superannuants or syndicates who rely on income and when a government dictates that revenue ceases or is severely reduced for a period the impact is massive.”

The National Cabinet’s mandatory Code of Conduct for commercial leasing was adopted by state and territory governments earlier this year to encourage good faith negotiations on rent reductions between landlords and tenants.

In particular, it required a landlords to grant a rent reduction equal to a tenant’s reduction in revenue if the tenant is a JobKeeper recipient with turnover below $50 million.

Mr Conry said an extension of the code was “grossly unfair” and would severely impact on the economy.

“You can’t have one sector subsidising another. Let market forces dictate responses,” he said. “It’s this government intervention that provides a lack of certainty for investors and the success of the market is based on certainty of income which is based on a lease agreement.”