Leasing codes back as battle lines drawn between retailers and landlords

Lockdowns are ripping through the retail sector and the NSW has joined Victoria in mandating relief from landlords.

An empty shopping carpark during a lockdown. Picture: Paula Thompson

Struggling retailers have been thrown a lifeline by the NSW government, which has extended the Morrison government’s leasing code as the state’s lockdowns drag on till later this year.

The move follows the Victorian government bringing in protections for tenants last month as landlords take a hard line on requests clemency in recent lockdowns.

The fallout from Covid-19 restrictions that have led to scenes of deserted malls have put already stressed tenants under pressure. But landlords want to avoid granting relief to large chains they believe performed well at the same time they are dealing with department stores exiting space and other tenants cutting back expansions.

Mid-size tenants have felt the heat as landlords have rejected their pleas for clemency, leasing agents told The Weekend Australian.

The NSW government on Friday said it would extend the leasing code that national cabinet announced in 2020, which saw landlords grant rebates in line with the fall off in turnover.

The move, which followed Victoria also protecting tenants hit by lockdowns, will hit large listed landlords like Scentre, owner of the local Westfield empire, and Vicinity Centres, which half owns Chadstone.

The NSW government said it was reintroducing the national cabinet‘s code to mandate rent relief for eligible tenants impacted by Covid-19. It also unveiled a $40m hardship fund to provide a monthly grant of up to $3000 for small commercial or retail landlords who provide rental waivers.

NSW Minister for Finance and Small Business Damien Tudehope said the rules would be extended until January 13, providing protection for small businesses such as cafes, restaurants, hair salons and gyms for six months.

“We have always encouraged landlords and tenants to come to the table and negotiate, but now we are going one step further by mandating the minimum relief that landlords need to provide impacted tenants,” Mr Tudehope said.

The move comes after pressure from retailers for relief as some considered closing permanently, despite plans for an economic reopening once vaccination rates rise.

Mr Tudehope said for many small businesses rent was one of the biggest fixed costs and urged landlords to again work with tenants.

“The government has not taken this step lightly but we saw last year that the framework set down by the national cabinet brought tenants and landlords to the table to work out a way forward,“ he said.

Dubbed the Morrison code, it requires landlords to provide rent relief in proportion with their tenant’s decline in turnover. Of the rent relief provided, at least 50 per cent must be in the form a waiver, and the balance a deferral.

The rules apply to commercial and retail tenants with a turnover of up to $50m who qualify for the Covid-19 Microbusiness grant, Covid-19 Business Grant or JobSaver Payment.

Evictions and lock outs are prohibited in most cases and commercial landowners can apply rebate of their land-tax liability.

Property agents say that landlords and tenants are at loggerheads and the code may be inadequate to resolve their differences, particularly at the small to medium enterprise end.

Industry body the Property Council of Australia expressed concern about the move to reintroduce mandated rent waivers.

NSW executive director Luke Achterstraat said large owners across NSW were demonstrating support above and beyond the requirements of the code.

“This one-size-fits-all intervention is a blanket approach in a challenging time when targeted support for those in genuine need is better suited. Government intervention in contracts not only risks the existing commercial relationships, but it also harms the potential for the economic recovery of the state on the back of this lockdown,” he said.