Commercial lease changes out of the blue! - Viranda Holdings LTD

The Government’s proposed amendments to the Property Law Act to insert a clause into commercial leases around rent relief are being met with criticism from all camps – tenants, landlords and property specialists.

As a property owner (or tenant) you may have been reading the news articles around this issue and feel uncertain if it will affect your circumstances and the agreements reached to date around fair rent proportions. We can confirm it will not apply to the majority of our clients’ leases and it is unlikely to supersede historic agreements or arrangements met.

The Covid-19 Response Legislation Bill is designed to ease the impact of Covid-19 restrictions on commercial tenancies and will legislate one solution across all commercial property contracts. If the Bill gets passed, it will in effect apply clause 27.5 into leases that do not currently have it. This clause allows for a ‘fair’ level of rent reductions to be set (in scenarios such as a pandemic). Yet the legislation is ambiguous and risks taking away the spirit of sound relationships and the ability to work through the issues against the unique intricacies of every lease – for example, what might be critical for the retail or hospitality sector might be unnecessary for other sectors.

Just as dangerously, while the Government’s intent might be on helping smaller companies facing hardship, many companies who are performing very well (despite the pandemic) could still seek a hand out.

Our final gripe is that it will open up more legal work where landlords and tenants are unable to come to an agreement about what a ‘fair’ proportion of rent looks like. Match that with the lack of forewarning or consultation of this proposal and it feels like a frustrating concept to land on a property owner’s lap.

Rest assured, if we feel concerned about this legislation having an impact on your lease arrangements, we will take a proactive approach and discuss the situation with you. In the main, we have successfully worked through rent discussions and arrived at workable solutions for all parties.

If you have any further questions, please reach out – we are happy to help.