More than 1,000 people tuned in for the Property Council’s livestream event on Friday as three leaders from MinterEllison, AMP Capital and Primewest shared their insights into the commercial leasing code.
The National Cabinet's mandatory code of conduct for commercial tenancies, released on 7 April, outlines a set of good faith leasing principles for negotiations between landlords and tenants.
“Our experience at Minters is that landlords are genuinely trying to look after their SME tenants in that spirit of good faith,” said Virginia Briggs, managing partner for infrastructure, construction and property at MinterEllison.
But the devil is always in the detail. While the code introduced consistent principles, Briggs pointed to the “complexities that arise from a practical perspective”, especially as each state and territory must “separately legislate”.
For example, the code provides for a range of rent relief measures for tenants that meet eligibility criteria for the JobKeeper program, have an annual turnover of less than $50 million and have experienced a revenue loss of 30 per cent or more. In New South Wales, tenants only need to qualify for Job Keeper, “but in Victoria they need to be participating,” Briggs explained.
AMP Capital had received more than 350 “expressions of interest” from tenants, said managing director for office and logistics, Luke Briscoe. “We are receiving a number of requests from tenants that would not normally qualify,” Briscoe said, adding later that, of the 350 requests, “less than 10 have formally put in the paperwork”.
Briscoe agreed that the code had given negotiations “more structure – which is a positive”.
“Customers understand that fundamentally we are providing a non-recourse loan and we need to understand if the tenant is eligible.”
AMP had established a tenancy review committee to assess each request to ensure “consistency across the portfolio”. An independent third-party review was also being undertaken to “ensure when this is all over we’ve done the right thing” by all parties, including investors. “It’s not as simple as landlords with big deep pockets,” Briscoe said.
Primewest had also received an “avalanche of requests” in April, according to the company’s executive chairman John Bond. Primewest approached the negotiations with good faith “the overarching principle”. Some requests “weren't justified and when faced with paperwork requirements the requests disappeared,” Bon said.
Primewest has offered smaller tenants “free accounting advice to ensure they are seeking all the relief from government they can before they come to us,” Bond added. Banks are “doing a nice job of deferring, but there's no waiving”. This left landlords “caught in the middle”.
But Primewest had long-term partnerships with its tenants and mediation would not be required. “We expect to sit down with access to all information and come to a successful decision, and that has happened,” Bond said.
AMP Capital’s Briscoe was also upbeat. “We can now see what's ahead of us – and it’s probably not as bad as people thought on day one,” Briscoe said.
“We can get through this. As the prime minister says, we will share this pain. But it's not a catastrophic situation.”
The Property Academy’s On Demand series on the Code of Conduct for commercial leases has been launched this week. Legal experts from MinterEllison dissect the detail to help participants understand the impact as it applies to state tenancies. New South Wales and Victorian videos are available now, with all other states and territories to follow. Book today and for a limited time save 20 per cent with the code: EOFY2020.