As March 2020 began, it became obvious to a number of businesses that trouble was on the horizon. While seemingly reluctant at first, the Federal Government recognised the potentially huge impacts of the pandemic on businesses and introduced the JobKeeper scheme. It wasn’t perfect and some people simply missed out, but it did address a key issue for business owners and managers – how to retain their staff.
While the results of standing down staff would be incredibly detrimental to businesses, losing the premises from which the business trades and the calling of personal guarantees (which are widely given) could actually be fatal. If this occurred, the flow-on effect to employment (unemployment) would be significant and undo much of the good that came out of the JobKeeper scheme itself.
The realisation that the tens of thousands of landlord–tenant relationships across the country were about to dissolve came late to the National Cabinet and, after some earlier signaling, it released the long-worded National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 (commonly called “the Code”) on 7 April 2020. Without the usual government logos and user-friendly formatting, the Code looked more like a year 10 student’s project, complete with typos, iffy grammar and a pretty random set of general principles. The Code looked rushed because it was rushed.
Each state and territory duly introduced their own provisions, attempting to set binding laws consistent with the Code in a way that has never been done before. Again, rather than seek perfection, they were looking for a quick fix, but at least business had something – that must be a good thing?
The answer to that is yes and no. While the Code (and the provisions) has brought some guidance, what has become apparent is that neither landlords nor tenants are happy with the outcomes. Landlords are understandably upset that the Code and provisions have sought to disturb commercial arrangements that were often hard won, and tenants can’t understand why they should be expected to pay rent in circumstances where they are unable (either economically or by mandate) to fully use their premises.
In trying to fix one problem, the Code has created another. The ongoing uncertainty surrounding what might happen (Victoria’s current position being a stark reminder) means that landlords and tenants are struggling to be able to commit to an agreement that, in normal circumstances, they could live with.
The Code and the provisions initially applied till the end of September but as the clock kept ticking, the states and territories extended them further (to the end of this year or early next year). Where does that leave us? Parties are choosing to kick the can down the road because the Code allows them to do it.
As we approach the end date, a significant number of landlords and tenants won’t have come to an agreement. Previously harmonious landlord–tenant relationships are going to start looking like litigation matters in waiting – with all the uncertainty and costs that entails.
What does seem certain is that there are unlikely to be any winners. The size of a party’s loss, however, will be higher if they are unprepared or ill-informed of their rights and obligations. If landlords and tenants are unable to engage in meaningful negotiations and come to an agreement they can live with, they may find that a reluctant legal system will look to strike the commercial bargain on their behalf. Once the kicking has stopped, the can is going to be in pretty poor shape.
Dan Holdsworth is a director of BlueRock Law