Business Franchise Australia


Urgent Advice to Retail Tenants – Practical Considerations

Prime Minister Scott Morrison announced a six month moratorium on evictions in relation to commercial and residential tenancies, where it arises from financial hardship related to COVID -19.

There were no other prescriptive measures or directives other than landlords and tenants should communicate and reach an agreement whether it be for a suspension of rent or abatement of a part or all of the rent.

If your business has been ordered to shut down then, of course, you have no option to do so.

What to do now

If you have a private landlord or an agent acting for a landlord contact them and confirm you are no longer able to trade.

A call is fine but follow it up in writing (an email is fine) to confirm that is the case.

Ask them for an abatement of rent while you are unable to trade.

An abatement means a reduction of the rent either fully or partially and that the Landlord cannot then later come back to you and ask for that rent to be paid.

A suspension of rent or deferring rent (not a tenant’s preferred option) means you are still liable to pay that rent once the suspension if over so it remains a liability you will have to meet, and the issue is how will that be paid.

A landlord could then at a later stage claim it against the security deposit or bank guarantee so be clear and careful as to what relief you are seeking and what is agreed!

Shopping centre managers will likely try to have you agree to a suspension or deferment- don’t agree to this.

If a landlord or shopping centre management asks you to sign any document whether a letter, authority, acknowledgement be careful and get advice before you sign it, as you may be locking yourself into a long term more difficult position.

We know that some centre’s and landlords are still sending invoices to retail tenants for next month’s rent showing no sign of support whatsoever.

The six month moratorium is on evicting tenant’s it does not address the issue that you are still liable for the rent unpaid.

The Government has not directed that landlords must reduce or hold payment of rents.

The best thing is to have open and immediate communication with the landlord or the agent politely and professionally but ensure it is in writing.

Should I close the doors and remove all my stock?

A temporary closure would not usually involve your removing your stock and vacating the premises.

If you remove your stock fixtures and fittings that would be an indication you have abandoned your lease and puts you in breach.

The landlord may then accept your action and decide to terminate the lease or keep the lease on foot and continue to claim rent.

This places your security deposit or bank guarantee at risk and also enables the landlord to claim for refit fees, loss or rent and other damages.

If closing the store place, a note on the window for customers “temporary closure due to Government direction and Coronavirus”.

Then take a photo of the front of the store with your stock and the sign -Why? It shows you have not abandoned the premises but only temporarily closed.

Can I rely on the Force Majeure clause in your lease?

The answer, in short, is no.

Also, it is unlikely a tenant can rely on the doctrine of frustration to end the lease and who has the time and money to go to court to seek an order anyway?

It is a matter of communicating and reaching an agreement with your landlord.

Be transparent and provide any supporting information the Landlord or agent may reasonably require.

Don’t forget to seek legal advice during these difficult times as your Lawyer is here to help you during the good and tough times.