Your selected location:
3 Jun 2020

HHG Legal Group’s Property team’s Anne Hurley and Julia McCullagh explore the newly gazetted WA Code of Conduct which finally provides certainty for landlords and tenants looking to negotiate rent relief.

20200408 in article tenancy

Weeks of uncertainty for WA landlords and tenants has ended as the WA Code of Conduct was gazetted on Friday 29 May 2020. Until Friday landlords and tenants found themselves having to negotiate rent relief using the Commercial Leasing Principles under the National Cabinet Mandatory Code of Conduct for SME Commercial Leasing Principles (National Code).

The WA Code of Conduct (which came into operation on 30 May 2020) is found in the WA Commercial Tenancies (COVID-19 Response) Regulations 2020. This code is WA’s response to the National Code endorsed by the National Cabinet.

As most of us would recall, on 29 March 2020 the National Cabinet announced that a moratorium on evictions for non-payment of rent would be applied across commercial tenancies impacted by financial distress due to the COVID-19 pandemic.  The National Code was endorsed on 7 April 2020 and set out overarching principles and specific leasing principles to guide negotiations to help commercial tenants and landlords reach agreements about rent during the COVID-19 pandemic.

Why two codes?

Under the Australian Constitution the Commonwealth Parliament can only make laws on certain matters. States retain legislative powers over matters not specifically listed in the Constitution. Therefore the National Code could only be given force by state legislation (although it can and has been used for guiding principles during negotiations).

The Commercial Tenancies (Covid-19 Response) Act 2020 (WA) (WA Act) was assented to on 24 April 2020, and it :

  • Enabled a WA regulation to be made to adopt a code of conduct.
  • Introduced a moratorium on evictions for small commercial tenancies.
  • Introduced a freeze on rent increases during the emergency period.
  • Provided for the resolution of disputes, either by way of an application to the SAT or in some cases by applying to the Small Business Development Commissioner.

Issues for WA landlords and tenants

At the time that the WA Act came into operation there was no WA Code of Conduct in place. Whilst waiting for the WA Code of Conduct landlords and tenants were encouraged to use the National Code principles as a guide for negotiations. Now that the WA Code of Conduct has come into operation there will be issues for landlords and tenants already engaged in negotiations or who have successfully negotiated an agreement.

Under the WA Code of Conduct if the tenant believes that the rent relief provided under a pre-existing agreement (that is an agreement pre-dating the WA Code of Conduct)  is less favourable than the rent relief that might be provided under the WA Code of Conduct, the tenant is entitled to make a further request for rent relief under the new code. This potentially throws existing agreements into doubt and means more work for both parties.

Another question will be to what extent parties who negotiated an agreement prior to the adoption of the WA Code of Conduct will be able to rely on the dispute resolution provisions in the WA Act.

The WA Act specifies that the dispute resolution provisions apply to disputes arising out of, or in relation to, the operation of the WA Act including “a code of conduct dispute.” A code of conduct dispute is defined as a dispute that arises out of, or in relation to, the application of the code of conduct adopted by way of regulations under the WA Act (including, without limitation, a dispute about the waiver or deferral of rent payable under a lease). So in circumstances where the parties to a lease have negotiated an agreement for the waiver or deferral of rent prior to the adoption of the WA Code of Conduct and a dispute arises about the terms of that agreement, there is a question as to whether those parties can apply to the SAT to have the dispute determined.

How is the WA Code of Conduct different?

Most of the leasing and general principles from the National Code were ultimately adopted in the WA Code of Conduct (although worded somewhat differently). While the WA Code of Conduct has similar principles to the National Code there are some differences, these include:

  • The WA Code of Conduct (unlike the National Code) imposes an obligation of confidentiality on landlords and tenants. For example, the parties must not share protected information including information relating to business processes or financial information including information about the trade of a business.
  • The WA Code of Conduct (unlike the National Code) specifically deals with the situation where the landlord is also a tenant. If the landlord is a tenant under a lease (the head lease) of the land or premises and as the tenant, is provided rent relief under the head lease, the landlord must pass on the benefit to the sub-tenant.
  • Missing from the WA Code of Conduct is the overarching principle from the National Code that the parties will assist each other in their respective dealings with other stakeholders including governments, utility companies, and financial institutions.
  • The WA Code of Conduct also sets out clear processes and timelines for landlords and tenants where the tenant is seeking rent relief. For example, a tenant seeking rent relief must put the request in writing to the landlord and provide information and evidence of the reduction in its business. Landlords must respond with an offer of rent relief within 14 days of receiving such a request.  This puts landlords under some real-time pressure.

To whom does the WA Code of Conduct apply?

There is the potential for a tenant to be covered by the National Code but not by the WA Code of Conduct if the lease does not meet the WA definition of “Small Commercial Lease.” We also note that the WA Code of Conduct applies to landlords and tenants only, it does not apply to guarantors.

An “Eligible Tenant” is defined in the WA Code of Conduct in a similar manner to the National Code. An “Eligible Tenant”  is a business whose turnover for the financial year ending on 30 June 2019 was less than $50 million (noting also that if the tenant is a corporation that is a member of a group* the $50 million turnover is the turnover of the group not the individual tenant that applies). An “Eligible Tenant” also qualifies for the Jobkeeper scheme under the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Commonwealth).

Small commercial leases

However, the WA Code of Conduct also only applies to relevant small commercial leases.  “A small commercial lease” is defined in the WA Act as

  1. A retail shop lease as defined in the Commercial Tenancy (Retail Shops) Agreements Act 1985; or
  2. A lease where the tenant owns or operates a small business and uses the land or premises that are the subject of the lease for the purpose of carrying on that business (small business has the meaning given in the Small Business Development Corporation Act 1983); or
  3. A lease where the tenant is an incorporated association as defined in the Associations Incorporation Act 2009; or
  4. Another type of lease prescribed in the regulations but not yet determined.

Where to go to from here?

Landlords and tenants in Western Australia now need to review their agreements made prior to the WA Code coming into force.

Tenants

If you are a tenant and you believe that the rent relief provided under a pre-existing agreement (that is an agreement pre-dating the WA Code of Conduct)  is less favourable than the rent relief that might be provided under the WA Code of Conduct you should make a further request for rent relief from your landlord.

Landlords, if you have been resisting providing rent relief to your tenant of a small commercial lease you cannot continue to resist any longer.

* As defined in the Corporations Act 2001 (Commonwealth) Section 9, corporations constitute a group if they are related bodies corporate.

HHG can assist

For over 100 years HHG Legal Group has been proudly serving Western Australian families, business and individuals. We have a team of experienced leasing and dispute resolution lawyers that can assist both landlords and tenants during this difficult time in negotiating terms of rent relief and lease variations that will comply with the WA Code and any disputes arising out of those negotiations.

With a choice of consultation methods (video, phone or safely-spaced, face-to-face), should you require some assistance please send us an enquiry or call us on +61 8 9322 1966.

 HHG Legal Group’s Property & Leasing Services

 

*This is general information only, and does not constitute specific legal advice. Please consult one of our experienced Legal Team for specific advice relevant to your situation.

Supporting Western Australian's for more than 100 years

"Always fast and thorough service. Thank you"

Sitka Pil

My circumstances at the time I made contact with HHG were dire following my argument being rejected by two no win no fee firms. Following my initial meeting with HHG's employment law team I was left feeling extremely positive by the response and concern shown by HHG in regards to their support of my argument along with their preparedness to pursue an outcome on my behalf.

I accept the fact that nobody really wins in these cases (mental health/ workplace) however the end result was what would be considered most favourable and far in excess of what would have been achieved had I not sought the advice from HHG.

I have no hesitation in recommending HHG to anyone caught up in the messy circumstances I found myself in at the time.

Great advice and five-star commitment to their client!!"

Nathan Lynch

"Thank you for such great assistance with the transaction of Flying Domestics on behalf of Lorna Good. It has been such a pleasure to work with the HHG Legal Group and I look forward to working with you in the future."

Jim Goodwin

"Simon Creek and his team were at all times empathic, professional and confident.  My matter needed to be addressed within a pressing time frame, and their availability at short notice and contact after hours was much appreciated.  It caused me considerable stress, but having such a thoroughly reliable and competent team to call on helped me to feel in control. Although I hope not to need their services again in future, I would be confident in doing so!"

Dr Lana Bell

"A good outcome is what we can expect.  A great outcome is a sign of a company which does the very best for their clients. A very big thank you to Daniel Morris for showing empathy towards my small and much needed legal action.

To HHG Legal Group, thank you for a great outcome.  I would recommend your company to anyone seeking legal services."

Jan Atkinson

"Your support this morning was amazingly kind, not to mention your totally reassuring competence, knowledge and wisdom that you used on my behalf.  It was extremely reassuring to have your knowledgeable support, and I particularly appreciated your real and obvious kindness to me. It means so much at a very difficult time. I'm so grateful to you."

Family Law Client

"Janene was very professional and we established a good rapport quickly. The subject of death and wills can be quite confronting to deal with, however, Janene's approach was soft and accommodating."

Lynette Livesey

"A big thank you to HHG for their professional service, continued support, and wide range of legal knowledge. Our clients have given us nothing but kind words regarding HHG Legal Group and so we have no hesitation in referring and recommending Simon Creek and HHG Legal Group for their outstanding services and legal expertise."

Nigel Plowman, Director at McKinley Plowman & Associates

"Simon is a friendly and practical legal advisor. I have received great feedback from the clients I have referred to him and his team at HHG Legal Group."

Richard Beal, Director at BDO

"Over the last few years, I have been impressed by Simon’s legal ability, management skills, entrepreneurial spirit, personal integrity and people skills. He appears to be that rare breed of lawyer – both knowledgeable and commercial."

Michael Malone, Founder of iiNet

"Our family has been a client of HHG Legal Group over many years.  Business has included drawing up of wills for three generations and preparing of probate for my father in law. I would have no hesitation in recommending HHG Legal Group to anyone requiring such services."

Bernice Climie

"You should be congratulated for the manner in which your staff address clients and we found our dealings with your company, once again a very pleasant experience and we would like to truly thank you for your efforts."

Steve Harvey and Jane Powell

"HHG Legal were absolutely fantastic. Extremely responsive and brought calm to our chaotic family situation through their knowledge and caring attitude. Extremely professional from our very first contact with them and they expertly guided our family though the required legal process over almost a 12 month period."

Amanda Williamson

"Fantastic team! They really care about their client. Tim Colcutt is a 'go that extra mile' guy who gives his client his all. I can't recommend HHG and Tim enough."

Kerry Samson

"I had a fantastic lawyer in Anne Hurley. She helped me out a great deal with good, sound advice in a friendly, professional manner. First class, thanks Anne"

Graeme Hammond

"Marine Plant Systems has been working with HHG Legal Group for a few years now and they continually provide first-class service. Their professional advice has been invaluable to our company."

Carolin Grimm - Marine Plant Systems

"We were kept up to date at all times. Pricing was always updated over the time period so we remained "in budget". Personal access to someone whenever I had questions. All in all a great experience without too much fuss."

Rosslyn Tasker - COO AltusQ Pty Ltd

"Good service you can count on."

Miles Lee

"HHG Legal Group has provided outstanding support as I have taken the journey of buying a business, their professionalism is beyond reproach. Their assistance throughout the Due Diligence process has been invaluable, I would fully recommend them."

Mark Armitage

"Very friendly and efficient service - what a pleasure working with Anne."

Jacques Taylor

"I highly recommend Daniel from HHG Legal Mandurah. When dealing with a complicated legal property matter recently I was extremely impressed by Daniel's honesty and integrity and the legal advice I received. I am very happy with the service from HHG Legal."

Tony Walker

Select your location:

Please select your nearest office location so we can show you the most relevant information.