Property update: A message to landlords, tenants and managing agents

Mar 24, 2020

A lockdown on social gathering venues (including clubs, pubs, restaurants, cafes and gyms) is now in force.

The indications are that this lockdown will continue for many months, and that greater restrictions may be imposed.

We do not need to tell you the impact that this is already having on landlords and tenants, in addition to the broader economic impacts of COVID-19.

We want to share with you the key issues our Property team is working on for landlords and tenants, in case it assists you, your clients or others you know.

Key issues for landlords and tenants

  • Force Majeure clause — Although Force Majeure clauses are uncommon in leases, a Force Majeure clause may give a tenant the right to end the lease or seek compensation.

    We are reviewing leases to identify and advise on the effect of such provisions.

  • Frustration of leases — Based on current law, the right to end a lease due to the frustration (because it is impossible to comply with the lease, through no fault of either party) is a very high bar for a tenant to establish.

    If a lease is held to have been frustrated, then at law, neither party has a right to claim against the other for any resulting loss or damage.

    We are assessing each factual circumstance against the current law for frustration.

  • Business continuity insurance — Many insurance policies will not cover a tenant’s inability to trade as result of a lock-down.

    We continue to recommend reviewing insurance policies carefully to see if a claim can be made.

  • Negotiating changes to rent — Some tenants and landlords are seeking to negotiate a rent-free period, rent deferral or some other arrangement.

    For tenants, survival now is the key to being able to prosper when the COVID-19 pandemic ends.

    For landlords, helping a tenant to survive is often the only way to maintain income now and to be able to quickly, and at minimal cost, recover revenue streams when the COVID-19 pandemic ends.

    We are taking a practical approach to negotiate and correctly document such arrangements.

The importance of decisive advice

Although legislative relief is being contemplated, many clients are acting now, based on sound and commercial advice.

Immediate, responsive advice and assistance is crucial at this time.

We are monitoring legislative developments closely and will update you as more information becomes available.

More information

If you require advice in relation to any of the above issues, or assistance with any other property related matter, please contact Morgan Scholz, Head of Property, on (03) 8600 8890, Mark Yaskewych, Principal Lawyer, on (03) 8600 8830 or Geoff Kliger, Special Counsel, on (03) 8600 8878.

Author

This Property update was authored by Morgan Scholz, Head of Property.

Note: This update is a guide only and is not intended to constitute legal advice.

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