Commercial tenancies response passes Parliament, still work to be done

The peak body for commercial property owners has acknowledged the passage of legislation to allow for a commercial tenancies code of conduct as a significant step to allay fears and anxiety experienced by the sector in recent weeks.

Property Council WA Executive Director Sandra Brewer said that although the Commercial Tenancies (COVID-19 Response) Bill had passed parliament, further work was required to get the settings right for landlords and tenants.

“We are relieved that there is finally progress in this space, two weeks after the Prime Minister announced the National Cabinet’s Commercial Tenancies Code of Conduct principles,” Ms Brewer said.

“These principles included eligibility closely tied to JobKeeper participation, as well as rental deferrals, waivers and no terminations of leases by tenants,” Ms Brewer explained.

“We were hopeful for more balanced legislation that would allow landlords and tenants to be on a level playing field to the fullest extent possible. The first version of the Bill did not achieve this, but we are satisfied the Opposition amendments in the Legislative Council limiting the Code to small commercial leases partially shifts the pendulum towards a more equitable position.

“We are also pleased that a landlord’s financial position now has to be taken into account, following Property Council WA advocacy. This is particularly important for smaller to medium sized landlords who are typically mum and dad investors and retirees, relying on commercial property for an income,“ Ms Brewer said.

Despite these amendments, the Property Council is calling for the State Government to craft a Code of Conduct that is more targeted towards supporting the viability of both tenants and landlords. These concerns come off the back of comments made by the State Government in Parliament that could see a WA Code of Conduct that is more expansive than that contemplated by the National Cabinet.

“We share the concerns of opposition and crossbench members of parliament when they say the legislation remains too broad and leaves the door wide open for the Code to go much further than the National Cabinet’s principles,” Ms Brewer said.

“The commercial property market in WA has lagged behind our eastern states counterparts for a long time. Adopting an east coast centric Code of Conduct for the WA market would compound the financial difficulties already faced by small to medium landlords.

Property Council WA has indicated two key elements it would like to see adopted by the WA Code of Conduct, which could take another month or two before it is complete.

“To craft a code that reflects WA market conditions,  consideration must be given to a small landlord carve out which exempts the most vulnerable landlords from being taken advantage of by big business tenants who are still able to meet their rental and outgoing commitments.

On the issue of terminations, Ms Brewer said the property industry was alarmed by the State Government’s introduction of an early termination bill that would give tenants the ability to terminate leases early, even after the pandemic has ended.

“We remain opposed to the possibility of tenant-led terminations, which the State Government has chosen to entertain by breaking ranks with National Cabinet and drafting the Commercial Tenancies (COVID-19 Response (Early Termination)) Bill,” Ms Brewer argued.

“We have worked with the State Government and the regulators in good faith on the issue of commercial tenancies, but were dismayed when the early terminations legislation was unveiled.

“Since the early terminations legislation was released, our members have already alerted us to developments being placed in jeopardy as a result of the risk terminations bring.

“We will continue to work with government in good faith to assist where we can with the development of the Code of Conduct. However, we will oppose any move to introduce early terminations, which will do nothing other than wreak havoc on the industry and investor confidence in WA’s property market.” Ms Brewer concluded.

Media contact:  Sandra Brewer | M 0418 501 030 |  E [email protected]