Retailers and landlords unite with leasing code of conduct

While Australia's banks will be given a $90 billion funding facility from the RBA and the country's Federal and State governments are offering unprecedented stimulus packages, there is still no clear-cut solution as to who foots the bill when retailers struggle to pay rent.

Thousands of retail outlets nationwide have closed in recent weeks including just about any clothing brand you can think of, as well as a raft of discretionary retailers like Michael Hill Jewellers, Adairs and Nick Scali.

In addition, social distancing restrictions have extended restaurant and café bans (except takeaway) to shopping centre food courts.

And while a welcome $130 billion has been pledged to subsidise wages for businesses that are suffering due to the pandemic, this is no panacea to pay the high fixed cost of retail space or the debts of the landlords who own it.

It is an inherently frictional relationship, and one that lends itself to blame game politics.

But the nation's retailers and shopping centre owners have shown goodwill today in an attempt to push through the crisis, following meetings over the past two days to establish a draft Code of Conduct for retail leasing.

The National Retail Association (NRA), Australian Retailers Association (ARA), the Pharmacy Guild of Australia (PGA) and the Shopping Centre Council of Australia (SCCA) have announced their shared commitment to ensuring business continuity.

The groups agreed no two retailers are the same and circumstances needed to be addressed on a case-by-case basis, but in general they agreed to the following leasing principles:

1. A short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus;
2. Tenants and landlords are encouraged to agree on rent relief or temporary amendments to leases;
3. The reduction or waiver of rental payment for a defined period for impacted tenants;
4. The ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress;
5. Commercial property owners should ensure any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by Covid-19;
6. Landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements; and
7. Cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance.

A full copy of the joint statement by all major Australian retail groups is attached and was sent to all states and territories today, calling for an implementation of the code.

"We sat down immediately after the Prime Minister's announcement to come together in good faith and continue our ongoing discussions to ensure landlords and tenants are working together," says NRA CEO Dominique Lamb.

"Our industry has a track record of working together, including on challenging issues, and this is about working together and assisting policy makers in the next phase given our group's longstanding engagement on retail leasing issues," adds ARA CEO Russel Zimmerman.

PGA national president George Tambassis notes pharmacies are under "immense pressure" as frontline health resources during the Covid-19 crisis, and they need the certainty and consistency that can be provided by this code.

SCCA executive director Angus Nardi highlights the work retailers and shopping centre owners can do to keep business going.

"Shopping centre owners and retailers have a mutual interest in business continuity and it's positive to have a unanimous and timely approach to tackle the pressing challenges we all confront in the current environment in a way that is fair and balanced to everyone," says Nardi.

Updated at 5:07pm AEDT on 31 March 2020.