Prime Minister Scott Morrison has called on landlords to "do the right thing", after the national cabinet rejected a draft agreement designed to help businesses survive the coronavirus crisis.
Shopping centres and retailers were sent back to the negotiation table, on Friday, on the draft code of conduct, which Mr Morrison said did not give sufficient security to tenants.
The code will go to national cabinet again on Tuesday and would be made compulsory, Mr Morrison said.
It must include the "proportionality principle", where the lost revenue is matched by lower rent, he said. While the principle must be in the code, the detail could still be negotiated between individual tenants and landlords, and could include deals such as a rent waiver for six months in return for a lease extension, or lower rent over the term of the agreement.
The code of conduct is being negotiated between the country's 25 big shopping centre owners and tenants in the centres, but Mr Morrison wants it to cover all businesses hit by the downturn.
While many landlords were doing the right thing, "there is unreasonableness from landlords and tenants alike," he said.
"Landlords not taking the tenants' calls and continuing to take the rent. And tenants threatening to throw the keys in the door and walk away from leases.
"It is not the way to behave. We need a code of behaviour that will be mandatory under state and territory laws to get people into a room and sort it out. If people don't want to do that they won't have those protections."
Australian Retailers Association executive director Russell Zimmerman, who represents the retailers, said the sticking point was the "proportionality principle", which was not in the draft that went to cabinet.
"The reduction in turnover of the tenant needs to be reflected in the rental waiver of the landlord. He's made it clear to us and the Treasurer made it clear to me that we need to go back to the negotiation table and put it into the code."
Retailers would be happy to see it there, he said. He did not divulge details about the draft agreement the tenants and landlords had reached before Friday, but said it had "insufficient clarity" on that issue.
"We were as comfortable as we could be with it, but let me be honest, it was not ideal and that's why I think this particular statement has come from the Prime Minister," Mr Zimmerman said.
The Property Council, representing landlords, did not speak directly, but issued a statement saying it "noted" the direction from cabinet.
"Commercial landlords build, manage and fund the property assets which support the Australian economy and are here for the long haul with their tenants," chief executive Ken Morrison said.
Landlords had already been supporting tenants without fanfare.
"We must also ensure the needs of tenants experiencing genuine financial hardship is balanced against the significant financial obligations that many landlords are also required to meet, including to non-bank or offshore lenders," he said.
"We welcome the recognition that governments must also be part of the solution with meaningful relief on land tax and other costs incurred by commercial property owners."
Asked whether shops that had stopped trading in the Canberra Centre were still paying rent, centre manager Gary Stewart said, "In the face of this unprecedented situation we are committed to working flexibly with our retail partners to assist them in navigating through this so that the industry recovers as quickly as possible."
Mr Morrison said the code of conduct would cover all small and medium businesses to a turnover of $50 million who had seen a reduction in revenue of at least 30 per cent over a month.
The principles set out by cabinet are:
- Rent should keep being paid where it can, with landlords and tenants to negotiate a solution when there was financial distress
- Rent reductions should match decline in turnover
- Evictions would be banned if a tenant hadn't paid rent
- A freeze on rent increases
- A ban on penalties for tenants who stopped trading or reduced opening hours
- A ban on landlords passing land tax to tenants
- A ban on landlords charging interest on unpaid rent, and a ban on landlord claiming against a bank guarantee for unpaid rent
In return, states and territories would look at waiving and deferring land tax.
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