New Commercial Rent Relief Does Not Protect Small Businesses, Industry Says

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  • The NSW government has re-launched its Commercial Lease Code of Conduct, which provided a framework on how landlords should provide rent relief during the foreclosure in early 2020.
  • Some industry groups claim that the policy has allowed large organizations to take advantage of government funds while making a profit.
  • “Government intervention in contracts not only jeopardizes existing business relationships, but also undermines the potential for economic recovery,” said Luke Achterstraat, NSW executive director of the Property Council of Australia (PCA).
  • Visit the Business Insider Australia homepage for more stories.

New South Wales retail trade groups have opposed the commercial rent policy that reverts to rules first introduced during the original pandemic lockdowns.

The NSW government on Friday passed a law that once again required NSW commercial landlords to provide rental relief to tenants with annual turnover of up to $ 50million of dollars.

Critics, including several industry groups, say the $ 50 million cap could risk a repeat of last year’s backing results, which saw larger retailers including Myer, Accent Group and Harvey Norman pocketing awards. government JobKeeper wage subsidy payments – as well as others such as rental relief, while making a profit.

In March, a report by corporate governance consultancy Ownership Matters found that a fifth of JobKeeper payments made to Australia’s largest ASX-listed companies ended up in profitable company accounts.

The analysis raised concerns at the time that the $ 83 billion wage scheme was being abused by parts of Australian businesses and showed that 66 of ASX’s 300 largest companies claimed a total of $ 1.38 billion in JobKeeper payments for the six months to the end of December. 2020.

As of Friday, some groups in the retail and commercial real estate industry have said the overhaul represented government interference in an issue they said was under control.

The revenue limit of $ 50 million, the same cap as in early 2020, is too high, they say, with some suggesting that the program’s revenue limit should be reduced to $ 10 million to ensure that small and medium-sized enterprises are supported and that large enterprises are deprived of a second opportunity to access a business support system.

Similar to measures taken by Australia’s Big Four banks, large retailers had already implemented rent deferral programs to support small businesses. Now, the new legislation gives large retailers the flexibility to refuse to pay rent until they are mandated to do so.

Industry groups say “holistic approach” is not the right decision

Luke Achterstraat, NSW executive director of the Property Council of Australia (PCA) told Business Insider Australia its members are already supporting their tenants on a case-by-case basis, ensuring businesses in need remain viable.

Achterstraat said a comprehensive government approach has only opened the door to already profitable organizations.

“Government intervention in contracts not only jeopardizes existing trade relations, but it also undermines the state’s potential for economic recovery following this lockdown,” he said, adding that ” many business owners are still providing ongoing support to tenants affected by the 2020 lockdowns, with considerations in place. ”

Angus Nardi, executive director of the Shopping Center Council of Australia, told Business Insider Australia he doesn’t think a repeat of the 2020 policy makes sense.

“We think this is bad, badly done policy,” Nardi said.

“We could reach a threshold of $ 5 million in sales and our members [are] are already supporting real SMEs that are doing the hard way, ”he said.

“We are quite shocked that the government has adopted the $ 50 million threshold. “

However, some industry groups like the Australian Retailers Association (ARA) have welcomed the return of government intervention and say it is the state government’s appropriate response to another extended lockdown period.

Paul Zahra, managing director of the ARA, said in a statement that he called for the return of the commercial rent policy, which he says has been successful in supporting small and medium-sized businesses during the first wave of the pandemic. .

“The ARA has called for the return of proven support programs that we know worked well during the initial phase of the pandemic,” Zahra said.

Businesses in New South Wales are feeling the pain now more than at any point in the pandemic, he said.

Australia’s economic capital is now facing its longest foreclosure in its history, Zahra said, and rent is “the biggest problem for retailers suffering from the current foreclosure in New South Wales”.

Under the amended regulations, which will apply until Jan. 13, rent negotiations must adhere to the National Cabinet Code of Conduct for Commercial Leasing.

Finance and Small Business Minister Damien Tudehope said landlords must now give tenants rental relief equal to the drop in turnover and at least half “must be in the form of a waiver and the balance of a deferral “.

“We’ve always encouraged landlords and tenants to negotiate, but now we’re going one step further by imposing the minimum relief landlords need to provide affected tenants,” Tudehope said.

“The government has not taken this step lightly, but we saw last year that the framework established by the national cabinet led tenants and landlords to discuss a way forward.”

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