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“Thousands” of SMEs facing financial difficulties amid COVID-19 may not be covered by the government’s Mandatory Code of Conduct for commercial rent relief, says one brokerage.
Asset finance brokerage Talk to a Broker (TTAB) has flagged that SMEs working within co-share office spaces or communal working environments may not be eligible for rental relief under the federal government’s Mandatory Code of Conduct.
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TTAB leases office space in the Sydney CBD from an international flexible workplace provider, one of many small and medium-sized businesses that work under such arrangements, and requested a rental deferral in exchange for a 12-month lease extension, after finding itself eligible for relief under the code.
However, the brokerage was denied assistance by its landlord, due to the landlord’s claim that a co-share agreement is “not a technical lease agreement”, meaning they are not technically bound by the code.
According to a letter sent to TTAB from the owner of the shared workspace, the signed agreement sees the brokerage pay for a “membership” that permits access to its commercial co-share buildings as well as rights over their allocated working space, arguing that the membership agreement does not constitute a landlord-tenant relationship.
Director William Hong said the company’s landlord was now demanding TTAB pay outstanding rent in full or incur late fees and the loss of their security deposit, citing the fact that they are signed under a co-share agreement “and not a technical lease agreement” to argue that “they don’t have to follow the code”.
“Unfortunately, thousands of SMEs like TTAB who have co-working agreements are vulnerable to an unsympathetic landlord because they are not covered by the Mandatory Code of Conduct for commercial rent relief,” Mr Hong said.
“We are now being bullied into paying immediately and have no protection like those businesses that have a formal lease.
“The government’s Mandatory Code of Conduct specifies that eligible tenants are entitled to receive rent reductions in the form of waivers or deferrals to enable them to navigate the uncertain waters of the pandemic.
“The code sets out several ‘good faith’ leasing principles to be separately legislated and regulated by each state and territory and applied to all SME tenancies that are suffering financial stress or hardship,” Mr Hong said.
“We have tried negotiating with [the landlord] in good faith under the guiding principles of the code to also offer to pay out the majority of the outstanding lease out of our own directors’ bank accounts as the business can’t afford it, but this also was rejected,” he continued.
“It looks as if we may have no other option but to refer the matter to the NSW Small Business Commissioner for independent mediation,” Mr Hong concluded.
[Related: Major brokerage sees ‘influx’ of HomeBuilder enquiries]
