Eviction Moratorium Extended In Nearly All Aussie States
AUSTRALIA – Nearly all states here have extended their eviction ban for tenants of commercial properties, but a property expert thinks that lessees could still end up losing their businesses once the moratorium ends, reported Real Commercial on Thursday (15 October).
In March 2020, Australian authorities enacted a 6-month eviction ban so that leases of commercial properties like office space won’t be terminated if the tenant fails to pay rent due the effects of COVID-19 lockdowns.
Prime Minister Scott Morrison urged occupants and commercial property owners to reach some sort of deal to keep the tenancy until the virus outbreak has been overcome.
This led to rent reductions, rent deferrals and rent waivers throughout the country. Back then, the government thought that 6 months is ample time for the COVID-19 crisis to recede.
In April, the National Cabinet introduced a national code of conduct that laid out a set of good faith rental principles for commercial property tenancies, in which the occupant has an annual revenue of under A$50 million and suffered a drop in turnover during the virus outbreak of at least 30 percent.
The principles also included a stop in rental increases and the removal of penalties for occupants terminating their tenancy earlier than agreed because of financial losses due to COVID-19.
Then recently in October, nearly all state governments in Australia have extended their eviction ban until at least December 2020, with some lasting in 2021.
In Tasmania, the moratorium on eviction will end on 1 December 2020, while that in Victoria, New South Wales, Queensland will continue until the end of the year.
The Australian Capital Territory’s eviction ban will persist until 31 January 2021, while that in South Australia has been extended until 6 February of the same year. Western Australia has the longest extension of until 28 March 2021.
On the other hand, the Northern Territory has stopped short of imposing a moratorium on evictions, but it has rolled out emergency rental reforms to assist residential and commercial tenants affected by the pandemic.
The moratorium on eviction will certainly help lessees of commercial properties, but some tenants could be compelled to leave the premises once the eviction ban ends due to zero or insufficient income.
“[COVID-19] has certainly been challenging for commercial tenants. Many have chosen to shut for a period of time while others are being heavily supported by government measures, such as the moratorium on evictions and JobKeeper,” said Cameron Kusher, Executive Manager of Economic Research of Realestate.com.au.
“[But] I would expect if landlords aren’t willing to renegotiate leases in light of reduced incomes and the impact of the recession, that we will see many tenants vacate their commercial spaces, particularly in the retail and office sectors.”
However, Kusher pointed out that the eviction ban could be negative for lessors, as mortgage interest is still accruing, although banks granted holidays on loan repayments and the government has provided financial aid.
Consequently, some commercial property owners may have no choice but to terminate tenants’ leases once the eviction ban ends due to severe decline in rental revenue that would impact their ability to repay property loans.
Based on an August report by the Property Council of Australia, it estimates that commercial landlords would incur A$4.8 billion in costs due to the extension of the commercial leasing code of conduct. This in addition to the A$4 billion reduction in their revenue from April to September 2020.
