AUSTRALIA’S automotive dealers have joined with the nation’s retail groups and shopping centre landlords to propose a code of conduct for retail leasing principles.

Created by the National Retail Association (NRA), Australian Retailers Association (ARA), the Pharmacy Guild of Australia (PGA) and the Shopping Centre Council of Australia (SCCA), the code aims to assist retailers and landlords during the current economic upheaval.

The Australian Automotive Dealer Association (AADA) this week circulated a code of conduct to its members, and AADA CEO James Voortman said “most were relatively happy with it”.

He said the AADA supports the concept of the national code of conduct for retail leasing, however he noted that the current proposal only applies to businesses with turnover of less than $50 million.

“Dealers will always be disadvantaged by any measures which use turnover as a threshold, due to the high value of the goods which they sell,” he said.

“One need only look at the exceptionally thin profit margins being made to realise that turnover is not an adequate descriptor of the health of companies in the automotive industry.

“The automotive retail industry is facing significant headwinds and to navigate through these difficult times many dealers will need to work closely with their landlords on some form of relief.

“Only allowing retailers with a turnover of less than $50 million to be covered by this code essentially means that most dealers will be outside of this system.”

The Australian Competition and Consumer Commission (ACCC) has weighed into the matter, saying shopping centre owners and managers had been granted interim authorisation to discuss and implement rent relief measures for tenants facing hardship because of the COVID-19 pandemic.

“This follows an application by Shopping Centre Council of Australia Limited (SCCA) and Scentre Group,” the ACCC said in a statement.

The SCCA represents Australia’s major shopping centre owners, managers and developers, while the Scentre Group owns and operates retail real estate under management including 42 Westfield shopping centres.

“The ACCC has allowed shopping centre owners and managers to jointly develop a plan to help their small business tenants, including franchisees and licensees, which have a turnover of up to $50 million a year,” the commission said.

It said the plan could include an offer to defer or reduce rents and other payments, waive interest payments and extend leases.

“Support for small and medium businesses in this difficult time will help the economy start up again when the pandemic has subsided,” ACCC chairman Rod Sims said.

“We are allowing shopping centre owners to work together to come up with a plan to support their tenants experiencing financial difficulties. Nothing in the proposal stops individual owners from offering more generous concessions to their tenants.

“The ACCC will be notified of the rent relief measures agreed to, which will be published on its authorisations register.”

The NRA, ARA, PGA and SCCA responded to the federal government cabinet proposals. These are as follows, with the groups’ responses also included:

• 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. The SCCA has already agreed to non-termination for non-payment of rent for SMEs.
• Tenants and landlords are encouraged to agree on rent relief or temporary amendments to leases. The retail groups said this would need to be considered on a case-by-case basis and tenants would need to provide relevant financial data and other business information to heighten the lessor’s understanding of the retailer’s capacity to pay during the affected period.
• The reduction or waiver of rental payment for a defined period for impacted tenants. The groups said that rent assistance, including in the form of rent deferral, would be for a defined period, with a focus on non-essential SME tenants, on a case-by-case basis, facing financial hardship as a result of COVID-19.
• The ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress. The groups do not support this termination clause saying they are more in favour of tenants seeking mediation from small business commissioners on the grounds of financial stress as a result of COVID-19. This would ensure tenants and landlords reach a commercial outcome and allow retailers to resume trade and become financially viable within a defined recovery period.
• 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. The groups responded by saying governments should reduce statutory charges such as land tax and council rates, which will be passed on to give relief to tenants during this period.
• Landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements. The groups agreed, as per the terms of lease agreements. All parties should comply with existing leases, subject to the principles above.

By Neil Dowling