How landlords’ short-sighted approach to SME rent rates during COVID-19 is threatening mutual survival

It’s no secret that many small retailers are struggling to pay rent rates during the current pandemic, thanks to a catastrophic combination of reduced customers and challenging social distancing restrictions. 

Throughout my years of advocating for SMEs – not to mention running my own small business – I’ve never seen anything quite like it. 

The dire situation is being made even worse by some landlords failing to do their part to support their tenants.

The Commercial Leasing Code of Conduct clearly outlines the need for landlords to work with occupants in good faith to weather the COVID-19 storm.

Unfortunately, this is not the lived experience of many tenants around the country. This is in turn threatening the livelihoods of thousands of business owners and their staff.

A symbiotic relationship

This is not about small business David versus landlord Goliath. If retailers are put out of business, landlords will be losing tenants that they cannot replace. The alternative is broken lives, empty shops, and landlords being forced to offer huge rent holidays to attract new tenants. 

Banks, governments and private businesses have already stepped up to the plate and are assisting individuals, retailers, and landlords alike with short-term solutions to get us all through this crisis. 

In contrast, some landlords simply roll out the good work of others as a solution to their tenant’s predicaments. In reality, it’s actually in their best interest to help the retailers overcome this difficult period. 

Too much red tape

The experience of seeking rent relief is currently marred by unrealistic bureaucracy to delay outcomes and prevent relief being given.

While the Code provides a solid framework for conversations to occur between tenants and their landlords, it too has delayed outcomes as landlords wait for it to be fully legislated and regulated before acting, at the expense of the small businesses desperate for help.

In some cases, tenants are being asked for information far in excess of what is technically required. Some have even been asked to sign confidentiality agreements and to provide financial projections for 2021/22 financial years (even the best economists can’t do that right now!), and show that they have used all state and federal small business support packages before negotiations can occur.

These unrealistic and unhelpful delay tactics are causing relief to get stuck in a bureaucratic no-man’s-land.

An existing solution

The solution to this predicament will require both landlord and government support.

Western Australia has provided a great example of a practical, timely and helpful solution, with $100 million in support provided to landlords who provide three-month rent waivers for tenants who have suffered a 30% drop in turnover due to COVID-19. We now need all other states and jurisdictions to introduce similar mechanisms. 

The ALNA is calling for an immediate three-month rent waiver followed by good faith negotiations for all small business tenants. This should be the norm across the country for all impacted small businesses.

Restarting rental payments after the crisis will mean small businesses can continue – and landlords will still have tenants able to pay their rents and bring in foot traffic. 

To avoid an incredibly damaging long-term impact to small businesses, we also need governments to extend the provisions and protections of their Leasing Codes of Conduct well into 2021 to give more time for the backlog of negotiations to all be resolved. 

Retailers need landlords’ leadership and partnership. In times like these, neither small businesses or landlords can afford delayed outcomes. Action is required, and we need it now.

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