In response to the growing concerns of landlords and small business owners amid the COVID-19 outbreak, the Australian Banking Association (ABA) announced that banks and lenders will be extending the six-month deferral of loans to commercial property owners.

According to the ABA, the support will apply to an additional $100bn of business loans. This means that the six-month deferral of loan payments will apply to up to $250m worth of loans. Furthermore, extra cash will be available to struggling businesses.

"This will help protect many more thousands of small businesses from being evicted if they are struggling to pay the rent as it covers approximately 90% of commercial property owners who have loans with an Australian bank," ABA CEO Anna Bligh said.

Bligh said banks are extending their support to an additional 30,000 businesses by raising the threshold, allowing them to defer payments for loans of up to $10m.

Commercial landlords of properties such as local shopping centres, pubs, clubs, and restaurants will be eligible to apply for this assistance.

"Where landlords within this threshold do the right thing by their tenants, banks will do the right thing by them," Bligh said.

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While the new measures will apply in all sectors of the economy on an opt-in basis, the following conditions must be met:

  • For commercial property landlords, they provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears as a result of COVID-19.
  • The business has advised that its business is affected by COVID-19  
  • The business was current in terms of existing facilities 90 days prior to applying 
  • Interest is capitalised – meaning either the term of the loan is extended or payments are increased after the deferral period. 

Ken Morrison, chief executive of the Property Council, said these loan relief measures will play a crucial role in helping these landlords support tenants affected by the coronavirus outbreak.

"Commercial landlords want to do the right thing by their tenants and have a strong interest in helping them through this crisis. They also need help in meeting their own obligations, so the decision by banks to offer deferrals is significant, along with the agreement not to enforce business loans for non-financial breaches of the loan contract," Morrison said.

Furthermore, he said this assistance will help commercial landlords bridge the gap resulting from the six-month moratorium on commercial and residential evictions.

More assistance needed

However, Morrison said the government must also do its part in helping businesses.

Adrian Kelly, president of the Real Estate Institute of Australia, said the government's moratorium on evictions overlooks the fact that owners and real estate agents are also going to be affected by the ongoing crisis.

"We need to address the support of agents so that what the prime minister wants, in terms of landlords and tenants — finding a solution to get through the crisis, can be achieved," Kelly said. "Estate agents will work very hard to facilitate the role between landlord and tenant, and to do this they need income."

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Damian Collins, president of the Real Estate Institute of Western Australia, echoed Kelly's sentiments, adding that some businesses that are not affected by the outbreak should continue to pay rent.

"We are all in these challenging times together. Just as landlords and the government will come together to help support tenants in trouble, it is vital that those who are still in a solid position continue to do their part and pay their rent," he said.

Collins said there is a need for rental assistance to help ensure tenants can continue to afford rent. He said many landlords are "mum and dad investors" who are also affected by the outbreak.

"It cannot be left up to the landlords to bankroll the non-payment of rent on their own. It's vital that the government follow through on tonight's announcement and provide rental assistance directly to landlords where a tenant is legitimately unable to pay," he said.