Banks throw lifeline to commercial landlords who help tenants

Australian banks will give some commercial landlords six month loan holidays, so long as they don’t terminate the lease or evict any tenant who is in arrears because of the coronavirus pandemic. 

Today’s move builds on the Australian Banking Association’s Small Business Relief Package announced last week, which gave businesses with loans of up to $3 million the chance to defer repayments for six months. That offer has now been extended to businesses with loans of up to $10 million.

Eligible businesses include commercial landlords of properties such as local shopping centres, pubs, clubs and restaurants. 

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Commercial landlords will be helped by banks with a loan deferral during COVID-19. Picture: realestate.com.au

ABA CEO Anna Bligh says those who qualify must give an undertaking to their bank they will not terminate the lease or evict any tenant who is in arrears because of COVID-19.

“This takes a huge burden and worry off the minds of those small businesses who are worried about their rent,” she said.

“To be very clear, where landlords do the right thing by their tenants, their bank will do the right thing by them.”

The boosted package will expand support to an extra 30,000 businesses, and cover about 90 per cent of commercial property owners who have loans with an Australian bank.  

This extension of support will apply to an additional $100 billion of business loans, meaning a six-month deferral of loan payments will apply to up to $250 billion worth of loans in total. There is also extra cash available to 425,000 businesses to cope with the crisis during the COVID-19 pandemic.

The new measures will apply in all sectors of the economy on an opt-in basis, under the following four conditions: 

  1. 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 
  2. The customer has advised that its business is affected by COVID-19
  3. The customer was current in terms of existing facilities 90 days prior to applying
  4. Interest is capitalised – meaning either the term of the loan is extended or payments are increased after the deferral period.

The ABA’s latest announcement comes after Prime Minister Scott Morrison said the states and territories would move to put a moratorium on evictions for a six-month period, as a result of financial distress from COVID-19. 

Canberra continues to work on other elements of a rental relief package. Morrison said commercial landlords and tenants needed “to sit down, talk to each other and work this out”, and he said banks had a role to play.

“We need landlords and tenants to sit down and come up with arrangements that enable them to get through this crisis so, on the other side, the landlord has a tenant, which is a business that can pay rent, and the business is a business that can re-emerge on the other side of this and be able to go on and employ people,” the Prime Minister said.

“We want the banks to help them achieve this outcome.”

Details on the six-month moratorium on evictions under state and territory laws are expected in the coming days.