Motels and coronavirus – tips and ideas

26 March 2020

The last few days have seen an influx of questions from landlords and tenants alike as a result of the COVID19 crisis. This is a rapidly evolving crisis with regular policy announcements from local, state and federal governments and it really is impossible to provide clear and current advice on all questions raised.  However in this circular, as best we can, we will give you our comments on the principal issues which have been raised with us or which we see as warranting comment.

However we also need to stay positive in this and look for the silver lining and think outside the square.  The businesses that are almost instantly pivoting are reaping the benefits.  In the last few days we have seen all sorts of stories from Bundaberg Rum Distillery now producing ethanol for sanitiser, to cafes becoming gourmet take-away, to restaurants packaging up ingredients for their recipes to cook at home, and even dance schools taking their classes online via video conferencing.  It is the time to look for what you can do and not focus on what you can’t.

Motel facilities

This is your business, so you need to take a proactive approach to what you are doing to ensure that your business is clean, sanitised and able to attract whatever clientele is available.  Tell your customers what you are doing, such as cleaning at greater frequencies or carrying out sanitising.

Consider what facilities need to be closed.  Keep abreast of all government announcements in relation to the restaurants, bars, pools, barbeque areas, gyms and the like.

Insurance

Some businesses may be fortunate enough to have insurance that covers you for loss of income caused by the COVD-19 crisis.  Check that with your broker and consult with us if you need assistance to determine if you are covered.

If your insurance is coming up for payment try to change your annual payment to a month to month arrangement.

Rent

Now more than ever is the time for you to be in close, regular contact by phone or email with your landlord or tenant.  This is a business partnership and hopefully you have built up some goodwill in the past, which you may both rely on now.

Rent is likely to be the single biggest expense for a motel tenant.  From a landlord’s point of view it may also be their only source of income.  There is pain on both sides of the fence.

At the time of writing this circular we are waiting to see the details of the rental assistance packages which the state and federal governments are set to announce and our comments above are made subject to what they might announce.

Whether your lease provides for any automatic relief in these circumstances is a complicated question and must be assessed on a case by case basis. If you are unsure, contact us to review the lease for you.

As a tenant, the first step is to reach out to your landlord.  They will already know what is going on, but are likely to want to see you taking as many measures as possible to stay afloat.  You should not use this as an opportunity, but should ask for short term, temporary assistance.  Remember that regardless of what is going on you are still likely to be in breach of your lease if you do not pay your rent, and you should be in contact with us immediately if you were to ever receive a breach notice.

Local council

The relief being offered by local councils varies, but you should reach out to them.  Seek an extension of any rates payments or ask for a payment plan.  Check what licence fees are being waived or delayed.

Don’t get too distracted – check your dates

It is easy in these times to be distracted by the uncertainty and stress of what is going on around you. Be careful to make sure that you continue to go about all of your usual business.

In particular make sure that you are conscious of any critical dates coming up – including the date by which you have to exercise any option in your lease.

Check your lease and please get in contact with us ASAP if you have any questions or concerns about these dates.

Bank support

All banks have offered a variety of packages to assist their business and personal customers and details are or will soon be available on the website of the banks. Many of these are freezing loan repayments – but you need to act and apply for this relief.

Your accountant or finance broker will be the best person to assist you if you want to approach your bank seeking assistance. We suggest you do so as soon as possible – you do not want to leave it until there is no cash in the bank.

Advertising and other expenses

Look at what you need, and what can be delayed or deferred for now.  Also consider your advertising channels – if you previously focused on the international market, you need to shift your focus to the local domestic market.

Employees

There are a myriad of issues surrounding employees at this time.  Issues like them being unable to work, caring for family members or children not in school, employees in quarantine or self-quarantine.  You should seek specific legal advice in relation to any action regarding employees. Transparency and honesty is very important in times of crisis.  Even if you need to terminate an employee because of the downturn, you will need to follow the relevant legislation, award and any employment agreement. Employers have rights to stand down employees without pay in certain circumstances. Stand down does not trigger redundancy and is often a better option.

Moving forward

None of us have a crystal ball which will accurately tell us when the crisis will end or where we will be when it does. There is much to play out in coming months but we remain confident that our industry can survive.  But you will need to get creative – what else can you do at your motel (obviously within council approvals and zoning)?  Can the rooms be let out on a longer term basis? Can your restaurant provide take-away? Are there any local hospitals or health care providers you can assist with accommodation? This obviously will not work for everyone but it just might keep someone out there afloat!

As you will appreciate, these insights are general guidance only and should not be relied on as legal advice. If any of these issues are affecting your specific business, please contact Mahoneys to obtain timely and practical legal advice on the actual issues you are facing.


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