Changes to Victorian Commercial Tenancy Relief Scheme now in force

By Emily Kyriacou

Much-anticipated changes to the Victorian Commercial Tenancy Relief Scheme have been released and are now in force – from 29 September 2020. Here’s what commercial landlords and tenants need to know.

The new COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations 2020 (Vic) amend the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (together, the Regulations).

How have the Regulations changed?

• The Regulations are extended to 31 December 2020.
• The definition of ‘eligible lease’ has been amended so that the tenant does not need to be an employer.
• Any amount received as part of a coronavirus economic response payment must not be included when assessing the tenant’s turnover.
• The tenant’s request for rent relief must set out the tenant’s decline in turnover that is associated with the premises (and no other premises), supported by specific information.
• The Regulations clarify that an eligible lease cannot be terminated for failure to pay rent or outgoings where a request for rent relief has been made in accordance with the Regulations.
• The landlord’s offer for rent relief must be, at a minimum, proportional to the decline in the tenant’s turnover associated with the premises. There is no longer a requirement for the landlord’s offer to take into account the landlord’s financial ability to offer rent relief.
• A landlord’s offer for rent relief must relate to the period starting on the date the tenant makes its rent relief request and ending 31 December 2020.
• Where the parties have reached agreement about rent relief, a tenant may make a further request for rent relief if:
  • the tenant’s financial circumstances have materially changed;
  • the agreement struck by the parties is not, at a minimum, proportional to the decline in the tenant’s turnover associated with the premises; or
  • the agreement does not relate up to 31 December 2020.
• A landlord cannot request payment of any deferred rent until 31 December 2020 (amended from 29 September 2020).
• The Regulations grant additional powers to the Small Business Commissioner to grant binding orders for rent relief between the parties.

What does this mean for you if you have already entered into a rent relief deal?

• You may still be able to seek further rent relief, depending on your financial circumstances.
• If you are a tenant under an eligible lease and your rent relief package does not offer, at a minimum, rent relief which is proportional to the decline in the tenant’s turnover associated with the premises, it may be worthwhile for you to submit a further request for rent relief as soon as possible. Note, the landlord’s offer must relate to the period from the date the offer is made until 31 December 2020. It will be crucial to ensure your request complies with the Regulations to ensure you receive the longest period of rent relief.
• If you are a landlord and you have agreed to defer rent payments to 29 September 2020, this date is, in effect, amended to 31 December 2020.

What if you have not entered into a rent relief deal?

• If you have an eligible lease (see our previous article which explains this term) and you are a tenant, you should submit your offer for rent relief to your landlord as soon as possible.
• If you are a landlord, you do not need to take any action until a request for rent relief is received. If you do receive a request for rent relief, to avoid escalation of a dispute to the Small Business Commissioner, it will be necessary to ensure the landlord’s offer for rent relief is at a minimum, proportional to the decline in the tenant’s turnover associated with the premises.  Care should be taken to ensure the information provided by the tenant demonstrating its decline in turnover directly relates to the premises.

What if you have entered into a lease after 29 March 2020?

• You are not entitled to the benefits of the Regulations.