Thinking | 13 May 2020
Commercial Leases and Rent Relief in the time of COVID – the Victorian position
疫情期间商业租约及租金减免 - 维多利亚州相关措施及法规
Victorians finally have some certainty about how the National Cabinet Mandatory Code of Conduct will be implemented in this State, with the COVID-19 Regulations enacted on 1 May 2020 (but operating with effect from 29 March 2020). The Regulations create legally binding obligations which are generally, but not entirely, consistent with the Code. For a landlord and tenant to fall within the ambit of the COVID Regulations, a tenant must qualify for and be a participant in JobKeeper and must be an SME entity. If a tenant is not eligible under the Regulations, the landlord will continue to have all of its rights under the lease including relation to enforcement, taking security and termination. The same applies if a tenant is eligible but does not seek relief.
To seek rent relief the tenant has to write to the landlord seeking relief and must advise whether the Regulations apply to it, providing information that evidences that fact. If a landlord receives a complying request, it is obliged to offer “Rent Relief” within 14 days or longer if agreed. If it doesn’t, the clock does not start to tick on the tenant’s offer.
Rent Relief is defined as ‘any form of relief provided to a tenant in respect of the obligation under an eligible lease to pay rent, including a waiver, reduction, remission or deferral of rent.’ The Regulations state that a landlord must offer up to 100% of the rent payable and that the offer is to ‘provide that no less than 50% of the Rent Relief offered by the landlord must be in the form of a waiver of rent, unless a landlord and a tenant otherwise agree in writing.’ The Regulations do not prescribe how much Rent Relief a landlord must offer and do not explicitly require the offer to be proportionate to the reduction in turnover the tenant has experienced. A landlord’s own financial position has a bearing on the terms of the offer.
What should a Landlord offer contain?
The Regulations are quite specific about what the landlord’s offer must provide and we recommend that any offer letter, address the following matters as a minimum:
Rent Relief - the quantum and nature of the Rent Relief that the landlord is prepared to offer;
租金减免 - 业主准备提供的租金减免金额及性质；
Rent Waiver - a statement that under the Regulations up to 50% of what the landlord has offered is to be in the form of a waiver of rent unless the landlord and tenant otherwise agree in writing. If the landlord’s offer does not satisfy this requirement then the offer should state that the landlord is asking the tenant to agree to vary that position which consent would ultimately be documented in writing. It makes sense to include the consent in any final agreement documenting the arrangement;
租金豁免 - 根据规定，业主提出要约的最多50％将以租金豁免的形式提供，除非业主与承租人另有书面同意。若业主的要约不满足此要求，则要约应说明业主正在要求承租人同意变更此条款，最终将以书面形式记录在案。任何最终协议应记录双方就此事项达成的一致同意；
Relevant Period - A statement that the period relevant to the offer is the “relevant period” as defined under the Regulations being between 29 March 2020 and 29 September 2020;
Rent Reviews - If a rent review is scheduled to occur during the relevant period, this should be addressed. If the landlord intends that the rent review proceed, the offer should state that the landlord is asking the tenant to agree to vary that position and if agreed, such consent will be contained in the final agreement documenting this arrangement;
租约评估 - 若计划在相关期限内进行租金评估，则应在要约中提及。若业主有意进行租约评估，则要约应说明业主正在要求承租人同意变更此条款，就此事项记录在最终协议中；
Extension of Term - if any part of the Rent Relief is provided by way of a deferral of rent, the landlord must offer to extend the term of the lease for a period equivalent to the period for which rent is deferred or seek the tenant’s consent to vary that requirement;
延长期限 - 若租金减免的任何部分以租金延期的方式提供，则业主须提供延长租约的要约，延长的期限为租金延期的期限或征求承租人同意的延长期限；
Outgoings - as Landlords must consider waiving recovery of outgoings or other expenses for any period where a tenant cannot operate its business, we suggest the offer expressly address outgoings or expenses and set out the landlord’s position, or the landlord retain a file note summarising its considerations in relation to this aspect of the offer, noting why in all of the circumstances, the landlord’s position was adopted; and
开支 - 业主须考虑在承租人无法开展生意的期间豁免其支付开支或其他费用，因此我们建议要约中应明确说明支出或费用并列出业主的立场，或业主保留一份文件摘要以总结其关于要约的考量，注明在考虑所有情况下业主会采取该立场的缘由；及
Amortisation of Rent - the period over which any deferred rent is to be repaid. The offer must provide for the amortisation of any deferred rent over the greater of the balance of the term or 24 months, unless otherwise agreed.
租金分摊 - 偿还任何延期租金的期限。除非另有约定，否则要约必须规定在任何剩余的租约期或24个月中的较长者中分摊支付任何延期的租金。
What if the tenant does not accept the Landlord’s offer?
The Landlord and the tenant are required to cooperate and act reasonably and in good faith to try to agree a variation to the lease based on the tenant’s position and the Landlord’s offer. If agreement cannot be reached, either party may refer the matter to the Small Business Commissioner for mediation. The Small Business Commissioner does not have the power to make a binding determination about any Rent Relief but will assist the parties to reach a mutually agreed outcome. If that does not occur, either party can refer the dispute to the Victorian Civil and Administrative Tribunal or the Supreme Court. The dispute will be treated as a dispute under the Retail Leases Act 2003 so each party will need to bear its own costs. It could be expensive and time consuming to resolve a dispute and we expect that this will incentivise parties to reach agreement in many circumstances.
Is an Agreement final?
No. A tenant is entitled to make another request of a Landlord if its financial circumstances change materially during the relevant period. This would start the process all over again.
However, importantly, when agreement is reached and documented a tenant is obliged to comply with that agreement (unless and until further varied) and a Landlord is not prohibited from ending the lease, calling on any security, or re-entering the premises if the tenant does not comply with the agreement, for instance by failing to pay the agreed revised rental amount.
We expect to see a flurry of activity in the market with eligible tenants and landlords now seeking to finalise and document Rent Relief. We recommend that any agreements be formally documented by way of a variation of lease to ensure that the arrangement is certain and binding on both parties.
For more detail, click on the following clinks to access our other published articles:
Each State is dealing with this slightly differently – click here for an update on each State:
For more information about rent relief and the impact of coronavirus on your business please contact us.
 《2020年COVID-19综合（紧急措施）（商业租赁及执照）法规 》(COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020).
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