COVID-19 Leasing -October Update

We refer to our previous article dated 11 May 2020 about the Commercial Tenant Relief Scheme provided by the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (the Regulations).

This article is intended to provide an update regarding the key amendments to the Regulations introduced by the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations 2020 (the Amending Regulations) which came into force in Victoria on 29 September 2020.

Extension Period

The Amending Regulations have extended the operation of the Regulations from the previous end date of 29 September 2020 to 31 December 2020 (Extension Period). However, the Amending Regulations will not apply retrospectively (that is, the Regulations will continue to apply in relation to the period from 29 March 2020 to 29 September 2020).

As a consequence, landlords cannot increase rent and evict tenants for non-payment of rent until 31 December 2020. The extension now also includes preventing evictions for non-payment of outgoings.

In addition, payments of deferred rent by tenants have now been extended to after 31 December 2020.

Eligible lease

The eligibility criteria under the Amending Regulations remains unchanged except that tenants who are sole traders are now also eligible for relief during the Extension Period.

Calculation of rent relief

The Amending Regulations have introduced a formula for calculating rent relief in that an offer of rent relief by a landlord must be, at a minimum, proportional to the decline in the tenant’s turnover associated with the premises (and no other premises).
The parties to rent relief negotiations must also bear in mind that:

  • an offer by a landlord must relate to the period commencing on the date the tenant makes a request for rent relief.
  • the landlord’s financial situation is not a relevant consideration for determining the relief in the Extension Period (this is a change from the Regulations).
  • landlords must divide the proportional rent relief between waiver and deferral, the waiver must constitute at least 50% of the relief.

A tenant may make a further request for rent relief during the Extension Period if:

  • its financial circumstances have materially changed; or
  • there is a rent relief agreement that is not proportionate to the tenant’s decline in turnover; or
  • the agreement does not apply from the date of the request to 31 December 2020.

Request for rent relief

If a tenant seeks relief for the Extension Period, a new compliant request must be made to a landlord. Importantly,
any agreement reached between the landlord and tenant only takes effect from the date of the request by the
tenant. Therefore, tenants should make requests as soon as possible.

In order to comply with the Amending Regulations, a tenant’s request must now be accompanied by:

  1. A statement from the tenant that:
    (a) the lease is an eligible lease (that is, a lease subject to the Retail Leases Act 2003 (Vic));
    (b) the lease is not excluded from the operation of the Regulations; and
    (c) the tenant is a small to medium enterprise as defined in the Regulations with a turnover under $50m; and
    (d) the tenant qualifies for and is participating in the JobKeeper scheme.
  2. Information that evidences the tenant:
    (a) has a turnover under $50m;
    (b) is participating in the JobKeeper scheme (including the tenant’s JobKeeper receipt number and a copy of
    the tenant’s most recent notice to the ATO under the JobKeeper scheme).
  3. Details of the tenant’s decline in turnover that is associated with the premises (and no other premises). The
    decline should be calculated in accordance with the decline in turnover test utilised by the tenant in respect of
    their JobKeeper application and for the most test period, expressed as a percentage.
  4. Information that evidences the tenant’s stated decline in turnover including at least one of (for the relevant
    (a) extract from the accounting records;
    (b) BAS;
    (c) statement issued by an ADI; or
    (d) a statement by a practising accountant.

Victorian Small Business Commission (VSBC)

The VSBC has been granted the power to make binding orders with respect to rent relief during the Extension
Period, on application by a tenant.

By the introduction of a prescriptive calculation for rent relief under the Amending Regulations, it is expected that
the need for dispute resolution or determination will be reduced but not discarded.

It is imperative for tenants make their requests for rent relief as soon as possible given they are only entitled to
rent relief from the date of their request to their landlord.

If you have any specific concerns or questions, please do not hesitate to contact our office to discuss.

Scott Legal can assist landlords and tenants with guidance, negotiation and drafting agreements to vary leases.

This article contains comments of a general nature and is not intended to be relied upon. No responsibility will be
accepted by the author for any loss arising from reliance on this article. Legal advice should be sought in respect to
your specific circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

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