COVID-19: Commercial leasing regulations update
Important amendments to the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) have now come into effect. Here we outline the new information regarding rent relief that both tenants and landlords need to know.
The Victorian Government published the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations 2020 (Vic) on 29 September 2020 (“Amending Regulation”). As the name suggests, the Amending Regulations amend the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (“Original Regulations”) published on 1 May 2020.
The important amendments which came into effect from 29 September 2020 are as follows:
1. Extension of the ‘relevant period’
Under the Original Regulations the ‘relevant period’ extended from 29 March to 29 September 2020. The Amending Regulations define the ‘relevant period’ as the period commencing on 29 March 2020 and ending on 31 December 2020. There is the possibility that the relevant period may be extended again;
The Amending Regulations continue to apply to retail and non-retail leases and licences (excluding agricultural) which are ‘eligible leases’ meaning:
- the lease/licence(referred to as ‘lease’ in this article) was on foot on 29 March 2020;
- the tenant/licensee (referred to as ‘tenant’ in this article) is an SME entity (annual turnover in the current financial year expected to be less than $50 million or turnover for 2019/2020 of less than $50 million);
- the tenant/licensee is an entity participating in the JobKeeper Scheme. The requirement that the tenant must be an ‘employer’ has been removed.
3. Rent-relief request
A tenant requesting rent relief must now provide:
- a statement that the tenant’s lease is an eligible lease and that the lease is not excluded from the operation of the Regulations under section 13(3) of the Act and that sets out the tenant’s decline in turnover that is associated with the premises (and no other premises);
- evidence that the tenant is receiving Jobkeeper including the receipt issued by the Commissioner of Taxation when the tenant elected to participate in the JobKeeper Scheme, and a copy of the tenant’s most recent notice under the JobKeeper rules to the Commissioner of Taxation;
- information that evidences the tenant’s decline in turnover (expressed as a whole percentage) including at least one of the following: extracts from the tenant’s accounting records; the tenant’s BAS relating to the relevant turnover test period; statements issued by an ADI in respect of the tenant’s account; a statement prepared by a practising accountant).
4. Landlord’s offer
The landlord’s rent relief offer must be made within 14 days after the landlord receives the tenant’s offer (unless a different time frame is agreed in writing) and apply from the date the tenant makes a complying rent relief request until 31 December 2020. All tenants, including tenants who have previously made a rent-relief request wishing to seek rent relief for the period 30 September 2020 – 31 December 2020 should make a rent request without delay. The offer must at a minimum be proportional to the tenant’s decline in turnover associated with the premises. This means that online sales and turnover at other premises leased by the tenant are not to be considered. In making an offer the landlord’s financial ability to offer rent relief is no longer a consideration. A coronavirus economic response payment received by the tenant is not included in the definition of ‘turnover’.
5. Deferred rent
The Amended Regulations provide that a landlord must not request payment of any agreed deferred rent until 31 December 2020. This applies to any rent deferred by variation/agreement prior to 29 September 2020. The requirement that deferred rent is to be paid over the greater of balance of the term and 24 months remains unchanged.
6. Moratoriums on evictions
The moratorium on evictions for non-payment of rent during the period 29 March 2020 – 31 December 2020 has been redefined to include the non-payment of outgoings.
7. Subsequent rent relief
A tenant can request subsequent rent relief following the procedure discussed in 3. above if:
- the tenant’s financial circumstances have materially changed; or
- the rent relief previously agreed was made prior to 29 September 2020 and was not proportionate to the tenant’s decline in turnover associated with the premises; or
- the rent relief provided does not apply to the whole of the period commencing on the date of the tenant’s request and ending on 31 December 2020.
8. Binding orders for rent relief
Where “it is fair and reasonable in all the circumstances”, the Victorian Small Business Commission (VSBC) has been given the power to make a Binding Order for rent relief upon application by a tenant under an eligible lease if:
- no agreement has been reached; and
- the VSBC has issued a certificate certifying that mediation has failed or is unlikely to resolve the dispute; and
- the tenant has not commenced proceedings in VCAT or a court.
A copy of discussion relating to the Original Regulations can be found here: https://www.hocw.com.au/blog-news/2020/may/covid-19-rent-relief-rights-and-responsibilities-of-landlords-and-tenants/
We can help…
Whether you are a tenant or landlord, and you'd like some assistance in working out your rights and responsibilities during this uncertain time, please contact our Commercial leasing team on 03 9550 4600.