Extension on the Commercial Tenancy Relief Scheme in Victoria

Extension on the Commercial Tenancy Relief Scheme in Victoria

Extension on the Commercial Tenancy Relief Scheme in Victoria

On 20 August 2020, the Victorian premier announced that the government would extend the Commercial Tenancy Relief Scheme until 31 December 2020. Our previous article on the initial rent relief measures can be viewed here

The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (Regulations) was then amended and took effect from 29 September 2020.

The Regulations now impose more prescriptive requirements on a tenant’s request for rent relief. A landlord’s offer of rent relief no longer needs to relate to the whole of the ‘relevant period’ but rather only from the date that the landlord receives a compliant rent relief application from the tenant. Accordingly, it is now crucial that a tenant’s rent relief request meets the requirements under the Regulations from the date the request is made.

A summary of the key changes to the Regulations are as follows:

Extension to the Regulations

The operation of the Regulations has been extended from its original end date of 29 September 2020 to 31 December 2020.

Moratorium extended to non-payment of outgoings

A landlord is now prohibited from terminating eligible leases, taking possession or drawing on a tenant’s security for the non-payment of outgoings during the Relevant Period.

Definition of Eligible Leases expanded

An ‘eligible lease’ is a retail/non-retail commercial lease or licence that was in effect on 29 March 2020 and under which the tenant:

  1. is an SME entity;[1]and
  2. is an entity entitled to a jobkeeper payment[2] under the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth).[3]

The requirement that the tenant must be an ‘employer’ has been removed.

Excluded leases

A tenant who is a member of a prescribed group and agricultural leases remain excluded under the Regulations.[4]

Tenant’s rent relief request

The requirements of a tenant’s rent relief request have been modified. The key additional changes are:

  1. The request must set out the decline in turnover that is associated with the premises only[5];
  2. The tenant must provide specified evidence to verify that it is entitled to JobKeeper payment[6];
  3. The tenant must provide evidence of the tenant’s decline in turnover which must include at least one of the following:[7]

(a) extracts from the tenant’s accounting records;

(b) the tenant’s business activity statements relating to the relevant turnover test period;

(c) statements issued by an ADI[8] in respect of the tenant’s account;

(d) a statement prepared by a practising accountant.

Landlord’s rent relief offer

The key changes are:

  1. A landlord is only required to offer rent relief from the date of the tenant’s rent relief request until 31 December 2020.[9]
  2. A landlord’s offer of rent relief must, at a minimum, be proportionate to the decline in a tenant’s turnover associated with the premises;[10]
  3. A landlord can no longer take into account its own financial ability to offer relief.

The Regulations also address the effect of a tenant ceasing to be on JobKeeper scheme. Generally, if a tenant was on JobKeeper scheme when it made its request for rent relief, then the lease remains eligible.[11]

Rent deferral

If a landlord offers to defer the rent, the deferred payment must not commence until after 31 December 2020. This applies retrospectively to any agreement for deferred payment prior to the commencement of the new Regulations.

No rent increase

Unless the parties agree otherwise in writing, a landlord must not increase the rent payable under an eligible lease at any time during the Relevant Period.

Tenant’s ability to request further rent relief

A tenant may make a further request for rent relief if an agreement on rent relief has been reached with the landlord and:

  1. the tenant’s financial circumstances has materially changed; or
  2. the prior rent relief agreement was made to 29 September 2020 and was not proportionate to the tenant’s decline in turnover; or
  3. the prior rent relief agreement did not apply up until 31 December 2020.

Compulsory mediation

A landlord or a tenant may refer a rent relief dispute to the Victorian Small Business Commission (VSBC) for mediation.

Binding Orders

The VSBC has power to issue binding orders on rent relief to the landlord in circumstances where a mediation has failed or unlikely to resolve the rent relief dispute.

Either party may apply:

  1. to VSBC for the binding order to be revoked or amended; or
  2. to VCAT for a review of any substantive decisions made by the VSBC under the binding order process or in relation to enforcement of a binding order.

Court proceedings if dispute is not resolved at mediation

The parties must obtain a Regulation 20A Certificate from VSBC before commencing legal proceeding at either VCAT or a court (other than the Supreme Court).                   

[1] being an entity that had less than $50M in turnover in either or both of the previous and/or current financial year;

[2] As defined in section 4 of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth).

[3] Refer to section 6, 11 or 12A of Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth).

[4] Refer to our previous article which can be viewed at https://dcc.com/news-articles/covid-19-temporary-relief-measures-for-landlords-and-tenants-of-eligible-leases-in-victoria/.

[5] New regs 10(2A) specifies that the tenant’s decline in turnover must expressed as a while percentage and calculated consistently with the actual decline in turnover test applying to the tenant relating to the most recent turnover test period applying to the tenant.

[6] The tenant should provide the receipt issued by the Commissioner of Taxation and a copy of the tenant’s most recent notice under the JobKeeper rules to the Commissioner of Taxation.

[7] See new regs 10(2)(c) of the Regulations.

[8] Authorised deposit taking institution.

[9] Previously under the old Regulations, a landlord’s rent relief offer applies to “the relevant period” (being 29 March 2020– 29 September 2020). However, any new applications for rent relief under the new Regulations will apply only to the period between the new request for rent relief and 31 December 2020.

[10] This should be consistent with the requirements set out in new regs 10(2)(a)(iii) of the Regulations.

[11] See new regs 24B and 24C of the Regulations.

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