Commercial Tenancy Rent Relief Scheme – as extended from 29 September 2020 to 31 December 2020
What is the new extended scheme?
The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (Amending Regulations) were published with effect from 29 September 2020.
The Amending Regulations vary and extend the operation of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (Regulations)
What are the changes under the Amending Regulations?
Firstly the rent relief is extended until 31 December 2020. Similarly, the moratorium on commercial tenancy eviction for non-payment of rent is also extended to 31 December 2020. Which means, the landlord cannot evict a tenant for non-payment of rent. The moratorium has now extended to non-payment of outgoings as well.
Regulations 9 and 18 have been amended to clarify that a landlord will not be prevented from terminating a lease or recovering possession of the land for defaults or circumstances other than non-payment of rent or outgoings or reduction or cessation of trade
What actions do the tenants need to take under the new Amending Regulations?
Tenants are required to submit a new request which must be accompanied by specific information relating to the tenants decline in turnover.
The VSBC provides a template letter which may also be accessed here. Tenants must complete that letter and submit to the landlord. The relief provided by the landlord will commence from the date the tenant submits that letter. THEREFORE TENANTS MUST MAKE THEIR APPLICATIONS AS SOON AS POSSIBLE.
This means that a tenant who delays in making a rent relief request (or whose request does not strictly comply with the Regulations) will be denied the benefit of the regulations until such time as a compliant request is made.
What relief must the landlord provide under the amending regulations?
Previously landlords were encouraged to offer genuine rent relief. Now, at a minimum, the landlord must offer a relief proportional to the decline in the tenant’s turnover. So if your business has been shut and your decline is 100%. Then the relief is 100% in the form that 50% of rent is waived and 50% of rent is deferred over the period of two years or the balance of the term.
How do you calculate the decline in turnover?
The tenant will need to provide information relating to the decline in turnover. They must provide at least one of the following:
- extracts from the tenant’s accounting records;
- the tenant’s business activity statements 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.
The turnover is calculated with reference to that premises only. The turnover calculation excludes coronavirus economic response payments (ie job keeper payments are not part of the turnover calculation).
What happens if tenants already had agreements with landlords under the previous scheme that are came to an end on 29 September 2020
Tenant may make a further request for rent relief 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.
When does payment of deferred rent begin?
The Amending regulations prevent the landlord from recovering deferred rent from 29 September. The deferred rent will now become payable after 31 December 2020.
What do I do if my landlord does not accept my request?
You may make an application to VSBC by clicking here. The VSBC will then write to the landlord seeking their response. They will then list the matter for a free mediation.
What if the landlord doesn’t mediate or respond to VSBC?
Under the amending regulations, the VSBC has the powers to make binding orders in relation to rent relief upon application by the tenant
Most importantly, the definition of an eligible lease has not changed. Therefore any leases entered into after 29 March 2020 are not captured.
VSBC’s FAQs page that is regularly updated with information about the Regulations: https://www.vsbc.vic.gov.au/fact-sheets-and-resources/faqs/