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Commercial Tenancy Rent Relief Scheme Extended

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By Maxim Oppy, Law Clerk and Alicia Hill, Principal, MST Lawyers

In response to the continuing impacts of COVID-19 on the Victorian economy, the State Government recently passed the COVID-19 Commercial and Residential Tenancies Legislation Amendment (Extensions) Act 2020 (Vic) (the Act). This extends the Commercial Tenancy Rent Relief Scheme introduced earlier this year, and introduces several changes aiming to assist both commercial tenants and landlords through financial hardship.

Extension of Eviction and Rent Increase Moratoriums

For eligible leases, the prohibition on eviction for non-payment of rent and prohibition on rent increase is extended until 31 December 2020. Eviction for breaches not related to payment, such as property damage, is still allowed.

Eligible leases are currently those by small to medium enterprises (SMEs) with an annual aggregate turnover under $50 million who have suffered at least a 30% reduction in turnover since March 29 2020. However, the Act allows for eligibility requirements to be adjusted in the future. To see how turnover is determined, please see MST Lawyers’ article here.

The Act also provides potential for the prohibitions to be extended up to 26 April 2021 by further regulations.

Inclusion of Sole Traders

From 1 October 2020, sole traders taking part in JobKeeper will be able to access the Commercial Tenancy Relief Scheme and seek rent relief from the date they apply to their landlord until 31 December 2020.

Requirement of proportional rent relief

Rent relief offered by commercial landlords must be in proportion to the fall in turnover experienced by their tenant due to COVID-19. This relief must apply from the date their tenant applies until 31 December 2020. Further, the rent reduction must be made up of at least 50% rent waiver, not just rent deferral.

Rent relief agreements already in place will be allowed to continue even if the relief is not proportional, however, a tenant can request further rent relief in proportion to the reduction in turnover from the date of their further application.

Empowering the VSBC

The Victorian Small Business Commissioner (VSBC) can currently provide assistance to commercial tenants and landlords by mediating rent relief disputes free of charge.

The powers of the VSBC will be increased by regulations, allowing them to make a binding order for rent relief if a landlord refuses to respond to rent relief requests or fails to negotiate in good faith. The VSBC will also be able to make binding orders relating to the process for rent relief applications. For more information on the services provided by the VSBC, see their website here.

Mediation agreements signed by both parties will be able to be enforced by VCAT.

Support for Commercial Landlords

While the Act is largely focused on the needs of commercial tenants, it also provides some support for landlords. Under the Commercial Landlord Hardship Fund, eligible small commercial landlords can apply for a grant of $3000 per tenancy. The Act also provides for a 2020 land tax waiver of up to 50% (increased from 25%) for landlords who provide a rent waiver to their eligible tenants of 50% over three months.

Commercial considerations

The changes described above provide assistance to both landlords and tenants as to the commercial tenancy landscape for the coming months, and should enable negotiations to continue where necessary.

Further changes to the scheme are likely to be made through regulations as Victoria’s economic situation evolves into 2021. MST Lawyers will continue to provide updates on the most important changes impacting commercial tenants and landlords.

Tenants experiencing financial hardship, and landlords whose tenants are struggling to make rent payments are encouraged to communicate with one another early and, if appropriate, seek out legal advice to resolve and potential disputes.

Please contact Alicia Hill on (03) 8540 0200 or Alicia.hill@mst.com.au if you have any questions regarding this article or require any advice regarding commercial tenancies.