The Commercial Tenancy Relief Scheme Regulations have arrived and apply for the period from 16 January 2022 to 15 March 2022

By Evelyn Marcou, Principal

On 1 February 2022 the Commercial Tenancy Relief Scheme Regulations 2022 (“the 2022 Regulations”) were brought into effect in Victoria. The 2022 Regulations are substantially the same as the 2021 Regulations and cover the period from 16 January 2022 to 15 March 2022.

Some things to note are:

• The 2022 Regulations apply to leases in effect from 16 January 2022, so new leases will also be able to apply for rent relief.
• The extension applies only to tenants or corporate groups with a turnover of less than $10M, which is down from $50M in the previous versions of the CTRS.
• To qualify as an “eligible tenant” a tenant must:
• be ‘small entity’, being an entity with turnover in 2020/21 of less than $10,000,000 (a substantial reduction on the $50,000,000 that applied through 2020 and 2021);
• have, as at 16 January 2022, carried on business (or been a non-profit body or deductible gift recipient); and
• satisfy the decline in turnover test (ie. 30% lower than its turnover during the relevant comparison period). For the majority of leases the turnover test period is January 2022 and the comparison period is January 2020.
• Some special rules and alternative comparison periods which reflect (but are not identical to) the 2021 Regulations do apply. Most relevantly if the tenant started trading after 1 January 2020 the ‘comparison period’ turnover will effectively be their average monthly turnover from the date they commenced trade to 31 January 2022) .
• The definition of ‘turnover’ continues to include Victorian government COVID-19 business support grants received by the tenant during the relevant period.
• The request process (and the subsequent process for offering relief) mirrors the process under the 2021 Regulations.
• A tenant will be entitled to relief for the period 16 January 2022 – 15 March 2022 provided it makes a request and provides relevant evidence while the Regulations are still on foot (that is on or before 15 March 2022).
• The form and content of a tenant’s request for rent relief is largely unchanged.  There does not appear to be a deadline for the retrospective application of the 2022 Regulations, however, tenants should make their requests for rent relief as soon as possible.  
• The new regulations do not expressly address whether a new request for rent relief must be made if the landlord and tenant are still negotiating about rent relief for the period 28 July 2021 to 15 January 2022.    Consequently, it is prudent for tenants who are still negotiating rent relief for 28 July 2021 to 15 January 2022 to make a fresh request under the new regulations as soon as possible.
• Payment of deferred rent under previous agreements for rent relief has been pushed back to 15 March 2022.
• The prohibition on rent increases remains. Landlords cannot apply a rent review that would have occurred between 16 January 2022 and 15 March 2022. 
• The principles of proportionality continue to apply (that is with a minimum obligation on a landlord to apply reduction in rent that is proportional to the tenant’s decline in turnover with at least half of the reduction waived (the other half deferred)).
• Eligible Tenants will not be in breach if the tenant does not pay rent or outgoings but, as per the 2021 Regulations, tenants will only receive that protection if they have made a valid request and have continued to pay rent, reduced by their stated decline in turnover.
• If rent has been deferred under the 2020 or 2021 Regulations and the tenant remains an eligible tenant who has requested rent relief under the 2022 Regulations then the 2020 and 2021 deferral repayments will be paused until 15 March 2022.

The Frequently Asked Questions on the website of the Victorian Small Business Commission are available here:

https://www.vsbc.vic.gov.au/fact-sheets-and-resources/faqs/

If you require any assistance, please contact Evelyn Marcou on 0409 384 025 or evelyn.marcou@mst.com.au.