2021 Retail Rent Relief – What Does It All Mean?

Eales & Mackenzie Lawyers Melbourne

By Charlotte Black

In response to the continuing COVID-19 pandemic and ongoing lockdowns faced by the Victoria population, the Victorian State Government has enacted further rent relief measures for eligible commercial tenancies.   This is known as the Commercial Tenancy Relief Scheme Act.  The legislation came into force on 28 July 2021 and will continue until at least 15 January 2022.

Whilst the introduction of this legislation is an important step forward for a numbering of suffering business, it is important to note that it merely enables the Government to introduce regulations which will further define the scheme.

Accordingly, whilst there is no relevant rent relief scheme available to parties as yet, it is important for both landlords and tenants alike to have regard to the anticipated particulars of the scheme legislation so they can be prepared when the regulations are enacted.

What leases will be eligible?

Similar to the legislation enacted during the lockdowns in 2020, a lease is likely to be eligible where it is a retail or a non-retail commercial lease.

Further, such eligibility may also extend to relevant licenses where they are prescribed however at this stage, it remains unclear as to what is determined as a ‘prescribed’ lease.

What relief is a tenant entitled to?

It is anticipated that, similar to the 2020 rent relief scheme, a tenant who has suffered a downturn of at least 30 percent and who have a turnover of less than $50 million will be entitled to rent relief.

As there is no longer the Jobkeeper scheme available to parties to prove a downturn in revenue, it is anticipated that a letter from the tenant’s accountant will be sufficient to prove your eligibility with regards to a tenant’s downturn.  A tenant would be entitled to have at least 50% of any reduction waived.

Furthermore, it is anticipated that should a tenant be paying off any deferrals relevant from previous agreements as to rent relief, they will be in a position to put a pause on these repayments whilst they remain eligible under this legislation.

For landlords, it is also anticipated that a tenant will have to meet a number of strict preconditions before making a rent relief application however these are still to be outlined by the legislature.  However, importantly, it is anticipated that any document which accompanies a rent relief application will likely need to be verified by a statutory declaration.

Can a lease be terminated whilst a tenant is receiving rent relief?

The legislation recommends that landlords be prevented from terminating leases who are eligible for rent relief for non-payment of rent.   Such a prohibition is similar to that of the 2020 scheme as it was determined that a tenant should not be evicted where their inability to pay rent is as a result of the impacts of the COVID-19 pandemic.

Further, Minister Martin Pakula has outlined that a landlord would be unable to evict their tenant for non-payment of rent unless the parties have attempted mediation.   Therefore, it is anticipated that parties will at least be required to mediate any dispute before eviction can occur.

Can rental be increased whilst a tenant is eligible for rent relief?  

Much like the 2020 rent relief scheme, it is anticipated that there will be a moratorium on a landlord’s ability to increase a tenant’s rent if the tenant has an eligible lease.

Can a landlord bring proceedings against a tenant?

One of the most concerning factors for landlords and tenants alike is the impact this legislation may have on, in particular, a landlord’s ability to lodge proceedings in VCAT with regards to a tenant’s non-compliance with their lease obligations.

It is anticipated that this legislation will require parties to not only negotiate in good faith and reach agreements as to rent relief but will also require parties to meet a number of pre-conditions, such as completion of a mediation, before proceedings can be commenced in VCAT.  Furthermore, it is anticipated that the new regulations will allow VCAT to take into account the conduct of both the tenant and the landlord in any dispute.

What does it all mean?

At this stage, it remains unclear as to many of the specifics of what this legislation will entail.  We do not at this stage know what a tenant’s obligation will be when making an application for rent relief.  Similarly, it is unclear what a landlord’s obligation is in relation to assessing such an application and providing rent relief.

However, what is abundantly clear is that both landlords and tenants must be ready to actively negotiate with each other as to rent relief when clear direction is provided by the government on these queries.

Many landlords may require guidance to ensure that their tenants have provided sufficient information as to an application for rent relief and ensuring that any rent relief is appropriately documented.

Many tenants may require guidance to ensure they are adhering to the legislation in making their application for rent relief.

At Eales & Mackenzie, we can assist with all aspects of rent relief applications whether you be a landlord or tenant.

Please contact Richard Mackenzie or Charlotte Black on (03) 8621 1000 for any advice on a retail rent relief application.

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