On 29 September 2020 the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations 2020 (“The Amending Regulations”) came into effect.
The Amending Regulations extend the operation of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (“the Regulations”) from 29 September 2020 to 31 December 2020.
This article highlights some the key changes to the rent relief process established by these Amending Regulations.
Who is eligible?
An eligible lease must have been in existence at the commencement date of the Regulations on 29 March 2020. The Regulations now define an eligible lease as a retail lease or a non-retail commercial lease or licence under which the tenant is:
- an SME entity (with an annual turnover of less than $50 million); and
- an entity entitled to JobKeeper payments.
What is the process for rent relief from 30 September 2020?
The Amending Regulations create a new process for rent relief for the period 30 September 2020 to 31 December 2020.
If a tenant with an eligible lease would like rent relief from 30 September 2020 to 31 December 2020 they must make a compliant request to their landlord.
The Amending Regulations have increased the information required to accompany a tenant’s request for rent relief. A tenant now must make a written request for rent relief accompanied by:
- A statement from the tenant:
- that the tenant's lease is an eligible lease; and
- that the lease is not excluded from the legislation for the Commercial Tenancy Rent Relief Scheme; and
- setting out the tenant's decline in turnover that is associated with the premises and no other premises; and
- Information that evidences that the tenant is:
- an SME entity; and
- an entity entitled to JobKeeper payments including the tenant’s JobKeeper receipt number issued by the Commissioner of Taxation and a copy of the tenant’s most recent notice to the Commissioner of Taxation under the JobKeeper rules; and
- Information that evidences the tenant’s stated decline in turnover, including 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 authorised deposit-taking institution in respect of the tenant’s account;
- a statement prepared by a practising accountant.
The tenant’s decline in turnover should be expressed as a whole percentage and based on the decline in turnover test applied by the tenant for JobKeeper with respect their most recent decline in turnover test period.
After the landlord receives the request for rent relief, they must offer rent relief to the tenant within 14 days, or longer by agreement.
The Amending Regulations have changed the requirements of the landlord’s offer of rent relief.
The landlord’s rent relief offer must be based on all the circumstances of the eligible lease and
- relate up to 100% of the rent payable under the eligible lease during the period starting on the date of the tenant's compliant rent relief request and ending on 31 December 2020;
- provide that no less than 50% of the rent relief offered by the landlord must be in the form of a waiver of rent, unless a landlord and a tenant otherwise agree in writing;
- be, at a minimum, proportional to the decline in the tenant's turnover associated with the premises and no other premises consistent with the evidence provided by the tenant (expressed as a whole percentage and based on the decline in turnover test applied by the tenant for JobKeeper with respect their most recent decline in turnover test period); and
- apply to the period starting on the date of the tenant's compliant relief request request and ending on 31 December 2020;
Significantly, relief may only apply from the date the tenant’s compliant rent relief request is made to the landlord. For example, if a tenant requests rent relief on 1 October 2020 but does not provide all of the required information until 10 October 2020, their landlord is only obliged to make a rent relief offer from 10 October 2020. It is therefore important for a tenant to request rent relief and provide the required information to their landlord as soon as possible.
Following receipt of a landlord's offer by a tenant, the tenant and the landlord must negotiate in good faith with a view to agreeing on the rent relief from 30 September 2020 to 31 December 2020.
When must tenants pay deferred rent?
Notably, the Amending Regulations have postponed payment of deferred rent until 31 December 2020. This also applies to any deferred rent under rent relief agreements made under the Regulations before the Amending Regulations came into force.
Can tenants get subsequent rent relief?
A tenant’s entitlement to subsequent rent relief has changed. A tenant may make a further request for rent relief if:
- Subsequently, the tenant’s financial circumstances have deteriorated; or
- A rent relief agreement has already been reached before the Amending Regulations but does not have rent relief proportionate to the tenant’s decline in turnover or does not extend to 31 December 2020.
The tenant and landlord must follow the same process as outlined above which means that the additional relief will only apply from the date the tenant’s compliant request is made.
Further, no less than 50% of the subsequent rent relief offered by the landlord must be in the form of a waiver of rent.
What should tenants and landlords do going forward?
If you are a tenant with an eligible lease seeking rent relief from 30 September 2020 to 31 December 2020, you should make a request for further rent relief as soon as possible and ensure that you have collected your required supporting loss of turnover information for that purpose.
If you are a landlord with a tenant who is seeking rent relief from 30 September 2020 to 31 December 2020, this will be a separate process to be assessed separately upon the tenant requesting rent relief with new information.
Where can I find further details?
As Accredited Property Law Specialists, we are well equipped to advise you of your rights and obligations. Should you have any questions on how the Amending Regulations may impact you, or if you need assistance in negotiating your position in a lease, please contact us on 1300 205 506.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
Liability limited by a scheme approved under Professional Standards Legislation.
For further information contact
Andre is a Principal of Sharrock Pitman Legal.
He heads our Property Law Group and is an Accredited Specialist in Property Law (accredited by the Law Institute of Victoria). He also deals with Commercial Law. For further information, contact Andre Ong on his direct line (03) 8561 3317.