COVID-19 Rent Relief Regulations for Commercial Leases & Licences

The COVID-19 Commercial Leases and Licences Regulations have been amended to extend the relevant period for rent relief to 31 December 2020.

There are also a number of other significant changes including the following:

  1. A Tenant who is an SME and on JobKeeper is no longer required to also be an employer in order to be eligible under the Regulations.
  2. The prohibition against evicting a Tenant for non-payment of rent for Tenants who have complied with the Regulation (by requesting rent relief and providing the required data) has now been extended to include non-payment of outgoings as well as non-payment of rent.
  3. The Tenant under an eligible Lease must now provide significantly more information when requesting rent relief from the Landlord including evidence confirming the Tenants decline in turnover and further JobKeeper information amongst other things.
  4. Whilst the Victorian Small Business Commission (VSBC) has now the power to make a binding determination for rent relief, this power is limited to circumstances where a Landlord has failed to respond to a Tenant’s application for rent relief or has failed to negotiate in good faith. An application for a Binding Order can only be made by a Tenant, and any binding determinations made by the VSBC are subject to review.
  5. Importantly, the Regulations now directly link the rent relief which the Landlord is required to offer to a Tenant to the Tenant’s downturn in turnover during the relevant period from the date of a rent relief request.
  6. After receipt of a Tenant’s request for rent relief under Regulation with all of the required information, a Landlord must offer rent relief to the Tenant within 14 days (unless a different time frame is agreed in writing between the parties) and that offer of rent relief must be based on all of the circumstances of the eligible Lease and:

a. Relate to up to 100% of the rent payable under the eligible Lease during the period commencing on date of the Tenant’s request for rent relief and ending on the 31 December;
b. 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 both parties agree otherwise in writing);
c. Be at a minimum proportional to the decline in the Tenant’s turnover associated with the premises consistent with the Tenants statement when requesting rent relief;
d. Apply to the period starting on the date of the Tenant’s request under the Regulations and ending on 31 December;
e. Take into account:

i. Any waiver already given by the Landlord with respect to outgoings or other expenses payable by the Tenant;
ii. Whether a failure to offer sufficient rent relief would compromise a Tenant’s capacity to fulfil its ongoing obligations under the Lease including payment of rent; and
iii. Any reduction to outgoings charges imposed or levied in relation to the premises.

Any portion of rent which is deferred (and not waived) must comply with Regulation 16. The Landlord must not request payment of that deferred rent or any part of that deferred rent until after 31 December 2020. The deferred rent is to be amortised and payable over the greater/of:

a) The balance of the term of the Lease (including any extensions see below); and
b) A period of no less than 24 months.

Eligible Leases are taken to provide that if the payment of rent is deferred pursuant to an agreement reached under the Regulations, the Landlord must offer the Tenant an extension to the term of the Lease equivalent to the period for which rent is deferred (unless both parties agree otherwise in writing).

This publication does not deal with all of the amendments to the Regulations and is merely a summary of some of the key terms. It is important therefore that both Landlords and Tenants obtain legal advice to ensure that they understand their obligations including with respect to the requirement of an extended term.

Author: Cathy Drake