New Landlord and Tenant Regulations

Victoria’s emergency pandemic commercial leasing regulations came into effect as from 1 May 2020, bringing into law the Federal Cabinet’s commercial leasing Code with some exceptions and additions.

The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (Regulations) apply from 29 March 2020 to 29 September 2020 granting a right to rent relief for tenants who qualify as an SME and are eligible participants under the JobKeeper scheme.

The process under the Regulations requires that:

  • the tenant must make the request for rent relief in writing to the landlord accompanied by:
  • a statement by the tenant that the tenant’s lease is an eligible lease; and
  • the tenant must provide information that evidences that the tenant is an SME and qualifies for, and is a participant in, the JobKeeper scheme.
  • On receipt of the request the landlord must then offer rent relief within 14 days of receiving the tenant’s request.
  • The landlord’s offer to the tenant, based on all the circumstances must:
  • relate to 100% of the rent payable during the relevant period; and
  • provide that no less than 50% of the rent relief offered by the landlord must be in the format of a waiver of rent.

The landlord in making the offer for relief must consider:

  • the reduction in the tenant’s turnover associated with the premises during the relevant period;
  • any waiver of outgoings and expenses during the relevant period in which the tenant is unable to operate their business at the premises on the basis that the tenant is prevented from trading;
  • whether a failure to offer enough relief would compromise the tenant’s capacity to meet its obligations under the lease; and
  • the landlord’s ability to offer rent relief, including any relief provided to a landlord by its lenders; and
  • any reduction to any outgoings charged, imposed or levied against the premises.

The Regulations provide that the above process must be negotiated in good faith and may be given effect to by a deed of variation to the lease or other form of agreement.

Most notable the Regulations, unlike the Code doesn’t specify that the percentage of rent reduction should correlate to the percentage of reduction in the tenant’s income but rather is a factor that the landlord must consider.

Other notable deviations by the Regulations from the Code:

  • the Regulations apply to commercial licenses and not just leases;
  • confidentiality of information obtained during negotiations applies with exceptions for advisers, financiers and as required by law and the landlord may also disclose the request for relief to the SRO for land tax relief; and
  • agricultural leases and licenses have been excluded.

Other than the above the Regulations appear to be largely consistent with leasing principles set out in the Code.

Once negotiations have concluded the parties should sign a deed of variation of lease to ensure the agreed changes apply.

For support please contact the Beck Legal team on 54453333.

 

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