On 28 July 2021, the Victorian Government announced the reintroduction of the Commercial Tenancy Relief Scheme. The Victorian Labour Government has introduced new legislation to provide rent relief to commercial tenants that have experienced a loss in turnover of more than 30 per cent during the COVID-19 pandemic.
Eligible businesses will benefit from rent relief through the Commercial Tenancy Relief Scheme, with tenants and landlords encouraged to enter negotiations as soon as possible.
What are the requirements?
The new requirements work a little differently from last year’s rent relief scheme. Last year’s rent relief was all about JobKeeper, which meant if you were eligible for JobKeeper, you were basically eligible for the rent relief. It was a little easier obtaining JobKeeper’s eligibility as you were able to apply based on either a monthly or quarterly basis, i.e a business that didn’t initially meet the 30% reduction in turnover could still apply and meet JobKeeper’s eligibility criteria so long as the last quarter of 2020 suffered a 30% reduction in turnover.
New Eligibility Requirements:
- Carries on business in Australia
- Annual turnover of less than $50 million
- Suffered a decline in turnover equal to or exceeding 30% (“decline in turnover test”) (some specific exceptions apply i.e. non-government schools at 15%)
- Companies in liquidation
- Individuals in bankruptcy
- Tenant’s turnover over $50M a year (or tenants who are connected or affiliated with an aggregate exceeding $50M)
- Government agencies and bodies (and tenants wholly owned by government agencies and bodies)
What are some other conditions/benefits of this new scheme?
How do you apply?
Must include a statement from the tenant:
- That they are an eligible tenant;
- Satisfying the turnover test – and showing:
- Turnover for the turnover test period and which period used (i.e which 3 months?)
- Comparison turnover
- Tenant’s decline in turnover
- Evidence that the reduction in rent that tenant is seeking meets the minimum requirements that would satisfy the new rent scheme
- Within 14 days of submitting rent relief request, the tenant to provide to the landlord evidence of turnover figures including at least one of the following:
- Extract from accounting records;
- Business Activity Statements (BAS);
- Bank statements; or
- Statement from accountant.
- With statutory declaration made by the tenant as to the eligibility and truth of information provided to landlord [landlord obligations regulation 27]
When do they start to apply?
Protection may start to apply retrospectively from 28 July 2021. The protection period is from 28 July 2021 to 15 January 2022.
Rent relief will apply:
- If a request is made prior to 30 September 2021, rent relief will apply retrospectively from 28 July 2021; or
- If a request is made after 30 September 2021, rent relief will apply from the date of the request.
How much is the rent relief?
Landlords will be required to provide proportional rent directly as a result of the business’ reduction of turnover. i.e a business with a turnover of 40 per cent of pre-pandemic levels can only be charged 40 per cent of its rent.
Of the balance, at least half must be waived, with the remainder to be deferred. Any deferred amount of rent is not payable until after 15 January 2022 (across the greater of either 24 months in instalments or the remaining term of the lease). No fees or interests can be charged in relation to the deferred rent by the Landlord.
How is the 30% reduction shown? Do I need to continue to show a 30% decline in business to be eligible for the rent relief?
Businesses trading before April 1 2021: Any consecutive three (3) month period (chosen by the tenant) between 1 April 2021 and 30 September 2021, commencing on the first day of a month.
Businesses trading after 1 April 2021: For a period agreed in good faith.
General note: There is a range of different factors that could be taken into consideration – regulation 16 to 23 – i.e tenant having a substantial increase in turnover, sole trader with sickness/injury, tenant ceasing to trade during relevant comparison periods etc.
What about if I deferred rent previously?
Existing deferred rent repayments pursuant to any agreement made under the previous Rent Relief Scheme (the 2020 Rent Relief Scheme) will be frozen until 15 January 2022 and added to the deferred rent accrued during the current scheme.
What about rent increases?
Rent increases between 28 July 2021 and 15 January 2022 are prohibited unless agreed otherwise by the parties.
What about outgoings?
- Landlord is required to consider waiving recovery of outgoings during the period where the tenant is unable to operate their business
- Landlord may cease/adjust services as reasonable or on request from a tenant
Note: The tenant must not be able to trade – choosing not to trade may not trigger this obligation.
What about landlords?
The Victorian Government is providing land tax relief of up to 25 per cent (in addition to any previous relief). There is also a hardship fund available to landlords to apply. However, limited funding applies so get in quick.
Tenants and landlords are encouraged to enter negotiations as soon as possible with the Victorian Small Business Commission (VSBC) which is available to provide mediation if parties cannot reach a satisfactory agreement.
There are general obligations on landlord and tenant to work to negotiate in good faith, act cooperatively and act reasonably. There is also an obligation on the parties to not provide any false or misleading information.
Landlords will not be able to lock out or evict tenants without a determination from the VSBC.