Last year the Victorian Government enacted various protections and rent relief measures for eligible commercial leases and tenants under the Commercial Tenancy Relief Scheme. A new Commercial Tenancy Relief Scheme – released on 24 August 2021 – has come into force in Victoria, effective from 28 July 2021 (‘New Scheme’). It runs until 15 January 2022. Whilst aspects of the New Scheme may seem familiar, there are many important differences. We address some of those differences below.
Differences in the New Scheme Rent relief requests Eligibility Tenants eligible for rent relief under the previous scheme are not automatically eligible under the New Scheme. Tenants must meet the eligibility criteria and make a further request under the New Scheme. Turnover thresholds In order to obtain rent relief, tenants must now establish that they have suffered at least a 30% decline in turnover during the relevant comparison period. A lower 15% threshold applies for ACNC-registered charities, non-government schools and specific universities. Comparison period To demonstrate the requisite decline in turnover, tenants need to compare turnover in a consecutive three-month period between 1 April and 30 September 2019 (as chosen by the tenant) and the corresponding period in 2021. Different turnover test periods apply to tenants who commenced trading after 1 April 2019, see this table published by the VSBC. Alternative testing methods, similar to the JobKeeper eligibility tests, are also available. Turnover scope Tenants’ turnover now includes internet sales, sales from other premises and includes Victorian government COVID grants, but excludes Commonwealth government grants or assistance (e.g. JobKeeper). Supporting information Tenants must now, in addition to providing information to the landlord that evidences asserted turnover figures, also provide a statutory declaration that the information provided is true to the best of their knowledge and belief. Timing for provision of supporting information If tenants fail to provide supporting information, including the statutory declaration, within 14 days of a rent relief request, then the request will lapse and the tenant will not have made a complying request. A tenant can have up to 3 requests for rent relief lapse. Following this, a tenant cannot make a further request for rent relief under the New Scheme. Landlord offers As with the previous scheme, within 14 days of receiving a complying request (or another period as agreed in writing), landlords must make an offer of rent relief which: relates to 100% of the rent payable between 28 July 2021 to 15 January 2022; is at a minimum be proportional to the tenant’s decline in turnover; and provides that no less than 50% of the rent relief is in the form of waiver (unless agreed otherwise in writing). In addition, landlord offers must now also take into account any ‘other circumstances’ that the tenant would like the landlord to consider as well as part payments of rent. Whilst it is unclear to what extent landlords must consider other circumstances, landlords are required to act in good faith under the New Scheme. Reassessment date A mandatory reassessment date applies to rent relief agreements where tenants made a request for rent relief on or before 30 September 2021 and the tenant began trading prior to 1 April 2021. These tenants must, prior to 31 October 2021, provide specified reassessment information (similar to the initial request) supported by a statutory declaration. Where the reassessed figures differ from the initial turnover figures, the rent relief agreement is deemed to be adjusted for the remainder of the rent relief period so that it is instead based on the tenant’s reassessed change in turnover. Save for limited exceptions, tenants who fail to provide reassessment figures by 31 October 2021 may lose the waiver portion of their rent relief agreements from 31 October 2021 onwards. Deferred rent Where a compliant request is made under the New Scheme, existing deferred rent arrangements from the previous scheme are frozen until 15 January 2022, at which time tenants must resume paying the previously deferred rent in the same instalments and frequency. Deemed acceptance On the date that is 15 days after a tenant receives a compliant landlord’s offer of rent relief, the tenant is deemed to have accepted the landlord’s offer if there is no agreement and the tenant has not referred the matter to the VSBC. Extension of term As with the previous scheme, if the payment of rent is deferred by a rent relief agreement, the landlord under the eligible lease must offer the tenant under the eligible lease an extension to the term which is equivalent to the period for which rent is deferred. Previously, there was some doubt concerning what the length of the term extension must be. The New Scheme includes an example that if 3 months’ rent is deferred, 3 months must be added to the term of the eligible lease. General Obligations It is now an offence for landlords or tenants to give false or misleading statements or information under the New Scheme. The penalty is a $3,634.80 fine (in addition to any civil claims the other party may have arising from such conduct). General protections Rent Increases Landlords under eligible leases’ cannot increase rent between 28 July 2021 and 15 January 2022, regardless of whether a tenant has made a request for rent relief. If between 28 July 2021 and 15 January 2022, an eligible lease provides for an increase in rent or a review of the rent that would increase the rent payable that review is voided and may never be claimed by the landlord. This does not apply to eligible leases where rent is determined by volume of trade Evictions, re-entry and security deposits Similar protections for tenants under eligible leases apply as with the previous scheme for tenants who do not pay rent or outgoings between 28 July 2021 and 15 January 2022, provided they make a compliant rent request or comply with a rent relief agreement – subject to the changes below. This protection has been extended to tenants who are prevented from trading due to sickness, injury, or ‘natural disaster’ even if the tenant has not made a rent relief request. ‘Natural disaster’ is not a defined term. There has been some commentary that this term could extend to include the COVID-19 pandemic, which Victoria has declared a ‘state of disaster’ for various legislative purposes. This is not straightforward. The term ‘COVID-19 pandemic’ is used elsewhere in the New Scheme wording which might suggest a distinction is intended. Subject to the above extension, in order to obtain this protection, tenants who have made a compliant request for rent relief but have not yet entered into a rent relief agreement (e.g. negotiations are ongoing) must continue to pay a portion of the rent equal to the rent due reduced by the same percentage as the decline in turnover set out in the statement accompanying the tenant's request for rent relief Opening hours Tenants under eligible leases are not in breach for reducing opening hours or closing premises between 28 July 2021 and 15 January 2022 Security deposits Landlords under eligible leases must not access security deposits for purported breaches for non-payment of rent or outgoings or opening hours, which are encompassed by the above general protections. Fees, interest or charges Landlords under eligible leases cannot seek interest, fees or charges in relation to rent deferred by a rent relief agreement Indemnities A provision in an eligible lease, other agreement or security is void to the extent that it requires the tenant (or provider of the security) to indemnify the landlord against claims for which the landlord would be liable, but for the operation of the New Scheme. Dispute resolution process The VSBC mediation process under the New Scheme is practically the same as under the previous scheme. The VSBC has the power in certain circumstances to make binding orders in relation to rent relief requests. Either party may apply to VCAT for review in respect of any binding order made by the VSBC. VCAT and the courts otherwise have jurisdiction to hear an eligible lease dispute, subject to the VSBC issuing a certificate in respect of the dispute that the matter has failed to resolve (applications for injunctive orders are allowed without a certificate). Parties will need to apply for leave to commence a proceeding in the Supreme Court. Important note on this article Please note all comments in this article are of a general nature only and are not an exhaustive summary of the New Scheme. If you have any questions regarding a particular lease or tenant, you should seek legal advice about your particular circumstances. Further information / assistance regarding the issues raised in this article is available from the author, Jonathan Markowitz, Senior Associate or your usual contact at Moray & Agnew.
