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Employer Guide to Coronavirus1

Victoria’s New Commercial Tenancy Relief Scheme

The Victorian government has introduced the Commercial Tenancy Relief Scheme Regulations 2021 (Regulations) bringing into effect a new Commercial Tenancy Relief Scheme (Scheme).

Jane Wolfe

Associate Director, Australian Business Lawyers & Advisors

The Scheme provides rent relief to retail and commercial tenants who have experienced more than 30% loss in turnover during the COVID-19 pandemic. The measures under the Scheme follow on from and augment the relief provided under the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020¹. Both the Regulations and the Scheme apply retrospectively from 28 July 2021 and end on 16 January 2022 (protection period).

Who does the Scheme apply to?

Retail leases, commercial leases and commercial licences which were in effect on 28 July 2021. It is available to small and medium-sized businesses:

with an annual turnover of less than $50 million
who have lost more than 30% of their turnover during the pandemic².

Eligibility criteria for tenants

Tenants must provide a comparison of 2019 (pre-pandemic) turnover with more recent 2021 turnover. There is provision for tenants to compare the turnover for three consecutive months of the tenant’s choice, between 1 April 2021 and 30 September 2021, to the turnover for the same three-month period in 2019.

For new businesses that were not in operation in 2019, there is also provision for landlords and tenants to agree on turnover reduction.

What is the process?

During the protection period, a tenant may request its landlord to provide financial relief by way of a reduction in rent proportionate to the tenant’s reduction in turnover. Once a request has been made for rent relief, a tenant may commence paying its rent at the reduced rate prior to negotiating and entering into any rent relief agreement with its landlord.

Landlords and tenants are required to negotiate in good faith to reach agreement on the rent relief to apply, following a specific process:

The tenant makes a formal request of the landlord, including a statement that it is an eligible tenant and providing details of why it is an eligible tenant, and
The tenant then has 14 days from the date of making its request to provide the landlord with all relevant financial information, together with a statutory declaration stating that it is an eligible tenant and that the financial information provided is true and correct, and
The landlord then has 14 days to provide an offer of rent relief. The landlord’s offer of relief must be proportionate to the tenant's reduced turnover, with at least 50% of the relief to be by way of a waiver of rent (unless the parties agree otherwise), with the balance deferred (complying offer), and
Where the agreed rent relief includes deferred rent, the landlord must offer to extend the term of the lease by a period equivalent to the period of the deferral. The deferred rent must be deferred until after the end of the protection period, with repayments spread evenly over whichever is the longer of the balance of the extended term or 24 months. No interest may be charged on deferred rent.

Once the landlord has made a complying offer, the tenant may accept the offer, or, if dissatisfied with the offer, may refer the matter to the Small Business Commission for mediation. If the tenant does not accept or refer the matter within 15 days of receipt of the complying offer, the tenant will be deemed to have accepted the landlord’s offer.

What if a dispute arises during negotiations?

In any of the following cases where:

a landlord and tenant cannot reach agreement with respect to rent relief
a tenant or landlord cannot get a response from the other party
any other dispute arises out of negotiations or from the Regulations

either party may refer the matter to the Victorian Small Business Commission for mediation.

Are tenants protected during negotiations?

Where a tenant has made a request for rent relief, landlords are prohibited from evicting the tenant, re-entering the premises, or calling on any security (such as a bank guarantee or security deposit) for non-payment of rent or outgoings. It is important to note, however, that a landlord is not prohibited from taking any such actions for other breaches of the relevant lease, excluding where a tenant reduces its opening hours or closes the business conducted from the premises³.

Is there anything for landlords?

For landlords who provide rent relief to tenants, the Victorian Government will provide land tax relief of up to 25%. In addition, landlords who are able to provide evidence of acute hardship may be eligible to apply for payments under a $20m hardship fund.

It is important to note this information  does not  represent legal advice and you should seek specific legal advice for  your  circumstances. 

1. Initially in effect for the period between 29 March 2020 to 29 September 2020, later extended to 31 December 2020 and then again to 28 March 2021.
2. Excludes tenants which are a company, or a subsidiary of a company, listed on an Australian or overseas stock-exchange, and excludes leases of premises used wholly or predominantly for farming activities.
3. In the case of reduced hours or closing the premises, the tenant does not need to satisfy the decline in turnover test but must otherwise be an eligible tenant under an eligible lease.

Jane Wolfe

Associate Director, Australian Business Lawyers & Advisors

Jane is a senior lawyer practising in commercial property and business law. Her practice includes: commercial, industrial and retail leasing, commercial property sales and acquisitions, owners corporation and strata law, property due diligence and property financing.