COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations 2020

16 Oct

The Victorian government has published the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations 2020 (“the Amendments”), extending the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (“the previous regulations”).

This post will provide a summary of the changes to the previous Regulations made by the Amendments.

The Amendments

The Previous Regulations

Period of Validity

The measures are now extended until 31^st December 2020.

In other words, landlords must not increase the rent payable under the eligible lease at any time up till 31^st December 2020, unless parties agree in writing.

Landlords must also not attempt to recover or recover deferred rent payments until after 31^st December 2020.

Expired on 29^th September 2020

Definition of “Eligible Lease”

The requirement of tenants having to be an employer has been removed

The Amendments thus define “Eligible Lease” as:

1. Retail lease, or non-retail commercial lease or licence; and

2. Tenant must be an SME entity; and

3. Tenant qualifies for, and participates in, the JobKeeper Scheme.

Retail lease, or non-retail commercial lease or licence that was in effect on 29 March 2020 and under which the tenant:

(a) Is an SME entity; and

(b) Is an employer who qualifies for, and participates in, the JobKeeper Scheme.

Definition of “Prescribed Turnover”

The Amendments specifically rule out coronavirus economic response payments such as JobKeeper payments in the definition of “Prescribed Turnover”.

Rent Relief

Period of Rent Relief

Offer of rent relief only applies from the date the tenant makes a request for rent relief until 31^st December 2020.

Period of Rent Relief

Between 29^th March 2020 and 29^th September 2020.

Procedure to apply for Rent Relief

Tenants must:

A. Provide a statement stating:

1. That the lease is an eligible lease; and

2. That the lease is not excluded from the operation of the regulations (for reasons of grouping or agricultural nature); and

3. That the tenant suffered a decline in turnover that is associated only with the premises.

(This is expressed as a whole percentage and calculated in accordance with the decline in turnover test utilised by the tenant in respect of their JobKeeper application and in relation to the tenant’s most recent decline in the turnover test period).

B. Provide documents evidencing:

1. That they are an SME entity; and

2. That they are participating in JobKeeper; and

3. That they suffered a decline in the tenant’s turnover; and

4. The receipt number issued by the ATO and the tenant’s most recent notice to the ATO under the JobKeeper rules.

In order to show a decline in their turnover, tenants need to provide:

· Extracts from the tenant’s accounting records; or

· Business Activity Statement; or

· Statements issued by an ADI; or

· Statements by the tenant’s practising accountant

Procedure to apply for Rent Relief

Tenants must:

A. Provide a statement stating:

1. That the lease is an eligible lease; and

2. The lease is not excluded from the operation of the regulations.

B. Provide documents evidencing:

1. That they are an SME entity; and

2. That they are participating in JobKeeper.

Landlord’s Offer of Relief

These changes have been made:

· In addition to the other circumstances that have to be taken into account, the landlord’s offer of relief must be, at a minimum, proportional to the decline in the tenant’s turnover associated with the premises.

· Removal of the need to account for the landlord’s financial ability to offer rent relief.

As such, the Amendments state that the landlord’s offer of rent relief must be based on all circumstances of the eligible lease and:

1. related up to 100% of the rent payable under the eligible lease during the period starting on the date of the tenant’s request and ending on 31 December 2020; and

2. provide that no less than 50% of the rent relief offered must be in the form of a waiver of rent, unless a landlord and a tenant otherwise agrees in writing; and

3. be, at a minimum, proportional to the decline in the tenant’s turnover associated with the premises

4. apply to the period starting on the date of the tenant’s request and ending on 31 December 2020; and

5. take into account

a. any waiver given pursuant to reg 14(2), i.e. recovery of outgoings or expenses;

b. whether a failure to offer sufficient rent relief would compromise a tenant’s capacity to fulfil the tenant’s ongoing obligations under the eligible lease, including payment of rent; and

c. any reduction to any outgoings charged, imposed or levied in relation to the premises.

Moreover, under the Amendments, rent relief applies to gross rent, which includes outgoings.

If the tenant was on JobKeeper when it made its request for rent relief or has already agreed on rent relief with its landlord prior to the Amendments, the lease remains eligible under the Amendments.

Landlord’s Offer of Relief

The landlord’s offer of rent relief must be based on all circumstances of the eligible lease and:

1. Related up to 100% of the rent payable under the eligible lease between 29 March 2020 and 29 September 2020; and

2. Provide that no less than 50% of the rent relief offered must be in the form of a waiver of rent, unless a landlord and a tenant otherwise agrees in writing; and

3. Apply to the period between 29 March 2020 and 29 September 2020; and

4. Take into account

a. the reduction in a tenant’s turnover associated with the premises between 29 March 2020 and 29 September 2020; and

b. any waiver given pursuant to the recovery of outgoing and expenses regulation; and

c. whether a failure to offer sufficient rent relief would compromise a tenant’s capacity to fulfil the tenant’s ongoing obligations under the eligible lease, including payment of rent; and

d. a landlord’s financial ability to offer rent relief; and

e. any reduction to any outgoings charged, imposed or levied in relation to the premises.

Subsequent Rent Relief

In addition, tenants can also apply for subsequent rent relief if:

· The rent relief agreement was made prior to the commencement of the Amendments and does not allow for, at a minimum, proportionate rent relief; or

· The rent relief agreement does not apply to the period ending 31 December 2020.

Subsequent Rent Relief

Tenants could only apply for subsequent rent relief if their financial circumstances materially change.

New powers given to the Victorian Small Business Committee (“VSBC”)

Under the Amendments, the VSBC now has additional powers in relation to disputes relating to eligible leases.

Mediation

· In order to apply to VSBC for help in relation to eligible leases disputes, the application must be:

o In writing; and

o In a form approved by VSBC; and

o Accompanied with evidence of written requests for rent relief, relevant correspondences between parties, contact details of other party, and any other documents requested by VSBC.

· After receipt of such an application, VSBC must issue a dispute notice to the other party.

· If the other party does not respond or responds after the deadline (i.e. 10 business days), VSBC may arrange for mediation or issue a certificate stating that the mediation has failed or is unlikely to resolve the dispute.

· Subsequently, VCAT may order that statements and documents made and shared during mediation be made admissible.

Giving of Binding Orders

· VSBC may issue binding orders in relation to rent relief if:

1. VSBC has issued a certificate stating that the mediation has failed or is unlikely to resolve the dispute; and

2. Proceedings have not commenced in VCAT or a court in relation to the dispute.

· The binding orders that VSBC may make include:

o Directing the landlord to waive part or all of the rent from the date of the tenant’s request until 31 December 2020

o Directing the landlord defer part or all of the rent payable from the date of the tenant’s request until 31 December 2020. The deferred rent to be repaid over the greater of the balance of the term of the lease or 24 months.

· VSBC’s decision will be based on written submissions, correspondence, evidence and documents provided by parties. There will be no hearings held.

Breaches of Binding Orders

· If a party breaches an order made by VSBC, the other party may apply to VCAT and VCAT may make orders it considers appropriate.

Review of VSBC’s Orders

· Parties may apply to VCAT for a review of the VSBC’s orders within 14 days after VSBC makes a binding order.

DISCLAIMER

These information reflects the state of the law at the time of publication. The information is for general information purposes only and not intended to be relied upon as legal advice in respect to your particular circumstances. For specific and up-to-date legal advice regarding your situation, please contact one of our qualified lawyers.

Verge Legal