5 May 2020 | Reading time: 3 minutes
On 1 May 2020, the Victorian Government passed the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Regulations).
The Regulations apply from 29 March 2020 to 29 September 2020 (prescribed period) to ‘eligible leases’ as described in our previous blog.
No reference to Mandatory Code of Conduct.
The Regulations do not incorporate or refer to the National Cabinet’s mandatory Code of Conduct for commercial tenancies (Code). The relevance of the Code to eligible leases in Victoria appears to be limited.
Which tenants are protected?
Tenants of eligible leases must follow a process for requesting rent relief.
A rent relief request must be in writing and accompanied by:
The Regulations do not specify what financial information the tenant should provide the landlord. The Small Business Commissioner is expected to provide guidelines on this shortly. In the meantime, common sense should prevail.
Protection for tenants.
Where tenants strictly follow this process, they will be protected in the event they do not pay rent during the prescribed period.
For tenants, this protection will mean that they:
Guidelines for landlords.
Provided the tenant’s request for rent relief is made in accordance with the above requirements, a landlord must offer rent relief to the tenant within 14 days (or a longer period as agreed) of receiving such request.
The landlord’s rent relief offer must be ‘based on all the circumstances of the eligible lease’ and take into account:
It is worth noting that, contrary to the Code, the Regulations do not require that rent relief be directly proportionate to the reduction in the tenant’s turnover.
Once the tenant receives the landlord’s offer, the parties must negotiate the rent relief in good faith.
Form of rent relief.
Rent relief can take various forms however at least 50% must take the form of a rent waiver. Where the rent relief includes a deferral, the deferred rent can only be recovered from the earlier of the end of the prescribed period or the expiry of the lease term, to be amortised over a deferral period of 24 months or the balance of the term (whichever greater).
Other tenant protections.
In addition to rent relief:
Landlords who provide rent relief may be eligible for land tax relief.
Formalising revised rent.
Any commercial agreement reached between the parties should be carefully documented by way of a Deed of Variation to ensure it is binding between the parties and their successors.
The Deed of Variation should include provisions regarding:
We can help.
If you are in the process of renegotiating your lease, we can help you navigate this process in line with the Regulations, and assist you to draft a Deed of Variation which covers all of the important points listed above.
For details of all of our COVID-19 tips and updates, visit the Bespoke COVID-19 Hub.