Policy guidance on the Victorian Government’s relief scheme.

18 June 2020 | Reading time: 2 minutes

In our previous blog, we discussed the guidance provided by the Victorian Small Business Commissioner regarding the type of information a landlord can request pursuant to the COVID-19 Omnibus (Emergency Measures) Act 2020 and the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020. This is referred to as the Commercial Tenancy Relief Scheme (CTRS).

The Victorian Government has now published a policy guidance (Guidelines) to further clarify the operation of the CTRS.

Minimising the documentation requirements.

Providing rent relief to tenants should be based on the financial information provided by the tenant. The information should therefore be kept to a minimum to avoid imposing additional burden on tenants that might already be in financial distress.

The Victorian Government considers excessive requests for documentation to verify financial positions to be inconsistent with the spirit of the CTRS.

Documentation to demonstrate financial circumstances.

The Guidelines clarify that a commercial tenant will only be required to provide one of the following documents to demonstrate its financial circumstances:

  • accounting system information extract (eg current cashflow statement);
  • a Business Activity Statement (BAS) extract; or
  • information provided to a financial institution.

The following are considered excessive under the Guidelines and should not be requested by landlords:

  • financial information for periods other than the ‘relevant period’ being the period nominated by the tenant as the period for a reduction in turnover;
  • future cash flow projections;
  • balance sheets, profit and loss, year to date financials;
  • bank balance details;
  • requiring the financial information to be verified, examined, assured or audited by a third party such as an accountant; and
  • requiring the financial information be provided by an accountant.

Proportionate reduction.

There is an expectation that rent relief should be proportionate to the decline in the tenant’s turnover. If the landlord offers rent relief that is not proportionate, the landlord should provide the tenant documentation in relation to their financial position to justify the amount of rent relief offered.

Other key takeaways.

The Guidelines also include the following key takeaways:

  • non-employing sole traders and franchises (at the franchisee level) are eligible business under the CTRS so long as they have a turnover of up to $50 million and participate in the JobKeeper scheme.
  • JobKeeper payments that a tenant receives should not be included in turnover calculations to determine the proportion of rent relief.
  • whilst a tenant may seek additional rent relief if its financial situation worsens, the same does not apply if a tenant’s business improves during the ‘relevant period’. On that point, it is not the Government’s intent that a new negotiation is required in such an event.

We can help.

The Guidelines provide further clarity to landlords and tenants with regards to their obligation to ‘negotiate in good faith’ under the CTRS.

Whether you are a tenant or a landlord, we can help you navigate this process to ensure compliance with the CTRS and negotiate the best outcome for you.