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Victorian Government passed regulations for commercial leases

Updated: Aug 5, 2020

On 1 May 2020, the Victorian Government passed the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Regulations). The Objective of the Regulations is for landlords and tenants work cooperatively and act reasonably and in good faith to implement measures to apply to tenants and landlords under eligible lease and to implement mechanisms to resolve disputes concerning eligible leases.

The regulations are in effect from 29 March 2020 to 29 September 2020 and stipulate that:

  • A tenant is not in breach of the eligible lease for not paying rent if they comply with the rent relief request process, and if this occurs, the landlord must not evict the tenant.

  • A landlord must not increase the rent payable during the relevant period.

  • A landlord must consider waiving recovery of any outgoings for any part of the relevant period, when the tenant is not able to operate the business at premises.

  • The period during which the rent is deferred will equate to the amount of time that the lease must be extended

To be eligible, the lease must be a retail lease or a non-retail commercial lease or licence already in effect at the start of the relevant period and the tenant must a small business qualified for the JobKeeper Program.

Rent payment and increase

If a tenant complies with the rent relief request process:

  • The tenant is not in breach of an eligible lease if the rent is not paid.

  • The landlord must not re-enter or recover the premises.

  • The landlord must not recourse any security bond.

  • The landlord must not increase the rent payable during the relevant period unless the landlord and the tenant agree in writing that this regulation does not apply to their eligible lease. However, this does not apply to a retail lease to the extent that it provides for rent to be determined by reference to the volume of trade of the tenant’s business.

Rent relief request

A tenant may request rent relief from a landlord under an eligible lease. The request must be made in writing and accompanied by a statement that the tenant’s lease is an eligible lease. The tenant must provide evidence that the tenant is either qualified for or participating in the JobKeeper Program.

The landlord must offer rent relief within 14 days (or a different timeframe agreed between both parties) of receiving a conforming request.

The landlord’s offer must be based on all circumstances and relate to 100% of the rent payable during the pandemic relief period and no less than 50% of the rent relief must be in the form of a waiver of rent (unless otherwise agreed). This is consistent with the Federal Government’s guidelines in this regard.

The landlord’s offer must take consideration of following:

  • The reduction of the tenant’s turnover during the relevant period.

  • Waiver of outgoings and expenses during the relevant period in which the tenant is unable to operate the business in premises.

  • A Failure to offer rent relief would compromise a tenant’s capacity to fulfil the tenant’s ongoing obligations.

  • The landlord’s financial ability (any relief provided to the landlord by lenders).

  • Reduction of any outgoings.

Payment of deferred rent

If any rent is deferred, the landlord must not request payment of deferred rent until the earlier of:

  • 29 September 2020; or

  • The expiry of the term of the eligible lease (before any extension).

The deferred rent must be amortised over the greater of:

  • The balance of the lease including any extension to the lease; and

  • A period of no less than 24 months (unless agreed by both parties).

A landlord must also consider waiving outgoings if the tenant is unable to operate the business at premises during the relevant period.

Change in trading hours

A tenant is not in breach of the lease if during the relevant period they:

  • Reduce the opening hours of the business.

  • Close the premises and cease to carry out a business at premises.

VIC SRO Coronavirus Land Tax Relief

An eligible landlord:

  • May receive a reduction of 25% on the property’s 2020 land tax.

  • May defer the payment of land tax for the remainder of2020 and up to 31 March 2021

The following requirements must be met:

  • The tenant’s ability to pay rent must be impacted by Coronavirus.

  • If the tenant is commercial, the tenant must be a small business with turnover less than $50 million and eligible for JobKeeper Program.

  • Both the landlord and tenant must have agreed to a reduced rent.

  • The rent reduction must be at least 25%.

If the property is not rented, the property must be available for rent and a tenant cannot be secured because of COVID-19.

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