Following the Federal Government’s Mandatory Code of Conduct for SME Commercial Leasing Principles during COVID-19, the Victorian Government has now released the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020.
Some of the important points of the Regulations are summarised below:
Who do the Regulations apply to?
They apply to certain “eligible leases” (including licences) where tenants are an SME entity and eligible for, and a participant in, the Jobkeeper scheme and have a turnover under $50 million p.a.
When do the Regulations begin and end?
They are in effect from March 29th 2020 until September 29th 2020.
What level of rent relief is required?
The tenant’s request for rent relief must be provided to the Landlord in writing, confirm that they have an eligible lease and seek relief of rent up to 100% of the rent payable.
The landlord must offer rent relief to the tenant within 14 days of receipt of that request. Rental waivers must constitute no less than 50% of the total reduction in rent payable, with the remaining 50% payable as a deferment by the tenant at the earlier of two years or the expiry of the lease beyond two years. The relief must take into account the reduction in the tenant’s turnover, the landlord’s financial ability to offer rent relief and 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 the payment of rent. When the premises are closed or the tenant ceases trading, outgoings must be considered as part of the relief.
Some of these requirements may be waived by mutual agreement.
What is prohibited under the Regulations?
Evicting a tenant, re-entering or recovering a premises, drawing down on a security deposit for non-payment of rent and rental increases (including attempting to do so) are all prohibited.
How do the Regulations differ to the Code?
Unlike in the Code, the amount of rent relief offered by landlords to tenants under the Regulations does not need to be directly related to the reduction in the tenant’s turnover.
What if the parties cannot agree?
The Small Business Commissioner of Victoria operates a free mediation service for retail and non retail premises for parties unable to agree on relief. A certificate is required that the parties cannot agree before proceeding to VCAT or other jurisdiction.
Any grey areas?
The definition of a “reasonable recovery period” is not defined so landlords and tenants will presumably need to continue discussion should the tenant be unable to pay the rent under the lease past September 29th.
The information to be provided by a tenant to support their turnover reduction is also unclear. We understand the Small Business Commissioner of Victoria will shortly be producing a guide on what financial information tenants need to provide to justify their drop in turnover.
A copy of the Regulations are available here:
For FAQs, please see the page below:
If you need help during this time, contact us. Commercial property management is what we do best.
Written by Bill DiDonna
After some 35 years as a commercial property manager, Bill has a strong knowledge of Melbourne’s suburban property market.