On 3 August 2021, the Victorian Government introduced into Parliament the Commercial Tenancy Relief Scheme Bill 2021 (Vic) to reintroduce the Commercial Tenancy Relief Scheme which operated until 28 March 2021 under the COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic) (repealed) (Omnibus Act). The Bill has now passed both Houses of Parliament and will commence on the day it receives Royal Assent.
The New Rent Relief Scheme
The Bill, which provides the framework for the new Scheme, substantially mirrors Part 2.2 of the Omnibus Act and empowers the Governor in Council to make Regulations to implement the new Scheme.
As the Regulations have not yet been published, the details of the new Scheme are not currently known with any certainty.
However, from the Bill, the second reading speech and various press releases issued in recent weeks, the new Scheme is expected to have the following features:
- The new Scheme will have retrospective effect from 28 July 2021 and will operate until 15 January 2022.
- The new Scheme will be available to small and medium-sized business (SME) tenants with an annual turnover of less than $50 million who have suffered a decline in turnover of at least 30% due to COVID-19. Turnover decline will be calculated by comparing turnover for Q4 of FY 2020/2021 with Q4 of FY 2018/2019, with special arrangements applying for businesses which were not operating in Q4 of FY 2018/2019. This differs from the previous Scheme which relied on participation in JobKeeper. Given the end of JobKeeper, under the new Scheme, in most instances a letter from a tenant’s accountant will be sufficient to demonstrate the tenant's eligibility for the scheme.
- Landlords will be required to provide their SME tenants with rent relief proportional to any reduction in turnover. At least half of the relief must be waived, with the remainder of the relief to be deferred.
- There will be a one-time test for eligibility so that SME tenants who qualify at the outset will not be disqualified later.
- There will be a mandatory reassessment of turnover at a later point in the operation of the new Scheme, with rent relief capable of being re-adjusted in line with turnover.
- There will be a suspension of rent increases during the operation of the new Scheme.
- Any existing rent deferral (including under a previous lease of the same premises) provided under the previous Scheme to an SME tenant who is eligible under the new Scheme will be "frozen" at the option of the tenant until 15 January 2022 and added to any rent deferred under the new Scheme.
- Evictions will be prohibited without a determination from the Victorian Small Business Commission (VSBC) following mediation.
- Mediations will be facilitated by the VSBC, consistent with the previous Scheme.
The treatment of outgoings under the new Scheme remains to be seen. Under the previous Scheme, landlords were only required to consider waiving recovery of outgoings, although did have an obligation to pass on any reductions in outgoings.
The Victorian Government has also foreshadowed the following financial assistance for landlords who comply with the new Scheme:
- land tax relief of up to 25%, in addition to any previous relief; and
- payments upon application from a $80 million hardship fund, details of which are still to be provided.
Complying with the new Rent Relief Scheme
We will provide more detail on the new Scheme as soon as it is available. The draft Regulations are expected to be published imminently.
As the new Scheme is expected to have effect from 28 July 2021, Victorian commercial landlords and tenants to whom the new Scheme may apply should start to consider how they wish to negotiate any potential rent relief as soon as possible.
Please do not hesitate to contact us if you require any legal advice regarding the new Scheme (or the previous Scheme). It is strongly recommended that any rent relief agreements reached under the new Scheme be documented, and we are also able to assist in this regard.