Rent Relief for Commercial Leases during COVID-19

On 1 May 2020, the Victorian Government enacted the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations (Regulations) to assist tenants and landlord during the unprecedented COVID-19 pandemic.

Since then, the Victorian Government has released the COVID-9 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations (Amended Regulations) which will amend the Regulations. The Amended Regulations are current and will expire on 31 December 2020.

Eligible Lease

In order to qualify for rent relief, a tenant is required to have an eligible lease in Victoria.

Prior to the release of the Amended Regulations, a tenant is considered to have an eligible lease if:

1. the lease is a retail lease or non-retail commercial lease that is in effect as of 29 March 2020;
2. the tenant is an SME entity with an annual turnover of less than 50 million dollars; and
3. the tenant is an employer qualified for the JobKeeper scheme, meaning that, they must show that their business has lost 30% or more of its revenue compared with a comparable period a year ago.

Under the new Amended Regulations, the above will still apply in order to qualify for rent relief, however, a tenant no longer needs to be an employer but rather an entity that is qualified for the JobKeeper scheme only.

Rent Relief

If the tenant is considered to have an eligible lease, then it is entitled to make a request for rent relief to its landlord.

The Regulations previously only required the tenant to make their request to the landlord in writing, accompanied with relevant documentation, evidencing that they have an eligible lease under the Regulations.

Pursuant to the Amended Regulations, they are still required to comply with the above requirements to request relief, however, they must also provide the following additional information to the landlord as per Amended Regulations:

1. a statement from the tenant;
   • that the tenant’s lease is an eligible lease;
   • that the lease is not excluded from the operation of these Regulations under section 13(3) of the COVID-19 Omnibus (Emergency Measures) Act 2020; and
   • setting out the tenant’s decline in turnover that is associated with the premise (and no other premises), expressed as a whole percentage and calculated in accordance with the “actual decline in turnover test” (as set out in section 8 of the JobKeeper Rules).
2. the receipt number issued by the Commissioner of Taxation when the tenant elected to participate in the JobKeeper scheme;
3. a copy of the tenant’s most recent notice under the JobKeeper rules to the Commissioner of Taxation; and
4. information that evidences the tenant’s stated decline in turnover, including at least one of the following:
   • extracts from the tenant’s accounting records;
   •  the tenant’s business activity statements relating to the relevant turnover test period;
   •  statements issued by an ADI in respect of the tenant’s account; or
   •  a statement prepared by a practising accountant.

Landlord’s offer for rent relief

The timeframe for the landlord to respond to the tenant upon receipt of the above information remains the same, meaning, the landlord must respond within fourteen (14) days.

Accordingly, the Landlord’s offer for relief must be based on the following:

1. up to 100 percent of the rent payable during the period commencing on the date of the tenant’s request and up to the relevant period, being 31 December 2020;
2. no less than 50 per cent of the rent relief must be in the form of a waiver, unless otherwise agreed in writing;
3. proportional to the decline in the tenant’s turnover associated with the premises;
4. any waiver or reduction in outgoings; and
5. whether any failure to offer sufficient relief would compromise a tenant’s capacity to meet its ongoing obligations under the lease.