On 20 August 2020 the Victorian government announced that as a result of the continuing impact of Stage 3 and Stage 4 restrictions in Victoria, the COVID-19 protection measures for commercial leases and licences would be extended to 31 December 2020. The existing measures are detailed in the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) and the regulations made under that Act. These regulations currently expire on 29 September.
New regulations will be issued to give effect to the extension, but before that can happen, the Act needs to be amended. A Bill to amend the Act passed the Legislative Assembly on 4 September 2020. It now moves on the Legislative Council for consideration where debate is due to end on 17 September 2020. There is little doubt the Bill will be passed. The extension has been applauded by the Australian Retailers Association, which reported that 60% of its retailers were still engaged in negotiations with landlords for rental relief.
While the details of how the extension will operate and who will be eligible for extended relief will not be known until the new regulations are issued, we can gain a some understanding of how the extension will work from the government’s press release on 20 August 2020.
Moratorium on rental increases
The ban on rent increases will continue unchanged until 31 December 2020. There is potential for this moratorium to be further extended as the Bill provides a mechanism for the government to make new regulations up until 26 April 2021.
Moratorium on evictions
The ban on tenant evictions is set to continue. However, a notable change is that this moratorium will not apply in “specific circumstances”. As yet it is not clear what these circumstances will be.
Definition of eligible lease
The Bill alters the definition of an eligible lease. The current regulations only cover leases where the tenant is both an SME and an employer eligible for the JobKeeper scheme. However, a new, broader definition of eligible lease is prescribed by the new Bill. The second reading speech that accompanied the Bill states that the new definition will include sole traders, not for profit businesses and franchisees. Tenants will no longer be required to be businesses with employees to be included in the scheme.
Rent reductions proportional to turnover
The approach under the existing regulations endeavoured to balance the tenant’s reduction in turnover and the landlord’s ability to absorb loss. The government announcement indicates the new regulations will increase the focus on the tenant’s financial circumstances and establish stronger measures to ensure that rent relief is directly proportional to reduction in turnover.
Increased powers for the Victorian Small Business Commission (VSBC)
At present, landlords and tenants can apply to the VSBC for assistance in resolving rent relief disputes by way of mediation. However, the VSBC cannot make binding orders. In its press release on 20 August 2020, the Victorian government stated that the VSBC “will now also have greater capacity to make an order on rent relief if a landlord refuses to respond to rent relief requests.”
The increased powers were confirmed in the Bill tabled in parliament last week. Under the new regulations, the VSBC will be able to make binding orders:
- directing landlords to give specified rent relief to tenants; and
- governing the process for rent relief applications by tenants, including what documents the tenant must provide to the landlord.
The Bill also allows for the review and enforcement of binding orders by VCAT.
Assistance to landlords
While the government announcement suggests the new regulations will place more emphasis on the tenant’s turnover situation and less on the landlord’s financial position, there will be new measures to assist landlords. First, a $3000 grant per tenancy will be available for eligible small commercial landlords. Secondly, a land tax waiver of up to 50% will be available for all landlords who provide tenants with an outright rent waiver for at least 3 months.
The extension means that landlords and tenants can now continue to engage in negotiations without the fear that the protections will end on 29 September 2020. However, we await release of the new regulations to fully understand how they will operate.
Our Property Team can provide advice and assistance on how to plan and manage the process in accordance with the Initial Regulations and New Regulations, in a way that best protects your rights and entitlements, whether as a landlord or tenant.
with Christian Mennilli, Graduate at Law