Commercial Tenancy Relief Scheme in Victoria – Omicron Extension Details Now Available


Commercial Tenancy Relief Scheme in Victoria – Omicron Extension Details Now Available

In July 2021 the Victorian Government announced a new package of rent relief measures for eligible retail and commercial tenants in response to the continuing COVID-19 pandemic, which applied for the period 28 July 2021 to 15 January 2022.  This is known as the Commercial Tenancy Relief Scheme (CTRS).

As one of the responses to the Omicron wave of the COVID-19 pandemic to protect small businesses, the Victorian Government announced on 15 January a further two month extension to the CTRS, to apply from 16 January 2022 to 15 March 2022.

On 1 February the Government released the Commercial Tenancy Relief Scheme Regulations 2022 (Vic) (2022 Regulations), setting out the details of how the extended CTRS applies.

Key Changes

The 2022 Regulations largely mirror the 2021 CTRS regulations. Our article discussing the previous CTRS regulations is available here.

However, there are a few notable differences in the 2022 Regulations, which are set out below.

Eligibility

The extension applies to retail and non-retail commercial leases or licences in effect on 16 January 2022, where the tenant (or licensee) is an eligible tenant under extended CTRS.

Previously, to be eligible a tenant must have had an annual turnover of less than $50 million.  This annual turnover threshold has now been reduced to $10 million.  Therefore in order to qualify for relief during the extension a tenant must have had an annual turnover of less than $10 million in the year ending 30 June 2021, or if they did not trade during that year, be likely to have a turnover of less than $10 million in the year ending 30 June 2022.

In addition to the annual turnover requirement, to qualify for relief during the extension the tenant must:

  • have been carrying on business as at 16 January 2022;
  • satisfy the Decline in Turnover Test (see below); and
  • not come under any of the specified exclusions (e.g. a company in liquidation or an Australian Government agency).

Decline in Turnover Test

Similar to the previous regulations, the Decline in Turnover Test will be satisfied if the tenant’s decline in turnover was 30% or more for the relevant comparison periods. For the majority of leases, this means comparing the tenant’s turnover in January 2022 with their turnover in January 2020.  See our previous article here for more information in relation to methods to determine decline in turnover.

There are also alternative tests available if special circumstances apply to the tenant making it difficult or impossible to calculate turnover during the relevant comparison periods. For example, if the tenant closed for a week or more in January 2020 because of an event or circumstances outside their ordinary course of business, they can use the turnover test period of December 2021 and the relevant comparison period of December 2019.

Deferred rents further postponed

If a landlord and tenant agreed to defer rent under the 2021 CTRS scheme, and the tenant is eligible for further relief under the 2022 extension, then the commencement of deferred repayments will be postponed until 16 March 2022. However, given that the 2022 Regulations are new, as opposed to an extension of the 2021 regulations, eligible tenants must submit a fresh request to access protection during the extension period.

Rent Relief Protections to Remain

Key aspects of the rent relief scheme remain unchanged, such as:

  • a landlord must provide continued rent relief for the protection period in line with the tenant’s decline in turnover, and at least half of the rent relief must be in the form of a waiver of rent;
  • a landlord must offer to extend the term of the lease for a period equal to the period in which rent is deferred;
  • a rent review cannot be conducted during the protection period; and
  • the prohibition on evictions and rent increases will continue during the protection period.

Eligible tenants should formally apply for relief under the extended scheme

Tenants who were entitled to relief under the 2021 CTRS, or reached agreement with their landlord for relief during this period, and who are eligible for relief under the extended scheme, do not automatically qualify for relief under the extended scheme.  It will be necessary for eligible tenants seeking relief during the extended scheme, to make a formal application in accordance with the requirements of the new Regulations as soon as possible.

If you are a tenant or landlord seeking assistance in this area, please contact the Property Group at Hunt & Hunt Melbourne.


~ by Peter Huang, Graduate at Law

Our Property Lawyers