On 14 December 2020, the Victorian Small Business Commission confirmed that the Victorian Covid-19 rent relief scheme for retail and commercial leases, which was due to expire on 31 December, would be further extended to 28 March 2021. The Covid-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) were amended accordingly.
Changes to the scheme
Apart from the extension of the expiry date, the updated regulations introduce minimal changes to the rent relief scheme.
When the rent relief scheme was extended for the first time (for the three month period ending on 31 December 2020), a number of significant changes were made, which we explained in our previous update. These changes carry through to the new extension period. It’s worth mentioning some of the key changes that will continue to apply during the new extension period:
- only “eligible tenants” are entitled to rent relief;
- rent relief will be directly in proportion to the tenant’s decline in turnover;
- of the rent relief amount, at least half must be waived by the landlord and the remainder deferred, and repaid (interest free) over the remaining term of the lease, or 24 months, whichever is longer;
- tenants wishing to receive relief after 1 January 2021 must make a new written request to the landlord as soon as possible;
- the application must be accompanied by the material necessary to demonstrate eligibility and decline in turnover. The Regulations specify what material is required for this purpose;
- a tenant is only entitled to relief from the date they make their written request, and supply all the required information; and
- during the extended period a landlord must not implement any rent reviews, and cannot take enforcement action (such as eviction or using any rent bond or bank guarantee) in relation to a tenant’s default in paying rent, providing the tenant is complying with the process for seeking rent relief under the Regulations, and continues to comply with any existing rent relief agreement.
The Victorian Small Business Commission website explains what the eligibility criteria are, how decline in turnover can be measured for the purpose of rent relief under the scheme, and provides a template letter for tenants wishing to apply for relief in the extension period in these extensive FAQs.
Once the landlord has received a tenant’s application for rent relief, the landlord must make an offer for rent relief, in proportion to the tenant’s decline in turnover, within 14 days unless the parties have agreed in writing to another time frame.
It is important to emphasise that rent relief will not apply retrospectively. This means that tenants will only receive rent relief from the date of their application until 28 March 2021. It is therefore prudent for tenants, who want to continue receiving rent relief, to make a fresh application as soon as possible.
Land tax relief for landlords
During this further extension period landlords may apply for a land tax discount on their associated 2021 land tax. Additionally, landlords will have the option to defer the remainder of their land tax liability until 30 November 2021.
Dispute resolution process
The Victorian Small Business Commission continues to provide a mediation service for disputes, and now has the ability to make binding orders. However it is considered that the scope for disputes has been reduced, in relation to the both the first and second extension periods, as the basis for determining the amount of relief is now much clearer than in the earlier regulations that applied for the first six months of the relief scheme.
If you are a tenant or landlord seeking assistance in this area, please contact the Property Group at Hunt & Hunt.
~ with Michelle Nguyen, Graduate at Law