The Victorian Government has introduced new legislation regarding commercial leases impacted by the COVID-19 pandemic. Under the Commercial Tenancy Relief Scheme Act 2021, which passed both houses of Parliament on 5 August 2021, commercial tenants who have experienced a loss in turnover of more than 30 per cent during the pandemic may be eligible for rent relief. The legislation will come into effect shortly, and is likely to affect existing arrangements between commercial landlords and tenants. This article explains the expected provisions under the Act to inform your commercial lease negotiations.
Who is eligible for rent relief?
Rent relief will be available to small and medium-sized business (SME) tenants with an annual turnover of less than $50 million who have experienced a loss in turnover of 30 per cent or more due to the pandemic. Eligibility for rent relief under the Scheme will be a one-time test so that commercial tenants who initially qualify will not be disqualified later. Instead, a mandatory reassessment of the tenant’s turnover will be required during the Scheme’s operation, with rent relief adjusted accordingly.
Notably, the new Scheme provides for special arrangements to assess the turnover of new businesses which were not operating in 2019. This differs from previous rent relief legislation which excluded newer businesses from receiving rent relief.
What amount of rent relief is available?
Eligible commercial tenants will receive rent relief proportional to their reduction in turnover. The amount will be calculated by comparing the tenant’s turnover in the final quarter of the 2020/21 financial year with turnover from the final quarter in 2018/19.
How long will the Scheme operate?
The Scheme will have retrospective effect, applying from 28 July 2021 until 15 January 2022.
What happens to rent relief already in place?
Rent relief under previous Schemes will be frozen at the option of the tenant until 15 January 2022 and added to any rent deferred under the new Scheme.
Can I evict my commercial tenant?
Commercial landlords will not be able to evict eligible tenants without first obtaining a direction from the Victorian Small Business Commission (VSBC).
What benefits are in place for commercial landlords?
To support commercial landlords, the Victorian Government will provide land tax relief of up to 25 per cent, on top of any previous relief. Small landlords who can show acute hardship are also eligible to apply for payments.
What should I do next?
Commercial landlords and tenants should begin to enter negotiations regarding their commercial leases in light of the new rent relief scheme. It may be helpful to seek advice from a legal professional or the VSBC regarding your commercial lease negotiations.