Commercial Tenancy Relief Scheme Passed This Week

Legislation passed this week to reintroduce the Commercial Tenancy Relief Scheme. Businesses that have experienced a loss in turnover of more than 30 percent during the pandemic are now guaranteed to receive rent reductions, while separate support will be provided to landlords. Tenants and landlords are encouraged to enter negotiations directly, with the Victorian Small Business Commission (VSBC) available to provide free and impartial mediation if parties can’t reach an agreement. No doubt each situation will be unique and the VSBC encourages fair resolution between landlord and tenant in good faith – with any luck this is no longer a quaint concept but a standardised one in these Delta-dominated times.

Rent relief eligibility will be calculated comparing turnover for the June 2021 quarter with the June 2019 quarter, with the percentage drop dictating the amount of initial rent relief (special arrangements are in place for businesses not operating in 2019). A compulsory reassessment of turnover will be required further down the timeline of the scheme with the proportion of rent relief adjusted in line with businesses’ turnover. Where there is an agreement already in place from the first rental relief Scheme, deferred rent repayments under that original Scheme will be frozen until 15 January 2022, at which point the outstanding amount will be added to the deferred rent accrued during the current Scheme.

Land tax relief of up to 25 percent to landlords who provide rent relief to eligible tenants has also rematerialised. Small landlords who can show acute hardship will be eligible to apply for payment as part of a $20m hardship fund. Protections (including those against tenant eviction) will be backdated to start from when the Scheme was announced on 28 July 2021, and all rental increases are banned.

Whilst any agreement between landlords and tenants with regards to rent relief can be documented by way of a variation of the existing lease, the most cost-effective and simple way to document such an agreement would be by way of written correspondence between the parties setting out the terms of the agreement between them and evidencing mutual consent.

More information available on the VSBC website. For further discussion, contact your Morrows Advisor or Lesley Davis from Morrows Legal (ldavis@morrows.com.au).