On 1 February 2022, the Victorian Government re-introduced its Commercial Tenancy Relief Scheme, which supports small businesses experiencing financial hardship due to the latest wave of the COVID-19 pandemic.
What does the new scheme include?
The new scheme will operate from 16 January 2022 until 15 March 2022 and covers eligible leases that were in place as of 16 January 2022, resulting in continuous support over the previous and current schemes where a tenant is eligible under the current scheme.
Eligible landlords will also continue to receive support with more details on a new round of the Commercial Landlord Hardship Fund to be announced shortly. Further, land tax relief of up to 25% is available for landlords who provided rent relief to their tenants under the previous scheme.
Can parties continue to use the previous rent relief agreement?
Landlords and tenants can continue with a previous rent relief agreement after 15 January 2022, where they both agree to do so. However, if they do not agree and a tenant wants relief, they will need to make a new request while continuing to pay the amount of rent agreed under the previous scheme.
What is the process for applying for rent relief?
Eligible tenants must make a written request to their landlord for relief, which must be accompanied by a statement that they are an eligible tenant and satisfy the decline in turnover test. Tenants need to demonstrate a decline in turnover of 30% or more by comparing earnings of January 2022 to January 2020 or December 2021 if the tenant stopped trading for a week or more during January 2020 and re-commencing before 16 January 2022.
Within 14 days of making a request, the tenant must provide a statutory declaration confirming the information provided, accompanied by at least one of the following to evidence their decline in turnover
- Accounting records
- Business Activity Statements
- Bank Statements, or
- Statement prepared by an accountant
Landlords must provide a written offer for rent relief within 14 days of receiving a request from an eligible tenant.
At a minimum, the rent relief offered must be proportional to a tenant’s decline in turnover. At least half of any rent relief must be in the form of a waiver, with the remainder being deferred. Any rent deferred will be payable in equal instalments commencing from 16 March 2022 until the end of the lease term or over a period of two years, whichever is greater.
Landlords are also required to offer an extension to the existing lease term equal to the period for which the rent is deferred.
Where an agreement is not reached within 14 days of an offer being made, a tenant will be deemed to have accepted a landlord’s offer of relief if:
- The landlord’s offer meets the requirements; and
- The tenant has not referred the matter to the VSBC
Although a one-time eligibility test, the regulations allow a tenant to make a further request to the landlord where there is a material change in circumstances.
Can tenants be evicted?
An eligible tenant cannot be evicted without the landlord obtaining a direction from the Victorian Small Business Commission (VSBC) if:
- They have requested relief and continue to pay rent in proportion to their decline in turnover;
- An agreement has been reached; or
- They are unable to trade due to sickness, injury or natural disaster.
The VSBC will still have power to conduct mediations and issue binding orders in the event that landlords and tenants cannot agree.
How can Morrows Help?
If you have questions regarding the legal obligations around rent relief; whether it’s your entitlements as a tenant or your responsibilities as a landlord, please reach out to Morrows Legal.
Alternatively, if you need help preparing a statement to prove your decline in turnover, please contact a member of our Morrows Tax and Business Advisory team.