URGENT ACTION NEEDED BY TENANTS WHO CAN MAKE RENT RELIEF APPLICATIONS FROM THE LANDLORD - DUE 30 SEPTEMBER 2021

28 September 2021

Hi,

As you know all Victorians have been in lockdown since 5 August 2021.

3.2 Re-introduction of the Commercial Tenancy Relief Scheme (from 28 July 2021)

The regulations have now been finalized and they:

A Quick Overview

Apply from 28 July 2021 and intended to apply until 15 January 2022. IF YOU ARE GOING TO MAKE A RENT RELIEF APPLICATION THEN YOU MUST DO IT BEFORE 30 SEPTEMBER 2021 IN ORDER FOR IT TO RETROSPECTIVELY APPLY FROM 28 JULY 2021 OR IT WILL ONLY COMMENCE FROM THE DATE THAT YOU MAKE THE APPLICATION IN OCTOBER OR BEYOND.
For businesses with turnover less than $50m.
Have suffered a decline in turnover of at least 30% due to COVID-19.
The data utilised to determine the decline in turnover is to be calculated by the tenant and or the accountant.
The rent relief provided by the landlord must be proportionate to the tenants decline in turnover. Of the relief provided 50% is to be waived and 50% is to be deferred.
Eligibility is a one time test and if eligible at the beginning of the CTRS 2021, eligibility will remain throughout the full term of relief scheme. It will be for the period 28 July 2021 to 15 January 2022.
Landlords will not be able to lock out or evict tenants without a determination from the Victorian Small Business Commission (VSBC).
For tenants that currently have an agreed deferred rent payment program under the CTRS 2020, the existing deferred repayment requirements will be frozen until 15 January 2022. From 15 January 2022, the existing deferred amounts will be added to the deferred rent from CTRS 2021.

Summary of Regulations (Please note this summary is available on the Mills Oakley Lawyers website):

the 2021 Regulations apply from 28 July 2021 to 15 January 2022 (Protection Period);
the 2021 Regulations only apply to ‘Eligible Leases’, which must satisfy a new Decline in Turnover test;
Eligible Leases must be in effect on 28 July 2021. However, they also include leases that are varied, extended or renewed during the Protection Period;
JobKeeper eligibility is no longer a requirement for rent relief. A new, complicated ‘Decline in Turnover’ test (30% or more, or 15% for charities) is the key qualifying criteria;
to obtain rent relief, a tenant must provide supporting evidence of its Decline in Turnover within 14 days of its rent relief request. If the supporting evidence is not provided on time, the request for rent relief lapses and the tenant must start over (but may only do so two further times). ;
to obtain rent relief from 28 July 2021, a tenant must make its request inclusive of supporting evidence, before 30 September 2021. Otherwise, rent relief will only commence on the date that the tenant makes its request and provides its supporting evidence;
rent relief will apply from the relevant date through to the end of the Protection Period;
a landlord must make a rent relief offer within 14 days after receiving a request for rent relief and supporting evidence. At a minimum, the offer must include the percentage of Decline in Turnover, provided as 50% rent waiver and 50% rent deferral (but the parties may agree otherwise as to how much of the rent relief is granted as a waiver and deferral);
a landlord may be required to grant greater relief depending on ‘other circumstances’. No guidance has been provided as to what these other circumstances may be, or what extra relief may be required to be provided (including whether this will extend to outgoings);
a tenant has 14 days to accept the rent relief offer or issue the matter to the Small Business Commission (SBC), and where it fails to do so, it is deemed to have accepted the offer (provided the minimum standards are complied with);
where the tenant began trading before 1 April 2021, the compliant rent relief request was made before 30 September 2021 and the parties entered into a rent relief agreement, there is a mandatory reassessment of rent relief based on the tenant’s actual turnover in the 2021 September quarter;
in addition, if a rent relief agreement is entered into and subsequently the tenant’s financial circumstances materially change, the tenant can make a further request for rent relief, and the same procedure must be followed;
the protections for Eligible Leases against termination, draw down on security etc, as provided for in the 2020 Regulations, apply with some alterations (including that the tenant must continue paying rent as reduced by their stated Decline in Turnover, even where rent relief not been agreed as yet)
tenants under Eligible Leases and a limited class of others, are entitled to reduce their trading hours or stop trade altogether during the Protection Period;
there is a total ban, rather than a mere postponement, of rent increases during the Protection Period – however there is some scope to contract out of this; and
similar to the 2020 Regulations, the 2021 Regulations provide for extensions of the lease term equivalent to the period during which any rent is deferred, and the tenant has at least 24 months within which to repay the deferred amounts – both of these aspects being capable of variation by agreement in writing between the parties.

Landlords providing tenant relief can access:

land tax relief of up to 25%
A $20m fund has been setup for landlords who can demonstrate acute hardship (Information on how to qualify and apply for this fund have not yet been released. We will keep you informed)

Further information and FAQ’s on the CTRS 2021 is available at;

https://www.vsbc.vic.gov.au/news-publication/rent-relief-to-come-for-victorias-commercial-tenants/

https://www.vsbc.vic.gov.au/fact-sheets-and-resources/faqs/#commercial-tenancy-relief-scheme-reintroduced-28-july-2021-victorian-government-faqs

We wish you all the best.

Regards

Alan Yildiz