COVID-19 – EDITION 11: RENT RELIEF FOR COMMERCIAL AND RETAIL TENANTS

May 25, 2020

The COVID-19 pandemic has brought changes to retail and commercial leasing laws. The Federal Government introduced a mandatory Code of Conduct for landlords and tenants. The Victorian Government has made regulations that apply to retail and commercial leases.

The regulations provide for rent waivers and deferrals for tenants who are registered for JobKeeper. Tenants must make a written request for rent relief to the landlord. The request must state that the lease is an eligible lease and provide evidence that the tenant is participating in the JobKeeper scheme. The tenant must also provide financial information to enable the landlord to make a decision on what to offer. The landlord then has 14 days to make an offer for rent relief.

The amount of rent relief a landlord may offer must take into account all the circumstances of the lease, including the reduction in the tenant’s turnover, the tenant’s and landlord’s financial position and whether any outgoings have been waived or reduced.

The rent relief offered by the landlord must be 50% by way of waiver and 50% by way of deferral. If a deferral of rent is agreed to, the tenant has the greater of 24 months or the balance of the lease to pay the deferred rent. If less than 24 months is remaining on the lease, the landlord must offer the tenant an extension of the lease term to allow for up to 24 months to pay the agreed deferred rent.

If a tenant is not able to operate its business from the premises, the landlord must consider waiving outgoings.

If the parties cannot agree, the matter is referred to mediation at the Victorian Small Business Commission. If mediation fails, the parties may take the dispute to VCAT or court.

It is very important that any agreement between the landlord and tenant is documented in writing and signed by both parties to be a valid variation of the lease.

If you require advice regarding the process for rent relief or assistance drafting an agreement, please telephone us on (03) 9870 9870.

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