New COVID-19 Commercial Rent Relief Laws
The Victorian Government has re-introduced the COVID-19 Commercial Tenancy Relief Scheme, with some changes. Tenants should apply before 30 September 2021.
The Scheme is in operation from 28 July 2021 to 15 January 2022. If the tenant submits a request for rent relief to the landlord before 30 September 2021, their relief can be back-dated to 28 July 2021. For applications made after 30 September 2021, the relief only applies from the date the application is made.
If an eligible tenant has suffered a minimum 30% reduction in turnover, they can apply for relief. Fall in turnover is calculated by comparing 2019 figures with 2021 figures. Relief will be in the form of rental waivers and deferrals. If the tenant has requested relief following the correct procedure, the landlord cannot end the lease due to non-payment of rent.
If an application is made under the new scheme, any existing rent deferrals agreed to under the previous scheme are deferred to 15 January 2022.
To apply for rent relief, a tenant must provide specific information and documents to the landlord. If the proper procedure is not followed, the request will not be valid
Within 14 days of receiving a compliant application, the landlord must make an offer of rent relief in writing to the tenant. If the landlord makes an offer after 14 days has elapsed, and that offer complies with the requirements of the regulations, the tenant is deemed to have accepted the offer. It is therefore recommended that if no offer has been received after 14 days, that the tenant immediately apply to VSBC for mediation so that they are not locked into the landlord’s offer.
For requests for rent relief made before 30 September 2020, there is a reassessment to be conducted on 31 October 2021. The tenant must provide further documentation to the landlord prior to this date. Failure to provide this documentation may mean that any waivers of rent no longer apply after 31 October 2021.
There is an additional regulation that seems to protect any eligible tenant who has suffered at least 30% decline in turnover (regardless of if a rent relief application is made) in relation to non-payment of rent or outgoings if the tenant is unable to trade due to sickness, injury, or natural disaster. ‘Natural disaster’ may include COVID-19 and its associated lockdown restrictions, but this is not clear.
For any eligible tenant who has suffered at least 30% decline in turnover (regardless of if a rent relief application is made), there will be a freeze on rent increases until 15 January 2022 and the landlord cannot claim any increases in rent after the regulations end. If there is a market review during this period, the rent can decrease but cannot increase.
The Commercial Landlord Hardship Fund
If a small landlord suffers hardship as a result of waiving rent under the scheme, they can apply to the Commercial Landlord Hardship Fund for a grant of up to $6,000, or a maximum of $10,000 if the landlord suffers acute hardship, per tenancy.
To be eligible, the landlord must have total taxable landholdings (not including your principal place of residence) of less than $3 million. This is not the Capital Improved Value, but the Site Value.
Landlords must show that commercial rent represents more than 50% of their total gross income for the 2019-20 financial year. If a landlord shows that the rent is more than 75% of their income, this is classified as ‘acute hardship’.
Applications close on 15 January 2022.