COVID 19, Rent Relief and Commercial Leasing in Victoria in 2021
By Rochelle Manderson: Partner, Solicitor and Mediator at TBA Law & TBA ADR
Commercial Leasing could be arguably one of the backbone structures of business, small business and investment in Victoria. Like many thing, the restrictions and lockdowns imposed by the Victorian State Government in response to the COVID 19 pandemic have been damaging on small business and investment. The nature of the beast has meant many tenants have had to close their doors, especially in the retail sector.
2020 saw the introduction of the COVID 19 Omnibus Regulations to offer rent relief to Tenants and tax relief to Landlords in commercial leasing. Sadly, the pandemic has continued to evolve and COVID 19 has not ceased to be an issue in Australia in 2021. The Delta strain has again devastated the day to day functioning of many small businesses, impacting small business owners leasing premises and landlords investors, as COVID 19 did in 2020. In response, the Victorian Government has released new rent relief measured in August in an attempt to assist small business and investors to maintain their livelihood.
Here is what you need to know:
- New legislation has been introduced into Victoria to assist Tenants who have experienced a loss in turnover of greater than 30 percent, calculated by comparing the turnover for the final quarter of 2022/21 financial year with turnover from the final quarter of the financial year of 2018/19. There is also provision for new businesses to benefit from the scheme despite not having a turnover amount from 2019.
- The percentage drop in turnover will determine the amount of rent relief/assistance the Tenant has available to them.
- There is a one off test for eligibility for the scheme, however mandatory reassessment of turnover will occur whereby the amount of relief granted will be adjusted to remain consistent with the business turnover.
The Commercial Tenancy Relief Scheme:
- Eligible Tenants or businesses can seek rent relief through the Commercial Tenancy Relief Scheme, whereby parties are encouraged to negotiate together in good faith as the first instance.
- Any deferred rent from the 2020 Omnibus regulations agreed in 2020 will be frozen until 15 January 2022. Deferred rent is the rent agreed to be repaid at a later date, many payments of which are falling due in the second part of 2021. Any deferred rent from the 2021 Scheme will be added to this amount owing from 2020;
- Landlords cannot issue eviction notices to eligible Tenants without first obtaining a direction from the Victorian Small Business Commission (VSBC);
- Landlords granting rent relief to eligible tenants can obtain land tax relief of up to 20% additional to any previous land tax assistance obtained in 2020; and
- Landlords who can demonstrate acute hardship may be eligible to apply for payments under a government funded $20,000,000 hardship fund.
Mediation as a lower cost option
Landlords and Tenants are encouraged to negotiate with each other in good faith to attempt to find a suitable resolution for all parties during this time. If that fails, mediation may be an option. The VSBC can host a mediation in an attempt for parties to reach agreement.
Parties can obtain their own legal advice, however be aware that the reason parties are looking to this Scheme is primarily for financial downturn of business and financial hardship, sop the cost of a lawyer my not be the best practical option for either party and they should attempt to act reasonably to avoid this.
There are also private mediators/Alternative Dispute Resolution (ADR) firms that conduct mediations that follow the Facilitative Mediation Model, which is aimed at putting the parties in control of the process to get to the heart of the issues. This can lead to a deeper understanding of the important issues to each party and can allow for a settlement agreement more suited to the parties and specific to their own situation.
TBA Law currently have two mediators available, and can offer half day Facilitative Mediation by Zoom through our TBA ADR web portal, or there are many other options available. NMAS can assist further in finding the right mediation style and mediator for your situation.