On Friday, the rent relief regulations (COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (“Regulations”) were amended and extended until 31 December 2020.
Who is eligible?
Tenants who are participating in JobKeeper and have an annual turnover of less than $50m. The tenant does not have to be the company that employs staff.
What rent relief can a tenant get?
At a minimum, the same percentage as their downturn in turnover associated with the premises (and no other premises). For example, if a tenant’s rent is usually $1,000 per month and they have experienced a 70% downturn in turnover, the landlord has to offer them 70% rent relief ($700).
Landlords must waive at least half of the rent relief amount, so it is never paid back ($350). Tenants can ask that the rest be deferred (paid back at another time).
Landlords can no longer take into account their own financial circumstances when offering rent relief.
What is included in turnover?
the proceeds of sales of goods and/or services (including click and collect);
repair and service income;
rent, leasing and hiring income;
government bounties and subsidies;
interest, royalties and dividends;
other operating income.
This does not include JobKeeper payments.
Can a tenant extend their lease?
Yes, if they have agreed to defer rent the landlord has to offer an extension that matches the number of months the rent is deferred.
For example, if you agree that your rent is deferred from October to December (3 months), then your lease should be extended for 3 months.
In our experience not many landlords have offered this, so tenants should be prepared to ask for this if it is what they want.
When does deferred rent have to be repaid?
Tenants should only start paying this back from 31 December 2020. This applies even if you have an existing rent relief agreement to start repaying it earlier. The repayment period must be either 2 years or the rest of the lease (whichever is longer). This includes any time that your lease is extended (as mentioned above).
For example, if it is 6 October 2020 and you have 3 years left on your lease. The tenant can repay the rent by the end of the lease, as it is longer than 2 years. The parties can agree to a different repayment period.
Landlords cannot charge any fees or interest on deferred rent.
How does a tenant ask for rent relief?
They must write to the landlord saying:
that the lease is an eligible lease;
the lease is not excluded (the Regulations mostly exclude farming/agricultural leases);
the tenant is an SME;
the tenant is participating in JobKeeper; and
what the percentage of downturn in turnover associated with the premises (and no other premises).
The tenant must include the following:
evidence that they are an SME entity with under $50m turnover;
their JobKeeper receipt number issued by the Commissioner of Taxation and a copy of the tenant’s most recent notice;
evidence of the decline in turnover, including one of the following:
extracts from accounting records;
statements issued by an ADI; or
a statement prepared by an accountant.
The Second Reading speech said that information requested should be as minimal as possible to save time and should basically mirror what tenants have already shown for their JobKeeper applications.
Rent relief will apply from the date tenants sends a compliant request, so this means it is important for tenants to do this ASAP and provide the correct information.
A landlord must respond with an offer in 14 days.
What if the parties have already negotiated rent relief this year?
The tenant can ask for rent relief again for the period of 30 September to 31 December if:
Their financial circumstances materially change;
The rent relief offered was not proportionate to the reduction in turnover. For example, the tenant’s downturn in turnover was 70% but the landlord offered a 50% rent reduction; or
The rent relief ends before 31 December 2020. Most rent relief agreements we have seen ended 29 September 2020.
Can a landlord evict a tenant for not paying rent?
No. Landlords also cannot use a security deposit. A civil penalty of $3,304 will apply.
Can landlords increase rent?
No, unless the parties agree in writing.
If the parties can’t agree they can go to the Victorian Small Business Commission for free mediation.
If a landlord is not responding and the parties aren’t negotiating in good faith, the VSBC has the power to make a binding order on rent relief.
If you are a landlord or tenant wanting help with your rent relief, please get in touch with us.