Commercial & Retail Tenancies – New Regulations are In

In our article published 7 September 2020, we told you about the new legislation that was passing through parliament at, what felt like, a glacial pace, but in legislation terms, was Barry Allen like (you know the guy, red suit, gold lightning bolt…the Flash).

Once again, to understand where we are coming from, if you haven’t read our earlier articles on the first version of the regulations, you might find it useful context (click here for our article on the initial regulations).

On 16 September 2020, we announced to you via our Facebook page and LinkedIn that the legislation had passed and the anxious wait for new regulations began.

Well, EXTRA, EXTRA, READ ALL ABOUT IT, on the day that the old Regulations were originally meant to expire, the amending Regulations (can be read here) have breathed new life into the tired 5 month old version that, frankly in our experience, wasn’t really working to resolve the disputes that actually needed imposition and guidance of legislature.

These amendments are an acknowledgement of that and so we set out on the path of trying to help you understand the new landscape.

The new Regulations, with amendments incorporated, can be found here.

What do the new COVID-19 Leasing Regulations change from the first version?

When we say new landscape, we mean it. Those still negotiating their first deal have a whole new bunch of considerations.

Those who thought they had theirs covered until the Scheme ends, might want to reconsider.

Those who negotiated to a fixed date earlier than 31 December 2020, can have another go.

Aside from entirely new provisions, most of which followed what we foreshadowed from the proposed Bill in our 7 September article, there are a number of significant changes to the way the existing system will work moving forward.

Can a tenant ask for more rent relief?

YES! The original Regulations allowed tenants a ‘second bite at the cherry’ upon material changes in their turnover being recorded.

This has been given a facelift, and now if a tenant’s previously agreed rent relief scheme wasn’t based on its decline in turnover at the premises subject of the lease (e.g. you agreed to fixed reduction per month, or included as part of the calculation, income from other sites within your business), or doesn’t go until 31 December 2020, you can apply again, even if your circumstances haven’t changed significantly since you did the deal with your Landlord.[1]

Can a tenant get rent relief now if they weren’t eligible previously?

The definition of an ‘eligible lease has come into the Regulations and been changed in a way that will now extend eligibility to non-employing tenants, starkly left out altogether in the first scheme.[2]

Does a tenant still have to pay its outgoings?

Previously a Landlord could press hard on outgoings and default a tenant for not paying these, but were prevented from doing so regarding rent. Now, if an eligible tenant has made an application pursuant to Regulation 10 that remains unresolved, failure to pay outgoings due any time after 29 March 2020 are exempted from eviction,[3] despite relief from payment of outgoings not being an option under the scheme unless a tenant pays a rent including outgoings.[4]

If parties are happy, do they have to change anything?

If an existing rent relief arrangement was entered into using a length of time referrable to the terms of the legislation, particularly the “relevant period”,[5] and a tenant is happy with it, then no changes need to be made.

If your arrangement specified an end date, and the parties want to extend it to the end of the year, then a simple email or written exchange should suffice to this effect, though us lawyers would recommend you properly record it by way of a lease variation.

How long do new rent relief arrangements go for?

A landlord’s offer of rent relief must now apply to the period starting on the date of the tenant’s request for rent relief and ending on 31 December 2020[6]. The amended Regulations do not make clear if this applies retrospectively to applications not yet resolved but applied for prior to the Amendments, or even those applied for prior to the original Regulations and ratified under same by Regulation 10(6). This could be huge, given many tenants never applied formally as the system was so late in coming into operation. See further below regarding the VSBC guidance to make a fresh application for all tenants.

If a tenant stops getting JobKeeper, can they still get rent relief?

Where rent relief has been agreed and the terms have already been extended (whether by result of the extended Regulations or by agreement), falling out of JobKeeper eligibility will not affect the ongoing arrangements.

If a tenant no longer qualifies for the new JobKeeper arrangements and didn’t apply to extend a rent relief agreement that has already finished, they are no longer eligible.

What are the options if parties can’t agree?

If the parties haven’t been to mediation through the VSBC, that’s the first step.

There are quite lengthy new provisions that give the VSBC the power to make a binding order if mediation fails. We’ll address these in a subsequent article on how to get the other side to agree to reasonable relief, so watch this space.

Does a tenant need to make a fresh application for relief over the additional period?

YES! The VSBC has provided guidance that, in their view, this is the case even if you’ve got an ongoing application, unless you have already provided the information required under the new version of Regulation 10.

The VSBC have provided links to their template letter and updated tenant information guidance.

How does a tenant make a fresh application?

The process for applying to a Landlord has not really changed, just been given more requirements rather than the guides previously provided.

1. Any fresh application for rent relief still must state the lease is an eligible lease, not excluded from the regulations.
2. It now must also include a statement setting out the tenant’s percentage decline in turnover[7] associated only with the premises to which the rent relief application applies.[8]
3. The information required to support a tenant’s request for rent relief, which the VSBC had previously published as a guide, has now been adopted as a requirement.[9] It is crucial this information is included in any fresh application, as without it, the date is not set from which relief begins, and the tenant is not able to rely upon the eviction moratorium in Regulation 9 (see point 2 above).
4. The turnover being assessed has been clarified as not including any “coronavirus economic response payment”, which adopts a definition from the Federal legislation as convoluted as you would expect, but presently only includes JobKeeper. It makes no clarification as to State Government grants, for example, leaving same to be a point of contention between disputing parties.

How can DSA Law help?

Our team of dedicated and experienced Commercial Lawyers, whether in our Melbourne or Ballarat offices, have been assisting Landlords and Tenants around Victoria navigate these Regulations. For advice regarding the changes, your obligations under the COVID-19 Omnibus Act, or other tenancy law issues please Contact Us or one of our Lawyers at DSA Law on (03) 8595 9580 or our Ballarat office on (03) 5331 1244.

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[1] Regulation 11, COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 passed 29 September 2020 (the Regulations).

[2] Regulation 4A.

[3] Regulation 9, as amended.

[4] Now clarified under Regulation 10(4A).

[5] Regulation 4, Definitions.

[6] Regulations 10(4)(a) and (c).

[7] Calculated in accordance with the decline in turnover test used by the tenant for their JobKeeper reporting, in relation to the tenant’s most recent decline in turnover test period, see sections 8 and 8A of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020

[8] Regulation 10(2)(a)(iii) & new Regulation 10(2A).

[9] Regulation 10(2), as amended

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[1] For more information regarding initial regulations relating to Commercial & Retail Tenancies, read our article, “COVID-19 Omnibus Regulations 2020 and Leases in Victoria”. [2]Daniel Andrews,  ‘Pause on Evictions Extended and Extra Renter Protections’, The Premier of Victoria (Media Release, 20 August 2020) <https://www.premier.vic.gov.au/pause-evictions-extended-and-extra-renter-protections>.[3]COVID-19 Commercial and Residential Tenancies Legislation Amendment (Extension) Bill 2020 (Vic). [4] Victoria, Second Reading Speech, Legislative Assembly, 3 September 2020, 2. [5] COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic) s 15. [6] COVID-19 Commercial and Residential Tenancies Legislation Amendment (Extension) Bill 2020 (Vic); for a progression of the present Bill, Legislative Assembly, ‘COVID-19 Commercial and Residential Tenancies Legislation Amendment (Extension) Bill 2020 (Vic)’, Victorian Legislation (2 September 2020), <https://www.legislation.vic.gov.au/bills/covid-19-commercial-and-residential-tenancies-legislation-amendment-extension-bill-2020>.