The COVID-19 lockdowns in Victoria and New South Wales have had a significant impact on businesses. To bring some rent relief to commercial tenants, new laws have been introduced in NSW and Victoria to help impacted businesses. This article will outline:
- key dates and eligibility criteria for tenants and leases in Victoria and New South Wales;
- available relief; and
- the prohibited actions from landlords.
Changes in Victoria
The Commercial Tenancy Relief Scheme Regulations 2021 have been implemented to provide relief from 28 July 2021 to 15 January 2022. The relief period may be extended, subject to governmental advice.
As a tenant, you may be eligible for relief if you are:
- an entity that as of 28 July 2021 that:
- carried on business in Australia;
- was a non-profit that pursued objectives in Australia;
- was a deductible gift recipient; or
- operated a public fund covered by the Regulation;
- an SME Entity; and
- satisfy the decline in turnover test (set out below); and
- are not an excluded tenant (set out below).
Decline in Turnover Test
You will satisfy the Decline in Turnover Test, if:
- your turnover for the Turnover Test Period (defined below) is less than your Comparison Turnover (defined below); and
- the above shortfall is no less than 30% (15% for ACNC-registered charity or a school which requires a decline of 15%).
The Turnover Test Period means:
- if you were trading before 1 April 2021 you may elect a 3-month consecutive period for the turnover test to apply; or
- you were trading on or after 1 April 2021, then you and the landlord must agree (in good faith) on the 3-three month period for the turnover test to apply.
The Relevant Comparison Period is the three-month period in 2019 corresponding to the 3-month period elected by you.
The Comparison turnover period is your turnover for the relevant comparison period, or, if an alternative comparison period applies to you, as calculated.
An excluded tenant is a tenant specified under Regulation which includes:
- an Australian entity or local governing body; and
- a listed corporation, a body corporate listed on the stock exchange outside Australia and a subsidy of a listed corporation of body corporate.
The relief provided must:
- relate to up to 100% of the rent payable under the eligible lease during the rent relief period;
- at a minimum, be proportional to the tenant’s decline in turnover;
- no less than 50% of the relief offered must be in the form of waiver rent; and
- take into account circumstances raised by you and any part payments made by you.
NOTE: 15 days after you receive a rent relief offer, it may be deemed to be accepted if a rent relief agreement has not been agreed on, it has not been referred to the Small Business Commissioner and the relief complies with the above.
Prohibited Enforcement Action
If you are an eligible tenant, and you have undertaken the following actions, your landlord is prohibited from undertaking certain actions against you. These include if you:
- have made a request to the landlord for rent relief and you continue to pay a portion of the rent due, equal to the rent due, reduced by the same percentage as your decline in turnover; or
- if a rent relief payment has been made and you are making payment in accordance with that agreement; or
- if you are unable to trade due to sickness or injury or natural disaster affecting the premises.
The landlord cannot increase your rent by reference to turnover, or take the following actions for non-payment of rent, or outgoings, or a reduction in trading hours, including:
- evicting or attempting to evict;
- re-entering or otherwise recovering the premises; or
- having any recourse to security.
Additionally, a landlord must consider waiving recovery for any outgoing or other expense payable. If outgoings are charged, it must not be for an amount that is greater than your proportional share of reduced outgoings (if already paid, this must be reimbursed by the landlord).
Changes in New South Wales
The New South Wales (NSW) Government has introduced the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 to provide eligible tenants with relief. Likewise, the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (the Regulation) has been extended to 13 January 2022. This Regulation prioritises mediation and prevents landlords from undertaking certain actions, including:
- evicting or terminating their tenant’s lease;
- exercising a right of re-entry or possession; or
- recovering the premises or land, amongst others.
Additionally, the Regulation reinstates the requirement for landlords to negotiate rent in accordance with the National Cabinets Code of Conduct. The Code mandates:
- that landlords provide rent relief in proportion to the tenants decline in turnover; and
- of the rent relief provided, at least 50% must be in the form of a waiver, and the balance a deferral.
As a commercial or retail tenant, you may be eligible for the relief if you:
- have an annual turnover of up to $50 million in the 2020-21 financial year; and
- are eligible for the Micro-business COVID-19 Support Grant, the COVID-19 NSW Business Grant or the Job Saver Grant.
There is relief available to landlords. Eligible landlords may receive a reduction of up to 100% of liability for 2021. To be eligible, landlords must be leasing to a commercial tenant that has:
- an annual turnover of up to $50 million; and
- is eligible for either 2021 COVID-19 Business Grant, JobSaver or the COVID-19 Micro Business Grant.
Further, a $40 million Hardship Fund is now available, providing a monthly grant of up to $3,000 for small commercial or retail landlords who provide rental waivers.
Prohibited Actions From Landlords
If you are an eligible tenant, your landlord cannot increase rent by reference to turnover or take prescribed action for breaches for:
- failure to pay rent or outgoings; or
- not keeping the premises open during the hours specified in the lease;
if renegotiation of rent or mediation has not first been attempted.
Prescribed actions include:
- evicting or terminating a tenant’s lease;
- exercising a right of re-entry or possession;
- recovering the premises or land;
- demanding a distraint of goods (i.e. seizing goods);
- demanding forfeiture;
- requesting damages;
- requiring a payment of interest on, or a fee or charge related to, unpaid rent;
- recovering a security bond; or
- requesting performance of obligations under the lease.
As a commercial or retail tenant, it is crucial to negotiate with your landlord and ensure that you obtain any eligible rental relief. Your landlord has obligations that they must comply with, and the law prohibits them from taking certain actions, like terminating your lease or recovering the premises.
If you have any questions about your COVID-19 rental relief entitlements, LegalVision’s experienced leasing lawyers can assist. Call us on 1300 544 755 or complete the form on this page.