On the day that the COVID-19 Omnibus (Emergency Measures)(Commercial Leases and Licences) Regulations 2020 (Vic) (Regulations) were set to expire, we received the amended and extended version of the Regulations (over a month after the Premier announced that the regulations would be extended)1. As with the first version of the Regulations, the extension was much anticipated by landlords and tenants alike.
As expected, the Regulations have been extended however also varied to address those gaps in the first version's drafting that have become clear over the past four months.
Notable changes to the Regulations
1. The Regulations have been extended to 31 December 2020, meaning that the Regulations are effective from 29 March 2020 – 31 December 2020.
2. The protection for eligible tenants under regulation 9 (that relates to the landlord's inability to re-enter, evict the tenant or apply security) has been extended to a tenant who has failed to pay rent and outgoings under the lease (rather than rent only).
3. Tenant's application for rent relief must include a statement setting out:
- the tenant's decline in turnover associated with the premises (and no other premises);
- statements that the lease is an eligible lease;
- information that it falls within the scope of sections 6, 11 or 12A of the JobKeeper Rules (as defined in the Regulations); and
- a copy of the tenant's most recent notice under the JobKeeper Rules.
The amendments make clear that the parties should consider the reduction in turnover at the premises only. This is a deviation from the National Code and the recent NSW Supreme Court decision of Sneakerboy discussed in our article where the tenant's turnover as a whole would be considered. This amendment will cause problems with landlords seeking to rely on internet sales or the average of multiple stores to avoid determining rent relief on a single store that has been heavily affected by the pandemic.
4. The Tenant's decline in turnover must be expressed as a whole percentage and calculated as per the decline in turnover test for the most recent turnover test period.
5. Rent relief must be, at a minimum, proportional to the decline in the tenant's turnover associated with the premises (Proportionality Principle). This enshrines the Victorian Government's Policy Guidelines.2
6. Landlords can no longer rely on their (own) financial ability to offer rent relief when considering an offer for rent relief. This aligns with the position in other States where the landlord's financial ability to offer further relief is not considered.
7. Regulation 11 (Subsequent Rent Relief) has been amended to allow for tenant's to seek subsequent rent relief:
- if their financial circumstances materially change; or
- if their variation or agreement (made during the first 6 months of the relevant period) does not comply with the Proportionality Principle and it was made prior to 29 September 2020; or
- if the rent relief does not apply for the whole of the relevant period (29 March – 31 December 2020).
8. The commencement for the repayment of deferred rent is delayed until 1 January 2021 (whether or not the rent relief agreement is made before or after 29 September 2020). Therefore, all agreements where the tenant was due to commence repaying deferred rent is delayed until 1 January 2020.
9. The mediation process has been altered to allow for the VSBC to make binding orders for rent relief. These amendments have been drafted in favour of the tenant (on the basis that they assume that the landlord is not acting reasonably in the negotiation process). We will be exploring this further in a later article.
10. If a tenant ceases to be eligible for JobKeeper during the relevant period, it appears that the tenant remains eligible for the protections under the Regulations (see regulations 24B and 24C).
The amendments to the Regulations have provided some substantive and notable changes to the legislative framework in Victoria. Some of the amendments bring the legislation in line with the Code of Conduct whilst some diverge further.
We will be exploring the changes to the mediation and dispute resolution process in another article that will be released shortly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.