Legislative update – Electronic signing and the reintroduction of rent relief schemes in Victoria & New South Wales
Electronic signing update
New Federal legislation makes it clear that documents can be signed electronically by companies and the parties can rely on the assumptions about valid execution in section 129(5) of the Corporations Act 2001 (Cth), provided certain formalities are met.
The new legislation is the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) and it came into effect on 14 August 2021. It confirms that Australian companies may sign documents electronically:
- either by two directors or by a director and the company secretary
- by split execution (different signatures on different counterparts).
This extends to deeds, not just agreements. It includes contracts of sale, leases, deeds of cancellation and deeds of variation.
The new legislation is temporary and will end on 31 March 2022. However, the Federal Government said that it will now seek to introduce permanent legislation later this year.
What about individuals?
The Federal legislation relates to companies. As a reminder, electronic execution of documents by individuals is governed by State and Territory laws.
Each jurisdiction has different rules and requirements for valid signing and witnessing of documents. Both the Victorian and New South Wales parliaments have passed legislation that recognises the validity of deeds and agreements that are electronically signed and in electronic form. This is a permanent measure in both Victoria and New South Wales.
Both the Victorian and New South Wales parliaments have also passed legislation that permits an individual’s signature to be remotely witnessed, provided particular requirements are met. The remote witnessing measures are permanent in Victoria. Similar measures in New South Wales are due to expire on 31 December 2021 unless they are extended.
If you have questions about how to ensure your documents are validly executed, get in touch with the Development team.
Reintroduced rent relief schemes for commercial tenants in Victoria and New South Wales
The various States and Territories introduced temporary schemes protecting commercial tenants when the COVID-19 pandemic first hit last year. Victoria and New South Wales have now reintroduced rent relief schemes. Broadly speaking the latest schemes operate in a similar way to those introduced last year. Here we cover the key aspects of the reintroduced schemes.
A new commercial tenancy relief scheme (2021 CTRS) has come into effect in Victoria. The Commercial Tenancy Relief Scheme Regulations 2021 (Vic) (Regulations) were made on 24 August 2021. The Regulations contain most of the details of the 2021 CTRS.
The protection period runs from 28 July 2021 to 15 January 2022.
Just like the previous commercial tenancy relief scheme that was enacted in 2020 (2020 CTRS), the Regulations provide a temporary process by which a tenant, whose business is affected by the COVID-19 pandemic, may obtain rent relief. Large parts of the new Regulations are similar to the 2020 CTRS. But there are some key differences.
Some of the key differences between the 2021 CTRS and the 2020 CTRS are:
- modified eligibility criteria as JobKeeper no longer exists
- a new decline in turnover test
- the tenant’s turnover includes Victorian Government grants as well as internet sales
- listed companies are excluded from being eligible tenants
- there are new protections for tenants affected by illness or a natural disaster
- the rent relief process is slightly different
- the tenant’s rent relief request may lapse if it doesn’t provide certain evidence within 14 days
- the tenant is deemed to have accepted the landlord’s rent relief offer after 15 days
- there is a mandatory reassessment of rent relief
- the prohibition on rent increases suggests that they are void and may never be claimed if they are scheduled to occur during the protection period
- there is a new offence where a party provides the other with false or misleading information.
What are the key points about the 2021 CTRS?
Eligible lease – The Regulations only apply to ‘eligible leases’. These are retail leases, nonretail commercial leases and licences which were in effect on 28 July 2021, where the tenant is an eligible tenant and are not in an excluded class of lease (agricultural leases or the tenant is a listed corporation).
Eligible tenant – The definition is similar to that in the 2020 CTRS. The tenant must be a SME with an aggregate annual turnover of less than $50 million at the group level. The tenant must satisfy the decline in turnover test i.e. experience at least a 30% decline in turnover due to COVID-19.
Decline in turnover test – This involves comparing pre-COVID-19 turnover to recent turnover in 2021. The tenant can compare its turnover from any three consecutive calendar months between 1 April 2021 to 30 September 2021 to its turnover in the same three months in 2019.
The tenant must make a formal application to the landlord for relief. The details are in the Regulations. The tenant’s right to rent relief is potentially retrospective to 28 July 2021. However, if a tenant did not make a rent relief request and provide all of the necessary evidence by 30 September 2021, it will have missed out on rent relief for the period from 28 July 2021 until it makes the compliant request.
The landlord must offer rent relief to the tenant at least proportional to the tenant’s decline in turnover. At least 50% of the rent relief must be in the form of a waiver, with the rest deferred and an offer to extend the term.
Tenant not in breach
Where a tenant has made a compliant rent relief application and observes the process and requirements in the Regulations, the tenant cannot be evicted for failure to pay rent and outgoings during the protection period (i.e. 28 July 2021 – 15 January 2022). Landlords can still take action for other breaches.
As was the case under the 2020 CTRS, the landlord must not increase the rent during the protection period. The Regulations go further than the 2020 CTRS and say that if the lease provides for a rent increase or review of rent that would increase it during the protection period, the rent review is void and may never be claimed by the landlord.
The 2020 CTRS did not take into account improvements in a tenant’s financial circumstances. The new Regulations provide a mandatory reassessment of rent relief agreements roughly halfway through the scheme. The reassessment applies if the tenant’s rent relief request was made before 30 September 2021 and the tenant was trading before 1 April 2021.
Deferral under 2020 CTRS extended
The 2020 CTRS enabled rent to be deferred. The Regulations provide that any rent that was deferred under the 2020 CTRS and is payable during the rent relief period, will be further deferred until after 15 January 2022.
The dispute resolution provisions are quite similar to those in the 2020 CTRS. Disputes about the impact of the Regulations on leases may be referred to the Small Business Commission for mediation. Tenants are able to apply to the Small Business Commission for binding orders. The parties can go to Victorian Civil and Administrative Tribunal (VCAT) or a court if the Small Business Commission certifies that the mediation has failed or is unlikely to resolve the dispute.
New South Wales
NSW has also passed legislation to protect retail and commercial tenants. It is contained in the following regulations (NSW Regulations):
- Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW) (for retail leases)
- Schedule 5 to the Conveyancing (General) Regulation 2018 (NSW) (for non-retail commercial leases).
The NSW Regulations were amended by the Retail and Other Commercial Leases (COVID-19) Amendment (Eligibility) Regulation 2021 (NSW) (Amendment Regulation) on 24 September 2021.
The NSW Regulations require landlords and tenants to renegotiate the rent payable under an impacted lease in order to take into account the economic effects of COVID-19 and the principles set out in the National Cabinet Mandatory Code of Conduct: SME Commercial Leasing Principles during COVID-19 (National Code).
The NSW Regulations apply to the six month period from 13 July 2021 to 13 January 2022.
Impacted leases and impacted lessees
To have an impacted lease, the tenant must be an ‘impacted lessee’. This is a tenant with less than $50 million annual turnover that qualifies for any one or more of the following grants (Grants):
- 2021 COVID-19 Micro-business grant
- 2021 COVID-19 Business grant
- 2021 JobSaver Payment.
If a tenant qualifies for a Commonwealth COVID-19 Disaster Payment, it may be ineligible for the Grants. The Amendment Regulation makes it clear that if a tenant would qualify for one of the Grants, but does not qualify because it receives a Commonwealth COVID-19 Disaster Payment, it can be an impacted lessee if it meets the other criteria.
Also, the parties must have entered into the lease before 26 June 2021.
The changes made by the Amendment Regulation mean that the tenant only needs to be an impacted lessee ‘at any time’ between 13 July 2021 and 13 January 2022. The tenant does not need to be an impacted lessee for the whole of that period. However, if the tenant ceases to be an impacted lessee, further rent renegotiation can take place.
If requested by the landlord, the tenant will need to provide evidence that it continues to be an impacted lessee. The landlord cannot ask for that information more than once every two weeks.
The NSW Regulations provide that a party to an impacted lease may request the other party to renegotiate the rent and other terms of the lease. The parties must take into consideration the economic impacts of COVID-19 and the National Code.
Under the National Code, the rent reductions should be proportional to the decrease in the tenant’s turnover and at least 50% must be waived, with the rest deferred.
The Amendment Regulation provides that when renegotiating the rent:
- any Grants made to the tenant are treated as trade or turnover of the tenant
- the landlord is not required to reduce rent for the period when the tenant is not an impacted lessee
- the landlord can provide that the negotiated rent reduction will not apply at times when the tenant ceases to be an impacted lessee.
What can’t landlords do?
Landlords under impacted leases are not permitted to exercise various rights including to evict tenants, seek possession, terminate the commercial lease and claim interest or damages.
This protection applies to breaches by tenants for failure to pay rent or outgoings or the business not being open during the business hours specified in the lease. Landlords are able to take action on grounds that are not related to the economic impacts of COVID-19. For example, if the tenant damages the property.
No rent increases
The NSW Regulations provide that rents payable under impacted leases must not be increased between 13 July 2021 to 13 January 2022.
The parties must attempt mediation before the landlord can take action such as to terminate the lease or exercise other rights. Before going to a tribunal or court, the Small Business Commissioner must have certified that mediation has failed and why it failed. The NSW Regulations provide that in resolving the dispute, a tribunal or court must consider the National Code.
Both the Victorian and the New South Wales schemes add another layer of complexity for commercial landlords (and tenants) to navigate in already challenging times.
Looking for assistance on how these schemes may impact you?
Get in touch with the Development Team
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