Legal Insights

New Commercial Tenancy Relief Scheme

By Guy O'Connor, Marine Nincevic, Stella Wild

• 27 August 2021 • 3 min read

On 24 August 2021, the Commercial Tenancy Relief Scheme Regulations 2021 (Rent Relief Scheme) came into force. The Rent Relief Scheme imposes a requirement for commercial landlords to give eligible tenants rent relief that is in proportion to a fall in the tenant’s turnover because of COVID. The rent relief is to be by way of a minimum 50% rent waiver, with the balance by way of rent deferral. There is also a requirement for a landlord to consider waiving outgoings. The period during which rent relief can be claimed under the Rent Relief Scheme is from from 28 July 2021 to 15 January 2022.

The Rent Relief Scheme is similar in many respects to the previous rent relief scheme which applied in Victoria, but with some notable differences. The key provisions of the Rent Relief Scheme are:

  • the scheme only applies to an eligible tenant. The definition of “eligible tenant” is similar to the previous scheme – the tenant must be a SME with an aggregate annual turnover of less than $50m (at the group level) and has had a minimum 30% decrease in turnover because of COVID. Turnover now includes all turnover of the tenant including turnover from online sales or sales from other sites and includes any State Government COVID grants but excludes Federal Government grants.
  • a fall in turnover is calculated by comparing pre-pandemic turnover of the tenant to recent turnover in 2021. The tenant can compare its turnover from any 3 consecutive months between 1 April 2021 and 30 September 2021 to its turnover in the same corresponding 3 months in 2019.
  • the tenant must make a formal application to the landlord for rent relief in accordance with the process and requirements outlined in the Rent Relief Scheme. An application for rent relief made before 30 September 2021 can apply from 28 July 2021. If an application for rent relief is made after 30 September 2021, the rent relief will only apply from the date that the application is made.
  • where a tenant has made a formal application for rent relief, and complies with the process and requirements outlined in the Rent Relief Scheme, the tenant cannot be evicted for a failure to pay rent between the period between 28 July 2021 and 15 January 2022. A tenant can still be terminated for other breaches of the lease, including a failure to comply with an agreed rent relief agreement.
  • if the tenant is entitled to rent relief under the Rent Relief Scheme, there can be no rent increases under the lease between 28 July 2021 and 15 January 2022, except as agreed by the tenant. The right of the landlord to any rent increase arising during that period is lost permanently.
  • if a request for rent relief is made before 30 September 2021, there is a mandatory reassessment as at 30 September 2021 to determine if circumstances have changed and any agreed rent relief should be adjusted.
  • if a tenant is eligible for rent relief under the Rent Relief Scheme, and has entered into a rent relief agreement under the earlier scheme (Existing Deferral Agreement), the repayment of any existing deferred rent payable under that Existing Deferral Agreement is suspended from 28 July 2021 until 15 January 2022. No interest or costs are recoverable as a consequence of the further deferral of the rent repayable under that Existing Deferral Agreement.
  • a dispute resolution process applies similar to the previous scheme, including mediation of any disputes between landlords and tenants by the Victorian Small Business Commission.

Next Steps

The Regulations are long and complicated. If you require assistance in understanding your rights and obligations under your leases or licences, or assistance with the negotiation and drafting of appropriate rent relief arrangements, please contact a member of our Property Team.

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