Purpose of Legislation

The Commercial Tenancy Relief Scheme Act 2021 (Legislation) passed both houses of Parliament on 5 August 2021. The Legislation will come into operation on the day after the day on which it receives royal assent. It is expected that this will occur as soon as practicable.

The purpose of the Legislation is to empower the making of regulations to provide rent relief to tenants who have experienced a loss in turnover of more than 30 per cent during the COVID-19 pandemic.

The Legislation provides that regulations made under the Legislation may have retrospective effect to a day not earlier than 28 July 2021.

The Legislation will be repealed on 30 April 2022. Any regulations in force immediately before 30 April 2022 continue in force until 30 October 2022.

Content of Legislation

The Legislation contains detailed provisions regarding what the regulations can address, but no specific details about what those regulations will contain. Accordingly, we will need to wait to see those regulations before definitive answers can be provided as to how the new rent relief measures will work.

Expected provisions

The Government’s press release on 3 August 2021 stated that rent relief will be available for eligible tenants who have suffered a drop in turnover of more than 30 per cent between quarter 4 2018/2019 and quarter 4 2020/2021. The percentage drop will also determine the amount of initial rent relief available to tenants.

The press release also indicated that there would be a mandatory reassessment of turnover during the scheme to ensure fairness.

While it is expected that the regulations will reflect many of the provisions in the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020, this will not be known until the regulations are available.

Key issues which are currently unknown are:

• In determining whether a lease is an eligible lease, will the $50M turnover cap (as applied under the previous rent relief regulations) continue to apply, or will the rent relief measures apply to all commercial tenants?
• How will turnover be calculated?
• Will the 50/50 split of waiver and deferral for any reduction in rent (as applied under the previous rent relief regulations) continue to apply to any rent relief granted?
• What information will a tenant be required to supply a landlord to verify the reduction in turnover?
• For how long will the rent relief continue to apply, and what information will a tenant be required to supply on an ongoing basis to continue to receive any rent relief?
• Will there be a prohibition on rent increases for eligible leases (as applied under the previous rent relief regulations)?
• How, and when, will the mandatory reassessment of turnover apply?

Next steps

As noted above, there remain a number of key issues which require clarity to enable landlords and tenants to properly negotiate any rent relief variation in accordance with the Legislation. Clarity on those issues will not be available until the regulations are passed.

If we can assist you in understanding your rights and obligations under your leases or licences, or assist with the negotiation and drafting of appropriate variations to agreements to reflect rent relief arrangements, please contact us.

If you have any further questions, please contact a member of our Property Team.