Leasing Update: Extension of Relief – and some Surprises

Giancarlo Romano
15 September 2020

A new Bill was introduced on 2nd September 2020 titled the COVID-19 Commercial and Residential Tenancies Legislation Amendment (Extension) Bill 2020 which will once again impact all commercial landlord and tenants impacted by the Covid-19 pandemic. This Bill once enacted will formally legislate the extension to the Commercial Tenancy Relief Scheme that the Victorian Premier, Daniel Andrews, had announced on 20 August 2020 in a press conference. It necessarily addresses the current expiry date of the initial Covid-19 Omnibus Act (Emergency Measures) Act 2020 (and its Regulations explained here in detail) which had an automatic expiry of 29 September 2020.

The contents of the Bill are largely procedural, setting the scene for the very important regulations that will follow shortly after the Bill is enacted. Until we have those regulations it is unknown exactly what will be amended however the Bill is likely to contain some surprises and it seems that it will not be a simple extension of the current laws for commercial leases. Below is our opinion of what is likely to come based on the wording of the Bill and parliamentary discussions to date.

Extension of Relief Obligations

Daniel Andrews had advised that the commercial tenancy relief scheme would be extended from 29 September to continue right up until the end of this year (31 December 2020). In the Bill however the operation of commercial tenancy parts of the Omnibus Act are to be extended to 26 April 2021. The second reading speech in Victorian Parliament stated that the Act will:

“extend and amend the current regulations (relief obligations) to 31 December 2020 and (also give government) the capacity to extend up to 26 April 2021 if required”.

New ‘Eligible’ Lease Types Included

The Bill also changes the definition of ‘eligible lease‘. Currently to be an eligible lease the tenant must be an SME and an employer who is participating in JobKeeper – these tenants will still be eligible but other tenants who may have missed out may also now fall into this category.

The Bill allows the ‘eligible lease’ definition to be prescribed by the Regulations (which are yet to be released) however the second reading speech in parliament stated that the new Regulations:

“will allow for the removal of the requirement that tenants must be employing businesses. This will confirm the Government’s intent that sole traders are eligible to participate if they are participating in JobKeeper and will increase flexibility for the Government to adjust as the JobKeeper program evolves.”

This no doubt will be welcome news for tenants who are sole traders or who only engage contractors (ie. not technically ‘employers’) and those who use ‘service companies’ as their leasing entity.

Stronger Powers for the Victorian Small Business Commission (VSBC)

The VSBC traditionally was only assisting by facilitating mediations and had no authority to force an agreement on the parties. The Bill however sets the framework for the new/amended Regulations to give the VSBC the power to actually make orders to:

• direct landlords under eligible leases to give or agree to give specified rent relief to tenants under eligible leases;
• specify requirements for the process for rent relief applications by tenants under eligible leases including the content of rent relief applications and documents that may accompany rent relief applications.

The Bill still allows for the review and enforcement of binding orders by VCAT. Interestingly though, only tenants are allowed to seek a binding order with VCAT; landlords are not afforded such a right.

If an agreement has already been reached between the parties it is unclear how the Regulations will apply however given a tenant has a right to reapply during the Relevant Period we suspect that any prior agreements may be voidable if there is a change in circumstances.

Land Tax Relief Increased

On 20 August 2020, the Victorian Government announced further land tax relief for landlords, in response to the coronavirus (COVID-19) pandemic.

Landlords of residential and commercial properties who provide a 50% or more outright rent waiver of at least 3 months’ rent to eligible tenants can now claim a 50% waiver of the property’s 2020 land tax (previously only 25%) and defer payment of the remaining tax to 31 March 2021. It remains to be seen whether these 3 months must be in sequence or must be the three months from October, November and December but Landlords are encouraged to apply using the “My Land Tax Portal” once it is updated.

Owner-occupiers of commercial properties can now also obtain a 25% waiver of the property’s 2020 land tax and payment of the remaining tax can be deferred to 31 March 2021 if their business meets the conditions in either of these two categories.

Furthermore, for landlords whose tenants run a licensed pub, club or restaurant under a general, full club or on-premises liquor licence who have seen a turnover reduction of at least 30% since March 2020 will now also be entitled to the land tax relief (subject to the tenant’s premises not turning over more than $50mil per year).

Our Property Team are currently assisting many tenants and landlords through these times and are readily available to assist in advices, negotiations, mediations and documenting agreed variations to your lease. As soon as the new Regulations are amended we will publish them and update with a further article on our Insights Library.

About Best Hooper – Victoria’s Property, Planning and Land Development Advisory Law Firm

Best Hooper are the oldest and most prominent developer focused law firm in Victoria who have served our community since 1886; through wars, recessions, depressions and pandemics. We are actively advising clients in relation to the COVID-19 outbreak on all property related matters including leasing, disputes, property transactions and planning advices and applications. We are continuously recognised as industry leaders in a variety of publications, including Doyles Guide and Best Lawyers.

If you require more information, please contact Giancarlo Romano, (03) 9691 0220 or gromano@besthooper.com.au.

Giancarlo Romano is a Senior Associate in the Best Hooper Property Team who represents private and corporate landlords and tenants across commercial, retail and residential leasing and all facets of property transactions.