By Pablo Fernandez, Partner, James Price, Partner, Tom Cantwell, Partner, Anthony Brearley, Partner, Tom Dugdale, Special Counsel and Matt Minas, Lawyer 

Late in the afternoon on Tuesday 29 September 2020, just as the previous regulations were due to expire, the Governor in Council made the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Miscellaneous Amendments Regulations 2020 (Vic) (Amending Regulations) under section 15 of the COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic) (Act).

The Amending Regulations make material changes to the commercial tenancy rent relief regime, details of which are summarised below.

1. The Amending Regulations extend the time during which landlords are required to offer rent relief to 31 December 2020^[1],  but only commencing from the date the tenant makes a compliant rent relief request, rather than back to the commencement of the regime on 29 March 2020.^[2]
2. The Amending Regulations allow tenants to make a further request for relief, even if they have an existing rent relief agreement in most circumstances, which will also only take effect from the date the subsequent rent relief request was made.
3. Rent relief must still be at least 50% abated with the remainder able to be deferred. The first date that a tenant is required to repay deferred rent has been deferred to 1 January 2021.^[3] Importantly, this also applies in respect of existing rent relief agreements.
4. The requirement that an eligible lease be ‘in effect’ on 29 March 2020 remains.
5. The Act’s application to commercial tenancies was extended through to 26 April 2021, which allows for further extensions of the regulations through to 26 April 2021.
6. The prohibition on landlords evicting, re-entering or drawing on security in relation to a non-payment of rent now also applies to non-payment of outgoings.^[4]A change impacting gross leases (i.e. where the rent is inclusive of outgoings), is that the landlord must offer rent relief with respect to the gross rent (being the rent payable inclusive of outgoings).^[5]
7. Tenants must still be SME’s, but are no longer required to be an employer.  The new test is that the tenant is an entity entitled to a JobKeeper payment under the JobKeeper Rules,^[6] so sole traders, partnerships, trusts and companies without employees are covered.
8. The Amending Regulations effectively formalise the guidance material given by the SBC in its frequently asked questions and now require tenants to provide turnover evidence of their decline in turnover associated with the premises with the initial request for rent relief. Evidence must include at least one of the following:
   • extracts from the tenant’s accounting records; or
   • the tenant’s business activity statements relating to the relevant turnover test period; or
   • statements issued by an ADI in respect of the tenant’s account; or
   • a statement prepared by a practicing accountant.
9. The turnover test period must be the month of September 2020 or the July quarter 2020 at the latest,^[7] for the new period of relief.
10. The Amending Regulations require that all rent relief offered be, at a minimum, proportionate to the tenant’s decline in turnover associated with the premises during the turnover test period.^[8]
11. The ability for the landlord’s offer to take into account the landlord’s financial ability to offer rent relief^[9] has been removed. The Amending Regulations also exclude JobKeeper payments from the tenant’s turnover for the purposes of calculating the fall in turnover.^[10]
12. The Amending Regulations introduce new, and very-detailed, dispute resolution provisions. These new provisions:
    • empower the SBC to make binding orders directing landlords to give specified rent relief to tenants where the landlord has either not responded to the tenant’s rent relief request or has not negotiated in good faith; and
    • confer jurisdiction on VCAT to review such orders made by the SBC.

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[1] Ibid r 4(3).

[2] Ibid rr 8(3)(a), 8(3)(c), 8(5).

[3] Ibid 10(1).

[4] Ibid r 7.

[5] Ibid r 8(4).

[6] Ibid r 5.

[7] JobKeeper Rules s 8(7)(a).

[8] Amending Regulations r 8(3)(b).

[9] Ibid r 8(3)(d).

[10] Ibid r 6.