Commercial Tenancy Relief Scheme Regulations

Further to our previous alerts (see here and here), the Victorian Government has now introduced regulations to accompany the legislation governing the Commercial Tenancy Relief Scheme (CTRS).

The Commercial Tenancy Relief Scheme Regulations (the Regulations) came into force in Victoria on 24 August 2021 and have a retrospective effect from 28 July 2021.

Tenants still have rights to claim rent relief from their landlords under the CTRS. To be eligible for relief, tenants must establish that they have suffered a 30% decline in turnover during the relevant turnover test period. Note that the reduction in turnover may be 15% for certain businesses (such as a school or charity).

What should I do?

As we have advised our clients since the introduction of the CTRS, landlords and tenants should open communication with each other as soon as possible. Importantly, as a tenant, you have until 30 September 2021 to apply to your landlord if you are eligible for rent relief from 28 July 2021, DO NOT miss this deadline.

Timing

If an eligible tenant fails to apply to the landlord for rent relief before 30 September 2021, the tenant will not be entitled to claim rent relief for the period between 28 July 2021 to 30 September 2021.

Any rent relief application made after 30 September 2021 will only apply to the period from the date of the compliant request to the conclusion of the CTRS on 15 January 2022.

Rent relief agreements entered prior to 30 September 2021 will be reassessed prior to 31 October 2021. If it is determined that the rental turnover has changed from the initial change in turnover, then the rent relief turnover agreement will be adjusted accordingly to reflect the amended turnover for the remainder of the rent relief period.

Importantly, if the tenant fails to submit the necessary evidence required for the reassessment by 31 October 2021, then the rent relief agreement will no longer apply from the reassessment date in respect of any rent waived.

A summary of the Regulations is below and a more detailed summary outlining the important terms and conditions of the Regulations can be found here.

Summary

1. Eligible tenants operating under an eligible lease can apply to their landlord for rent relief for the period between 28 July 2021 to 15 January 2022, if they have suffered a 30% decline in turnover for the relevant period, or 15% for certain businesses (such as a school or charity). If the eligible tenant does not apply to the landlord before 30 September 2021, they lose the right to claim retrospective relief.
2. Once the eligible tenant applies for rent relief, at a minimum the rent relief offered by the landlord needs to be proportional to the tenant’s decline in turnover and at least 50% of that rent relief needs to be waived.
3. The turnover is calculated on all of the tenant’s turnover for the turnover period but excludes any income from Commonwealth COVID-19 grants and financial assistance.
4. Eligible tenants who traded before 1 April 2019 can assess their turnover from any three consecutive months between 1 April 2021 and 30 September 2021 to the corresponding turnover in the same three months in 2019. This will determine if there has been a decline.
5. The tenant must provide evidence of its decline in turnover to support its application for relief within 14 days of applying to the landlord for relief.
6. The application for relief to the landlord must be accompanied with a statutory declaration from the tenant stating that the tenant:
   1. Is eligible under the Scheme; and
   2. The information provided in the tenant’s application for rent relief is true to the best of the tenant’s knowledge.
7. If the tenant fails to provide the required information within 14 days of making its application, the tenant’s request lapses. If the tenant allows three requests to lapse, the tenant is no longer eligible for rent relief.
8. If the tenant is already experiencing a deferred rent payment, that deferred payment will be further deferred to 15 January 2022 in addition to any new deferred rent.
9. A tenant retains similar protection for non-payment of rent or outgoings as were provided in the 2020 CTRS operation, including a prohibition on evictions or the claiming of security.

Like the 2020 Scheme, the landlord of an eligible lease cannot increase the rent payable under the lease between 28 July 2021 and 15 January 2022 (the Protection Period). This applies regardless of whether an agreement for rent relief has been requested.

However, different to the 2020 Scheme, the Regulations now provide that if an eligible lease called for a review of rent in the Protection Period that would result in an increase, the review is void and may not be postponed or frozen.

If rent was deferred by an agreement made under the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licenses) Regulations 2020 and that lease remains on foot or is a renewal, extension or replacement of that lease, the payment of the deferred rent is again deferred until the end of the Protection Period (currently 15 January 2022).

Next steps

Next steps

• If you haven’t already done so, speak to your landlord so as not to miss the 30 September deadline
• Prepare the relevant paperwork you will need to provide your landlord with if you are going to apply for a reduction.

If you would like to discuss the above Regulations and how they will affect you, please contact our Property or Commercial team for further information.