Commercial Tenancy Relief Scheme update

Further to our recent alert, the Victorian Government has introduced new legislation regarding the Commercial Tenancy Relief Scheme (CTRS).

The Commercial Tenancy Relief Scheme Bill 2021 is the enabling legislation to provide the framework once again for tenants to seek rent relief from their landlord. The legislation is largely consistent with the CTRS that applied in 2020. Landlords and tenants have been encouraged to start negotiating with each other as soon as possible. The Bill will need to pass both houses of Parliament and receive Royal Assent.

Some initial points to note are:

• The rent relief available for eligible tenants will be calculated by comparing the turnover of the final quarter of the 2020/21 financial year with the turnover from the final quarter of 2018/19;
• For a tenant to be eligible for the CTRS, the turnover reduction must be greater than 30%;
• The quantum of the percentage drop will also determine the amount of initial rent relief available to the tenant;
• If a business is deemed eligible at the beginning of the scheme, it will remain eligible throughout the period of the scheme’s operation;
• An eligible lease can either be a retail lease or a non-retail commercial lease or licence, or a retail lease or a non-retail commercial lease or licence of a specified class, that is prescribed by the Regulations;
• The proportion of the rent relief adjusted will be in line with their turnover;
• If there are applications under the new scheme where there is also an agreement in place from the first CTRS, any existing deferred rent repayment will be postponed until 15 January 2022. Any outstanding amount will be added to the deferred rent accrued during the current CTRS;
• The government will provide landlords with up to 25% land tax relief;
• Smaller landlords who can demonstrate hardship may be eligible to apply for payments as part of a $20 million hardship fund;
• Landlords are prohibited from issuing an eviction notice for eligible tenants without obtaining direction from the Small Business Commission;
• The Minister for Small Business will have broad powers to introduce regulations in relation to an eligible lease. Those regulations may prohibit the termination of a lease, change the term of a lease, or impose new obligations on landlords or tenants under the lease; and
• Notably, the Bill allows regulations to be made to extend or alter rental deferral agreements reached under the 2020 CTRS, where those leases will not qualify as eligible leases under the Bill.

While we await the introduction of the accompanying Regulations, if you are unsure of your rights regarding your lease, as either landlord or tenant, please do not hesitate to contact a member of our Property team.