Victorian Commercial Tenancy Rent Relief Scheme – Next Steps Following September 2021 Quarter

With Melbourne and other parts of Victoria locked down for all or significant parts of the month, many businesses will have seen their turnover severely impacted during September 2021. The end of the September quarter gives commercial tenants in Victoria additional options in relation to rent relief.

I previously indicated that it was risky to attempt to include September 2021 figures in a tenant’s claim for rent relief commencing 28 July 2021, given the application needed to be received by a landlord by 30 September 2021. However, a tenant is now presented with new options (and obligations) for rent relief following that date.

Tenants

Tenants who did not previously apply / qualify

Tenants who may not have qualified for rent relief since they could not establish a 30% decline over three consecutive months in the period from April to August 2021 (inclusive) may now qualify, based on their September figures. If so, the tenant is entitled to rent relief from that date they lodge their application (including the associated statutory declaration) until 15 January 2022.

The rent relief application requirements are effectively the same as those which applied in respect of applications by tenants pre-1 October 2021.  See our previous article in this regard.

Tenants who applied for rent relief on or before 30 September 2021

1 Tenants who have made rent relief agreements with their landlords

Mandatory reassessment applies in respect of any tenants who:

(a) lodged their previous rent relief application on or before 30 September 2021;

(b) have made a rent relief agreement;

(c) began trading prior to 1 April 2021.

Such tenant must submit their September quarter figures to their landlords by 31 October 2021, along with a further statutory declaration confirming the accuracy of the new turnover figures and that the tenant is remains an eligible tenant.

The “change in turnover” calculated using the September 2021 quarter figures will be the proportional rent relief the tenant is entitled to receive effective from 1 November 2021.  Any rent relief agreements already made will be automatically adjusted to account for the difference between the original decline in turnover set out in their original applications and the reassessed change in turnover pursuant to the reassessment.

In our view, it is not necessary for the tenant to demonstrate that the change in turnover is in excess of 30%. That is, if the tenant qualified for rent relief previously, the entitlement for relief remains, although the proportion may be less than 30%.

Failure to provide the September quarter figure will result in a tenant losing their entitlement to waiver of rent after 31 October 2021.

2 Tenants who have not yet reached rent relief agreements with their landlords

While formal reassessment is likely not required for tenants who have not yet entered into rent relief agreements with their landlords, the September 2021 quarter figures will likely constitute further information that tenants will want to provide to landlords as part of ongoing good faith negotiations. 

Further, there is an argument that a tenant who does not provide the further figures and who has not yet reached agreement with their landlord for rent relief will not be entitled to rent relief from 1 October 2021 once a rent relief application is made.

Accordingly, it will be prudent for tenants to provide to their landlords September 2021 quarter figures by 31 October 2021, irrespective of whether a rent relief agreement has been reached with their landlord.

3 Tenants who have received rent relief offers from their landlord

Tenants should keep in mind that if they do not respond to a rent relief offer from their landlord or refer the matter for mediation within 14 days will be deemed to have accepted that offer provided it complies with the minimum requirements of the regulations.

4 Tenants who have not received a response from their landlord

Given potential long waiting times for mediation, tenants may wish to refer rent relief disputes to mediation sooner rather than later, if they have not received a response from their landlord within 14 days after making their application.

This will particularly be the case, where the tenant is seeking something greater than the minimum rent relief prescribed by the regulations.

Tenants who have made rent relief requests are entitled to cease payment of rent in the proportion of the turnover decline evidenced in their application.  Tenants can also cease paying outgoings altogether until a rent relief agreement is made.

Landlords

Landlords who have received requests

Landlords who have had their tenants request rent relief should be responding to requests and making (at least) the minimum rent relief offer.

Applications should be carefully analysed for compliance with the legislation since, in our experience, there are numerous tenants who have misinterpreted the legislation or made assumptions such that they have made flawed applications and are not actually entitled to rent relief.

Landlords may wish to consider offering higher rent waivers and no deferral. In many circumstances, we consider deferred rental to be unattractive for both parties, unless the tenant’s business is likely to benefit from pent-up demand following the release of restrictions.

Technical and Strategic Advice

For further advice regarding what approach might be best in your circumstances, please contact

David Krolikowski