Rent Relief Rebate For Commercial Tenants & Landlords
Commercial tenants have been some of the hardest hit during the ongoing COVID-19 situation, with many losing out on revenue while businesses have been forced to close or make alternative arrangements across the state/country.
Several states have announced rent relief in the form of rebates and legislation to ensure that commercial tenants can viably remain in place during the ongoing situation facing the country.
Victoria
The Victorian government recently announced the finalised new regulations for the rent relief rebate and broadened the eligibility requirements for the Commerical Tenancy Relief Scheme (known also as “the Scheme”).
For Commercial Tenants
These amendments have been brought in to assist small and medium-sized businesses with some welcome rent relief, a major concern for many businesses within hotspot areas who cannot continue operations in the usual manner during the COVID-19 situation.
This rent relief rebate will be in the form of a proportionate reduction in rent, determined by the decrease in turnover/revenue.
Commercial tenants will now be able to choose three consecutive months between 1 April and 30 September to compare to their turnover in the same three months in 2019, to assist in determining the financial relief amount.
The Scheme is hoped to help the small and medium-sized businesses with an annual turnover of less than $50 million who have experienced a decrease of more than 30% during the pandemic of their revenue.
New businesses will also be eligible for assistance under the Scheme if they have been opened since April 2019. Special arrangements will be in place to calculate the turnover impacts for businesses that were not operating in 2019.
For Landlords
Commercial tenants are not the only beneficiaries of the rent relief amendments, however. Landlords who provide their eligible tenants with rent relief will be provided by the Government with tax relief of up to 25 per cent (in addition to any previous relief), with the support worth up to $100 million. Additionally, any small landlord who can demonstrate acute hardship will be eligible to apply for payments as a part of a $20 million hardship fund.
In accordance with the Scheme, the Victorian Small Business Commission will support tenants and landlords with the provision of information to assist in negotiating a rent relief agreement. They will also provide access to free and impartial mediation if a fair agreement cannot be brokered, and are also offering help with negotiations and mediation in the event that a tenant isn’t eligible.
Landlords and tenants will require a mandatory reassessment point (as per the Scheme’s provisions) during the period of rent relief to check in on one another, and assess whether the circumstances have changed and rent relief should be adjusted accordingly.
The Scheme will apply retrospectively from 28 July 2021 through to 15 January 2022.
In light of the new rental relief amendments to the Scheme, commercial landlords and tenants should enter into a negotiation with regard to their current commercial leases. Seeking additional advice from legal professionals or the VSBC regarding these negotiations is highly encouraged.
New South Wales
In New South Wales, the government reintroduced the National Cabinet’s Mandatory Code of Conduct for Commercial Leasing, which will mandate the rent relief for eligible tenants who have been hit hard by COVID-19 until at least 13 January 2022.
For Landlords
With the extension of the Retail and Other Commercial Leases Regulation (COVID-19) 2021, landlords will be required to renegotiate with their tenants about rent. Previously, this regulation only required the landlords to attempt mediation before evicting or locking out tenants, but landlords will now be required to offer rent relief in proportion with a tenant’s decline in turnover. At least half of this must be offered as a waiver, and rent negotiations must be entered into prior to moving to evict or lock their tenants out.
The mandated relief will also be accompanied by a new $40 million Hardship Fund, which will be offering monthly grants of up to $3,000 for small commercial or retail landlords who have waived rent of the same value and who rely primarily on that rental income from the commercial properties.
Eligible commercial landowners are able to apply for up to 100 per cent of their land tax liability for 2021. To be eligible, the landowner must have reduced rent for the affected tenant by at least the amount being claimed for any period between July 1 and December 31 this year.
For Tenants
The extended regulation of the Retail and Other Commercial Leases Regulation (COVID-19) 2021 is applicable to those commercial and retail tenants with a turnover of up to $50 million who meet eligibility criteria for either the COVID-19 micro-business grant, COVID-19 Business Grant or JobSaver Payment.
In addition, the NSW government has committed $2 million to the Small Business Commission so that it can handle the surging demand for mediation requests from small businesses.
Queensland
Commercial businesses who have been impacted by the effects of COVID-19, which has resulted in a reduction in turnover during the response period or extension period, may be eligible to negotiate rent relief with their landlord under the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (known also as the Regulation).
The deadline for this was 31 December 2020, but may be subjected to change or amendment depending on the current situation in Queensland (as of August 2021).
The Regulation and the COVID-19 Emergency Response Act 2020 (known as the Act) sets out the arrangements in place for Queensland regarding small and medium-sized enterprise commercial leases affected by the COVID-19 emergency.
For Tenants
Under the Regulation, landlords cannot take prescribed actions against a tenant with an affected lease who fails to pay rent or outgoings or is not open for trade during either the response period or the extension period (including the taking of action after either of those periods). However, this does not mean that a tenant does not have to pay anything, or otherwise comply with their lease.
Commercial tenants must have an affected lease to be eligible for rent relief assistance under the Regulation. It must meet all of the eligibility criteria to be eligible:
- It is a retail shop lease or prescribed lease
- It was binding on the tenant on 28 May 2020
- The tenant is a small and medium enterprise that carried on a business (or non-profit activity) in the financial year and had a turnover of less than $50 million for the 2020-21 financial year and/or turnover that was likely to be less than $50 million for the 2020-21 financial year.
- The tenant under the lease is eligible for but not necessarily enrolled in the JobKeeper Payment Scheme.
Small businesses can also continue to lodge small business tenancy disputes as needed.
For Landlords
Negotiation must be entered into regarding the lease and prompted by either the landlord or the commercial tenant. Any information shared must be true, accurate and correct, and not misleading, while also being sufficient enough to enable all parties to negotiate in a fair and transparent way.
The landlord must make an offer about rent (and other lease conditions) during the response period and/or the extension period to the tenant within 30 days of sufficient information being received.
During the response period, at least 50% of the rent reduction must be waived as a discount, and the remainder of the reduction must be deferred to be repaid by instalments after 30 September 2020.