What do the Victorian Commercial Tenancy Regulations mean for Landlords?

The Victorian Covid-19 regulations for Landlords with Commercial tenancies are now in effect.

What does that mean if you are a Landlord?

• If you do not comply you can be liable for financial penalties
• a tenant cannot be evicted if they do not pay rent during 29 March 2020 to 29 September 2020 provided they make a formal request for rent relief to their landlord
• a security deposit cannot be taken from a tenant between now and 29 September 2020
• A tenant can request that the Landlord forgive, defer or reduce their rent
• If the tenant is eligible for Jobkeeper Wage subsidy, the Landlord must consider the request
• If the tenant is not eligible for Jobkeeper, the Landlord is not obliged to consider the request but they should still consider a proposal about rent relief.
• Landlords need to act in good conscience when dealing with tenants and tenants can seek mediation at the small business commissioner if a landlord refuses.
• A response by a Landlord to reduce rent must, at a minimum be:
  • Forgiving at least 50% of the tenants rent
  • Any deferred rent can be paid over the next 24 months or even a longer term if the lease is longer
• Any rent reduction does not need to be directly proportionate to the tenant’s loss of turnover
• Instead, the rent reduction needs to “take into account”:
  • the tenants reduction in turnover
  • how the proposed the rent reduction may effect the tenant’s capacity to keeping paying rent
  • yhe landlords own financial capacity like repaying its own mortgage • A landlord must consider waiving the outgoings for the premises if the tenant cannot operate the business such as for pubs, clubs and gyms that have been shut down.

Clearly, most businesses are affected by Covid-19 and there are thousands of neg

The devil is in the detail for these Regulations. Many landlords and tenants are taking these negotiations informally and without legal advice. It is essential that Landlords obtain advice on any proposed agreement and ideally throughout negotiations to avoid potential penalties and the delay mediation at the small business commissioner. A landlord that is properly advised by working with our business lawyers will be likely to set up a long term arrangement with a tenant that will see them through the uncertainty of Covid19 and the lease continue for its full term rather than end up in a tenant being evicted shortly after the new Regulations expire.

Our business law team of Lachlan Edwards and Siobhan Liston are available to advise business clients at any time.