Negotiating rent relief: scenario

From 28 July 2021, the Victorian Government is making it a requirement for commercial landlords to provide rent relief that matches their tenants’ fall in turnover in response to coronavirus (COVID-19), where the tenant is eligible for this support. The Victorian Small Business Commission’s (VSBC) website will be updated to reflect this announcement. Read more

The following scenario shows a commercial tenant and landlord negotiating a rent relief agreement after 28 March 2021 in response to coronavirus.

Scenario: a café in Melbourne’s CBD

Before the pandemic, Jacqueline’s café had been doing really well and was growing a strong and loyal customer base. After restrictions to trade were introduced to slow the spread of coronavirus, the café’s turnover plummeted to the point where Jacqueline couldn’t keep paying the full rent and other expenses under her lease.

She negotiated rent relief with her landlord Danh under the Victorian Government’s Commercial Tenancy Relief Scheme (the Scheme), which ended on 28 March 2021. With restrictions easing and workers gradually returning to the CBD, Jacqueline had seen an increase in turnover during March, though knew she would still struggle to pay her deferred rent and resume her monthly rent payments in April.

Jacqueline reviewed her finances and sought advice from a business advisor. She contacted Danh to explain her situation and request 35 per cent rent relief for the April to June 2021 quarter, supplying extracts from her accounting records to show the café’s fall in turnover.

Danh’s response was that he was also struggling and needed Jacqueline’s rent payments to resume so he could pay the mortgage on the property and meet his other financial obligations. Communication broke down between Jacqueline and Danh.

Applying for help

Jacqueline applied for free mediation with the VSBC to help resolve the matter. Although the Scheme has ended, the VSBC is still providing supports to tenants and landlords in negotiating agreements after 28 March and resolving disputes at no cost.

The VSBC helped early on, quickly getting in touch with Danh to try to re-open communication and facilitate a discussion. Jacqueline and Danh started communicating again about their position and concerns, though couldn’t reach an agreement. The VSBC promptly progressed the matter to mediation, where an impartial mediator helped them to negotiate in good faith and explore creative options for resolving their dispute.

Reaching an agreement

Through mediation, Jacqueline and Danh reached an agreement:

Monthly rent: $8,000

Rent relief: 25 per cent ($2,000, part of which won’t be repaid and part of which will be repaid at a later date, over 12 months) from 1 April 2021 until 31 June 2021, taking into account the financial position of both parties and the reduction of outgoings Danh had already provided Jacqueline

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