Process for commercial tenants and landlords

To ease the pressure on Victoria’s small and medium-sized businesses at this time, the Victorian Government has reintroduced the Commercial Tenancy Relief Scheme (the Scheme).

The following steps outline the process for commercial landlords and tenants under the Scheme, which is effective from 28 July 2021 and will run until 15 January 2022.

Who is eligible?

It is important that tenants read the regulations for the Scheme carefully, in particular the information about eligibility, as the following provides general information only and doesn’t refer to all circumstances of a tenant’s eligibility or ineligibility.

In most cases, an eligible tenant:

  • is an ‘SME entity’ that, as at 28 July 2021, operated a business in Australia and
  • satisfies the decline in turnover test as set out at regulation 12 of the Scheme and
  • is not an ’excluded’ tenant or certain prescribed class of tenant.

An SME entity is defined in regulation 10 of the Scheme as an entity with an annual turnover of less than $50m at the group level during the 2021 financial year or, if having not traded for the full duration of the 2021 financial year, its turnover for the 2022 financial year is likely to be less than $50m.

An excluded tenant includes tenants who use the premises wholly or predominantly for a farming or agricultural activity. It also includes tenants who are a listed corporation or a subsidiary of a listed corporation.

For more information, including on the turnover test, turnover test period and comparison turnover, see question 9 of our FAQs.

If a tenant can’t afford to pay rent, what should they do?

Step 1

  • Keep paying, as a minimum, their monthly rent reduced by the same percentage as their fall in turnover.
  • Speak or write to their landlord as soon as they can to communicate their situation.

KEY REQUIREMENT: In order to get rent relief under the Scheme, eligible tenants must make a compliant request to their landlord in writing, providing the required evidence (see questions 12 and 13 of our FAQs).

Step 2

  • Make a written request to their landlord for rent relief, making sure it’s accompanied by the information detailed in question 13 of our FAQs and accompanied by at least one of four forms of evidence showing their fall in turnover as listed in question 18. Our FAQs also explain how the decline in turnover test is satisfied (question 15) and which comparison turnover period and turnover test period applies (question 17).
  • Tenants can use the VSBC’s letter templates accessible in question 13 of our FAQs to guide them in requesting rent relief from their landlord. These optional templates include:
    • a letter for making a single, complete request
    • a letter for making an initial request and a further letter for supplying the required evidence.

What does a landlord need to do to respond to a tenant’s compliant request for rent relief?

Step 3

  • A landlord must offer rent relief in writing to an eligible tenant within 14 days of the tenant making a compliant written request, unless a different time frame has been agreed to by the landlord and tenant in writing.
  • For information on what a proportional offer of rent relief must look like and access to our optional letter template for making an offer, see questions 20 and 23–25 of our FAQs.
  • Supports available to landlords who provide rent relief to their eligible tenants are explained in question 26.

Do landlords and tenants need to negotiate rent relief after the landlord makes an offer?

Step 4

  • Where a tenant doesn’t agree with the landlord’s offer, the landlord and tenant must continue to negotiate in good faith with the aim of reaching a fair agreement for the rent relief period. See question 22 of our FAQs to learn more about good faith negotiations.
  • The tenant is deemed to have accepted the landlord’s offer of rent relief 15 days after receiving that offer if:
    • the landlord and tenant have not agreed on a rent relief agreement and
    • the tenant has not made an application for mediation to the VSBC about the disagreement and
    • the landlord’s offer of rent relief meets the minimum requirements of the Scheme, which are explained in question 20 of our FAQs.

Step 5

  • If an agreement is reached, parties should document what has been agreed to in writing.
  • Parties can choose to document this agreement as a variation of the lease, but this isn’t necessary if the written agreement gives effect to the rent relief.

What if a tenant and landlord can’t reach a fair rent relief agreement?

Step 6

  • Either the tenant or landlord can apply for free and impartial mediation with the VSBC to try to resolve the dispute, making sure they include all relevant correspondence and other materials sent between parties.

KEY REQUIREMENT: Before a tenant applies for mediation under the Scheme, they:

  1. must have made a compliant rent relief request to their landlord, supplying the required evidence (see questions 12 and 13 of our FAQs)
  2. must attach their written request and evidence when applying for mediation.

Landlords can apply for mediation in situations where their tenant has stopped paying rent and an agreement can’t be reached.

Access our application forms here.

What happens at the VSBC?

Step 7

  • A case officer will contact the applicant (the person who applied for our help) and respondent (the party that the applicant is in a dispute with) to try to resolve the matter early on. If this isn’t possible, the case officer will promptly arrange a free and impartial mediation session to be held via videoconference or teleconference.
  • The session will be conducted by an experienced, independent mediator who will assist the tenant and landlord to have good faith negotiations with the aim of reaching a fair agreement.

Step 8

  • If the landlord doesn’t respond or sufficiently respond to a dispute notice from the VSBC or doesn’t mediate in good faith, the VSBC can make a binding order for rent relief where the VSBC is satisfied the decision to do so is fair and reasonable in all circumstances.
  • The VSBC can also issue a certificate that enables the dispute to proceed to the Victorian Civil and Administrative Tribunal (VCAT). VCAT is then able to make a determination on the rent relief dispute.
  • For information about binding orders – what they are and when they can be made – see question 61 of our FAQs.

Step 9

  • If the landlord and tenant reach an agreement during the mediation session, they are able to enter into binding Terms of Settlement.
  • If mediation fails to resolve a rent relief dispute, the VSBC can issue a certificate stating that mediation has failed. The landlord or tenant may then be able to file an application with VCAT to ask for a rent relief order.
  • If an agreement reached at mediation breaks down, the Terms of Settlement can be enforced by judicial or tribunal proceedings, if necessary (e.g. by applying to VCAT).

What if a tenant isn’t eligible for the Scheme?

  • Where a tenant isn’t under an eligible lease, the landlord and tenant can use the Scheme to guide their negotiations, though the rent relief requirements cannot be mandated. It’s important for parties to negotiate in ‘good faith’, which is explored in question 22 of our FAQs.
  • The VSBC is offering help early on and free and impartial mediation to resolve disputes over rent relief in situations where the small business tenant isn’t eligible for the Scheme. This includes situations where a rent relief request was made before 28 July 2021.

Where can tenants and landlords find more information?

Step 10

 

Related information