Process for commercial tenants and landlords

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 steps outline the VSBC’s recommended process for commercial tenants and landlords to have fair negotiations and resolve a rent relief dispute at no cost.

Negotiating a fair rent agreement and seeking help if needed

The VSBC is here to support commercial tenants and landlords who are experiencing financial hardship as a result of coronavirus.

We’re providing guidance in how to negotiate rent relief in good faith and reach a fair agreement after 28 March 2021. Where an agreement can’t be reached, either the tenant or landlord can apply for free and impartial mediation to help resolve the matter. Tenants and landlords can also apply for free mediation where the rent relief dispute is from before 28 March 2021.

Applications can be made via our application forms web page.

Tenant question: I’m having trouble paying my monthly and/or deferred rent. What should I do?

Step 1

  • Review your finances and keep paying what rent you can afford.

Step 2

Step 3

  • Try to negotiate a new agreement on rent with your landlord that you can both accept by:
    • talking with them about your situation, what rent you can afford to pay and the rent relief you are requesting (how much and for how long)
    • consider supplying documents showing your fall in turnover for the leased premises (e.g. extracts from your accounting records, your BASs, bank statements that relate to your account or a statement prepared by a practising accountant) to support your request.

Tenant question: What supports are available to small business owners who continue to be impacted by the coronavirus pandemic?

  • On 21 July 2021, the Victorian Government announced further support for small businesses most affected by the recent restrictions. An injection of $282.5 million means 90,000 Victorian small business employers and sole traders will now share in up to $484.3 million in support. On 28 July 2021, the Victorian Government announced a new jointly funded Victorian Business Support Package from the Commonwealth and Victorian Governments. This package will deliver an additional $400 million in support to thousands of businesses. For more information, visit Business Victoria’s website.
  • The Victorian Government has reached an agreement with the Commonwealth Government to fund income support payments for workers affected by the restrictions. Applications can be made through the Services Australia website.
  • The Australian Banking Association (ABA) has announced further support for small business owners who continue to be impacted, including bank repayment deferrals for up to 3 months with loan terms extended accordingly. Learn more by visiting the ABA’s website.

Landlord question: How should I respond to my tenant’s request for rent relief?

  • We recommend trying to respond within 14 days of receiving the request.
  • When offering rent relief, we suggest taking into account:
    • any waiver or reduction of outgoings you have already provided to your tenant
    • any waiver or reduction of outgoings or other expenses for the premises provided by other parties (e.g. water company or local council)
    • whether your tenant’s capacity to pay rent under the lease would be compromised by not being offered sufficient relief.

Tenant and landlord questions: reaching an agreement and accessing the VSBC’s help if needed

How can I negotiate a fair agreement and what steps should I take after reaching an agreement?

Step 1

  • You can negotiate a fair agreement, in good faith, by:
    • communicating with each other openly
    • being transparent
    • having discussions honestly and fairly with the genuine aim of reaching an agreement
    • providing sufficient and accurate information within the context of negotiations.

Step 2

  • Documenting what is agreed to in writing is important – you can do this as a variation of the lease but this isn’t necessary if you have a written agreement for rent relief.

Step 3

  • Landlords who have provided rent relief to their tenant might be eligible for land tax relief as part of the Victorian Government’s 2020 and 2021 measures. For more information or to apply, visit the State Revenue Office’s website.

What should I do if I can’t reach an agreement or get a response from the other party?

  • You can try to resolve the matter by applying for free mediation with the VSBC.
  • When applying, make sure you include:
    • all of the relevant correspondence and other materials sent between you and the other party (e.g. any written requests for rent relief and responses to these requests, documents showing fall in turnover)
    • the other party’s contact details including their mailing address and phone number
    • a copy of the lease.

What happens at the VSBC?

Step 1

  • A case officer will contact you and the other party in the dispute to try to resolve the matter early on and where this isn’t possible, arrange a free mediation session.
  • At mediation, an experienced, impartial professional – the mediator – will guide both parties in negotiations via video or telephone with the aim of reaching a fair agreement that they can both accept.

Step 2

  • The VSBC will forward your application to the other party.
  • You will be provided with information and resources to prepare you for your mediation session.

Step 3

  • The mediation session will be conducted at a time that suits both parties. If an agreement is reached during the session, the tenant and landlord will be able to enter into binding Terms of Settlement.

What can I do if an agreement can’t be reached or the Terms of Settlement are breached?

  • You can apply to the Victorian Civil and Administrative Tribunal (VCAT) or a court for a decision on the dispute. For applications to VCAT, you will be required to provide the VSBC file reference number and if Terms of Settlement were agreed to, a copy of this agreement.

What happens if the other party refuses to negotiate through the VSBC?

  • The Victorian Small Business Commissioner might issue a certificate noting this refusal so that you can pursue the matter at VCAT.

Resources

 

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