Negotiating rent relief: scenario

PLEASE NOTE: the Victorian Government’s extended Commercial Tenancy Relief Scheme (the Scheme) ended on 15 March 2022. The Victorian Small Business Commission will continue to offer free mediations to help resolve rent relief disputes for applications received up to 30 June 2022, whether or not the tenant was eligible for the Scheme. From 1 July 2022 the cost of mediation will return to $195 per party, per session.  

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The following scenario shows a commercial tenant and landlord negotiating a rent relief agreement after 15 March 2022.

Scenario: a restaurant in Melbourne’s CBD

Towards the end of January 2022, restaurant owner Martine had negotiated backdated rent relief with her landlord Ahmed under the extended Commercial Tenancy Relief Scheme (the Scheme) from 16 January 2022 to 15 March 2022. They agreed to 50 per cent rent relief. Half was waived and the other half was deferred for paying over 24 months, starting 16 March 2022.

Although trading restrictions had lifted, for Martine, business was struggling to return to what it was. The restaurant’s turnover was still down 30 per cent, falling well short of what she needed to pay her staff, supplier invoices, accumulated debts and other business expenses. The debts increased. Martine was struggling to pay her monthly and deferred rent but knew she wasn’t entitled to rent relief with the extended Scheme having ended on 15 March 2022.

Taking on board the Victorian Small Business Commission’s (VSBC) recommended process, she reviewed her finances and accessed free financial counselling by calling the Partners in Wellbeing helpline on 1300 375 330.

Martine spoke with Ahmed about her situation and what rent she could afford, and asked for further relief. She then made a written request for 30 per cent rent relief for April, May and June 2022. She supplied extracts from her accounting records to show the restaurant’s fall in turnover for the preceding three months compared to the same period in 2019.

Ahmed’s response was that he couldn’t afford to offer further relief. He explained that as a retiree, he was relying on the rent from the premises to cover his own living expenses and pay the remaining mortgage on the property. Martine and Ahmed stopped communicating.

Applying for help

Martine applied to the VSBC for free help to resolve the matter. Although the extended Scheme has ended, she heard about the VSBC’s continued support for tenants and landlords through her local council.

The VSBC helped early on by getting in touch with Ahmed to try to re-start communication and facilitate a discussion. Martine and Ahmed started talking again about their position and concerns but couldn’t reach an agreement. Recognising what was needed, the VSBC progressed the matter to mediation, where an impartial mediator helped them to negotiate a fair agreement.

Reaching an agreement

Through mediation, Ahmed and Martine agreed to the following:

Monthly rent: $8,000

Rent relief: 20 per cent ($1,600, part of which won’t be repaid and part of which will be repaid at a later date, over 12 months) from 1 April to 30 June 2022, taking into account the financial position of both parties and the reduction of outgoings Ahmed had already provided Martine.

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