Negotiating rent relief: scenario

The following scenario shows a commercial tenant and landlord negotiating a rent relief agreement under the Victorian Government’s reintroduced Commercial Tenancy Relief Scheme.

Scenario: a restaurant in Melbourne’s south east

Towards the end of February 2021, small business owner Ella had negotiated rent relief with her landlord Zhen under the Commercial Tenancy Relief Scheme for the period 1 January to 28 March 2021. They agreed to 50 per cent rent relief – half of it was waived and the other half was deferred for paying over 24 months, starting April 2021.

For periods during May, June and July 2021, Ella had to close her restaurant as Melbourne was in lockdown. Her restaurant closed again on 5 August and remained closed for the rest of the month under the lockdown restrictions. Ella has relied on a lot less income from takeaway only during these lockdowns and has had difficulty paying her monthly and deferred rent.

Using the turnover test period of June, July and August 2021 compared to the same period in 2019, the restaurant experienced a 40 per cent fall in turnover.

Ella called her landlord Zhen to discuss her situation and made a written request for proportionate rent relief under the Scheme. She used the VSBC’s optional letter template 1, supplying one of the required forms of evidence (her BASs).

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

Applying for help

Ella applied for free mediation with the VSBC under the Scheme to help resolve the matter.

The VSBC helped early on, quickly getting in touch with Zhen to try to re-open communication and facilitate a discussion. Ella and Zhen started communicating again about their position and concerns but couldn’t reach an agreement.

The VSBC promptly progressed the matter to mediation, where an impartial and experienced mediator helped them to negotiate fairly and explore options for resolving their dispute.

Reaching an agreement

Through mediation, Ella and Zhen reached an agreement:

Monthly rent: $6,000

Rent relief: 40 per cent rent relief for the period 28 July to 31 October 2021. This equals $2,400 per month. Half of this amount would be in the form of a waiver ($1,200) and half would be deferred ($1,200), with repayments of deferred rent to start from November 2021 and be spread over 24 months.

Payments of Ella’s deferred rent from the previous agreement that is still owing would restart on 15 January 2022 in the same instalments and frequency as had been agreed.

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