Negotiating rent relief: scenario

The following scenario show a tenant and landlord negotiating rent relief in response to coronavirus (COVID-19).

Scenario: A restaurant in Melbourne’s CBD

Impact

Because of restrictions to trade in response to coronavirus and surrounding businesses closing, the business owner has experienced a 40 per cent drop in turnover.

Access to JobKeeper

The business owner (the commercial tenant) is eligible for and is accessing JobKeeper payments.

Access to rent relief

The tenant writes to the landlord on 1 January 2021 requesting rent relief but doesn’t supply the necessary documents. On 15 January 2021, the tenant then supplies the following required information to their landlord:

  • a statement confirming their business is a small to medium sized enterprise
  • a statement confirming their lease is an eligible lease under the Commercial Tenancy Relief Scheme
  • evidence that they are taking part in JobKeeper
  • their business activity statement for the last quarter compared to the same period in 2019 (as one of the four types of evidence a tenant much choose from to show their fall in turnover).

The tenant’s current rent is $4,000 per month. The tenant asks their landlord for rent relief that’s in proportion to their fall in turnover (40 per cent).

The landlord responds to the tenant’s request within the required 14 days. The tenant and landlord agree to $1,600 rent relief per month – matching the tenant’s 40 per cent drop in turnover – for the period 15 January 2021 to 28 March 2021 (i.e. from the date the tenant supplied all of the required information).

The rent relief is made up of $800 in rent being waived each month (the minimum 50 per cent of rent relief that must be made up of a waiver) and $800 in rent being deferred each month until 28 March 2021.

The landlord and tenant agree on a payment schedule for the deferred rent ($2,000) to be paid over 24 months.

The tenant’s lease was going to end on 31 March 2021. Under the regulations for the Scheme, a landlord must offer their tenant an extension of their lease equal to the length of time that the rent is deferred.

As the rent is deferred for two and a half months, the landlord offers the tenant a two and a half month extension. The tenant accepts the offer.

More information about the Scheme

For more information, see our web page for commercial (including retail) tenants and landlords, the process under the Scheme and responses to frequently asked questions.

 

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