Process for commercial tenants and landlords

The following steps outline the process for landlords and tenants under the Commercial Tenancy Relief Scheme.

Tenant questions

Who is eligible?

Eligible tenants are small to medium enterprises (SMEs) with an annual turnover under $50m and an employer who qualifies for and participates in the Commonwealth Government’s JobKeeper scheme.

If I can’t afford to pay my rent, what should I do?

Step 1

  • Keep paying what rent you can afford.
  • Work out your reduction in turnover associated with the premises during the relevant period (from 29 March 2020 to 29 September 2020).

Step 2

  • Apply for rent relief from your landlord in writing. This request must be accompanied by:
    • a statement that your lease is an eligible lease
    • evidence that your business is an SME entity with a turnover under $50m and
    • evidence that your business is participating in the JobKeeper scheme.
  • Tenants can use the Victorian Small Business Commission’s (VSBC) letter template to guide them in requesting rent relief.

To understand more about the documents that need to accompany your request, read the VSBC’s responses to frequently asked questions.

Step 3

  • After receiving your written request, your landlord must offer rent relief within 14 days, unless a different time frame has been agreed to by you and your landlord in writing.
  • Unless you and your landlord otherwise agree in writing, no less than 50 per cent of the rent relief offered by the landlord should be in the form of a waiver.
  • The offer must apply to the period between 29 March 2020 and 29 September 2020.
  • Your landlord is required to take several factors into account when offering you rent relief such as:
    • your reduction in turnover
    • any waiver of outgoings or other expenses for the premises
    • whether your capacity to pay rent under the lease would be compromised by not being offered sufficient relief
    • their financial ability to offer rent relief, including any support they might have access to such as mortgage relief or Victorian Government schemes that they might be eligible for
    • any reduction in outgoings for the premises.

Step 4

  • If agreement is reached, document what has been agreed to in writing.
  • You can choose to document this agreement as a variation of the lease, but this is not necessary if the written agreement gives effect to the rent relief.

What if I can’t reach agreement?

Step 5

Apply for free mediation with the VSBC to resolve your rent dispute, making sure you include a copy of your lease and evidence that your business is participating in the JobKeeper scheme. For more information, read the VSBC’s responses to frequently asked questions.

What happens at the VSBC?

Step 6

  • A case officer from the VSBC will contact you to request all relevant information, such as:
    • information or records showing what your reduction in turnover is
    • evidence that your business is an SME entity with a turnover under $50m
    • details of any previous discussions that you have had with your landlord about rent relief (e.g. documented phone discussion, email correspondence).

Step 7

  • Your case officer will contact you and your landlord to try to resolve your rent dispute early on and, if needed, arrange a free mediation session. This session will be conducted by an experienced, independent mediator via video or telephone.

What if my landlord refuses to negotiate through the VSBC?

  • If your landlord refuses to mediate through the VSBC, the Victorian Small Business Commissioner may issue a certificate noting this refusal so that you can pursue this matter at the Victorian Civil and Administrative Tribunal (VCAT).

Step 8

  • If you reach an agreement with the landlord during the mediation session, you are both able to enter into binding Terms of Settlement.

Step 9

  • If an agreement cannot be reached or the Terms of Settlement are breached, either party can apply to VCAT or the Courts for a decision on their dispute.

Landlord questions

What should I do if my tenant has stopped paying rent and won’t respond to my request to negotiate rent relief?

  • You can apply for free mediation with the VSBC to resolve your rent dispute, making sure you include a copy of your tenant’s lease.
  • A case officer from the VSBC will contact you and your tenant to try to resolve your rent dispute early on and, if needed arrange a free mediation session. This session will be conducted by an experienced, independent mediator via video or telephone.

What if my tenant refuses to negotiate through the VSBC?

  • If your tenant party refuses to mediate through the VSBC, the Victorian Small Business Commissioner may issue a certificate noting this refusal so that you can pursue this matter at the VCAT.

What should I do if my tenant has written requesting rent relief under the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020?

Step 1

  • You need to respond in writing to your tenant’s request within 14 days, or within a time frame otherwise agreed by you and your tenant.

Step 2

  • Unless you and your tenant otherwise agree in writing, no less than 50 per cent of the rent relief you offer should be in the form of a waiver.
  • The offer must apply to the period between 29 March 2020 to 29 September 2020.
  • You are required to take several factors into account when offering rent relief including:
    • the tenant’s reduction in turnover
    • any waiver of outgoings or other expenses for the premises
    • whether your tenant’s capacity to pay rent under the lease would be compromised by not offering sufficient relief
    • your financial ability to offer rent relief, including any support you might have access to such as mortgage relief or Victorian Government schemes that you might be eligible for (see step 5)
    • any reduction in outgoings for the premises.

Step 3

  • Following your offer of rent relief to your tenant, you are both required to negotiate in good faith to reach a mutually satisfactory agreement.
  • If agreement is reached, document what has been agreed in writing.
  • You can choose to document this agreement as a variation of the lease but this is not necessary, as long as the written agreement gives effect to the rent relief.

What if I can’t reach agreement?

Step 4

Am I entitled to a land tax reduction?

Step 5

  • Landlords that have provided rent relief to a tenant can apply to the State Revenue Office for a land tax discount of 25 per cent (equivalent to three months) and the ability to defer the remainder of their land tax liability until 31 March 2021.
  • To receive the 25 per cent discount, landlords must provide a declaration from their commercial tenant that they meet eligibility criteria and that rent relief has been agreed to. Commercial tenants can provide the declaration to landlords by completing and submitting the Land Tax: Coronavirus land tax relief – commercial tenant details form online.
  • Land tax relief has been extended to landlords of eligible licensed pubs, clubs and restaurants. Eligibility criteria specific to this extension of the land tax relief are that:
    • a tenant must operate a licensed pub, club or restaurant under a general, full club or on-premises liquor licence as a commercial tenant
    • the tenant’s turnover at that premises must have reduced by at least 30 per cent since March 2020
    • at the premises level, the tenant’s turnover must have been no greater than $50 million in the 2018–19 financial year or their expected turnover in the 2019–20 financial year must be less than $50 million.

If I have a mortgage, should I contact my bank?

Step 6

  • Landlords who provide rental relief to tenants should ask their lender about mortgage payment deferral. Evidence of mortgage payment deferral may be needed at mediation.

 

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