The Regulations govern eligible leases for the “relevant period”.
Interestingly, “relevant period” is the six month period from 29 March 2020 to 29 September 2020 (Relevant Period). This contrasts from the Code which applied for the pandemic period in which the JobKeeper scheme is operational and a subsequent reasonable recovery period. It appears that the recovery period has not been factored into the Regulations. Rent relief includes any form of relief provided to a tenant under an eligible lease to pay rent, including a waiver, reduction, remission or deferral of rent (Rent Relief).
The landlord must offer Rent Relief to the tenant within 14 days of the tenant’s request or within a further period agreed by the parties in writing. The landlord’s offer must be based on all of the circumstances of the lease, apply for the Relevant Period and provide a rent waiver of no less than 50% of the Rent Relief (unless the parties agree otherwise). This minimum rent waiver reflects the Code.
The landlord’s offer must also take into account:
A portion of rent may be deferred (regulation 16). The landlord cannot request that payment of deferred rent commence until the earlier of 29 September 2019 and the expiry of the term of the lease. Further, the payment of deferred rent will be repaid to the landlord over the balance of the term (including an extension granted in accordance with the Regulations) and a period of no less than 24 months (whichever is greater).
The above largely reflects the principles in the Code save for the deferral proportion of rent. Under the Code, the proportion of rent deferred was directly attributable to the reduction in the tenant’s turnover.
Prohibition on rent increases (regulation 12) – unless agreed otherwise between the parties, rent during the Relevant Period must not be increased. This excludes turnover rent under a retail lease.
Extension of the term (regulation 13) – if payment of rent is deferred, the landlord must offer to extend the lease by the same period for which rent is deferred (which will likely be the Relevant Period). An extension of a lease term is a deemed new lease at law. Parties should be cautious about the implications this may have for leases that are also governed by the Retail Leases Act 2003 (Vic).
Recovery of outgoings or expenses (regulations 14,15) – a landlord must consider waiving recovery of any outgoing or expense under a lease for any part of the Relevant Period that the tenant is not able to operate its business from the premises. If the tenant is not able to operate its business (for example, on account of a government order) the landlord may cease providing a service (e.g. cleaning of the premises) if reasonably requested by the tenant. Further, if an outgoing charged or imposed on the premises is reduced (e.g. government rates and taxes or service charges), the tenant must not pay more than its proportional share once the reduction has been applied. If the tenant has already paid this amount in advance or this is determined to have occurred, the landlord must reimburse the tenant for the excess paid as soon as possible.
Fees, interests and charges (regulation 17)
Prohibition from recourse (regulation 9(4))
Tenant may reduce business hours or cease business trading (regulation 18)
This is likely to encourage tenants to share financial records for the purpose of reaching a reasonable agreement on Rent Relief.
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