In May this year, the Victorian Parliament passed the COVID‐19 Omnibus (Emergency Measures) Act 2020 and COVID‐19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020, which modify laws relating to certain retail leases and non-retail commercial leases in response to COVID-19.
The rent relief terms provided under these amendments were originally intended to apply until late September, with the Victorian government announcing in August that it would be extended until 31 December.
DBA Lawyers director Daniel Butler explained that under the Victorian Act, only tenants and their connected entities with less than $50 million in turnover are eligible for protection under the act. They must also be a JobKeeper recipient.
He also pointed out that the Victorian legislation carves out situations where there is an SMSF who is the landlord with a related-party tenant, being the business.
“In that instance, that is actually carved out of the Victorian legislation, so an SMSF with a related-party tenant is not covered by the Victorian legislation,” Mr Butler explained in a recent DBA Lawyers webinar.
“The reason behind that is that if the government has seen that the landlord and the tenant is one and the same, they don’t need this statutory protection, so it has been carved out under this provision in the Victorian Act.”
However, those tenants who are not covered by the Victorian Act could still seek to negotiate on rent based on market conditions, he clarified.
For example, the National Cabinet Mandatory Code of Conduct, which is a policy document setting out non-binding policies which landlord and tenants are encouraged to abide to, states that rent relief negotiations should apply for the period for which JobKeeper is running, he said.
Now that JobKeeper has been extended, some tenants will be expecting an extension.
“The ATO is insisting upon appropriate and sufficient evidence to be retained,” he said.
“So, if you do want to provide rent relief, particularly where it’s a related-party tenant, you really do need the documentation in place and the evidence to support that it is generally in accordance with market conditions. Under the Victorian Act, a landlord and related-party tenant are not covered, so they will need to rely upon the market forces and the spirit under the code.”
