We Explain The Newly Released Commercial Tenancy Relief Scheme Regulations

Here we go again – the Commercial Tenancy Relief Scheme in Victoria has been “extended”until 15 March 2022!

In reality, the Regulations comprising the 2022 Commercial Tenancy Relief Scheme are new, separate and stand-alone Regulations. They are not merely an “extension” of the 2021 Commercial Tenancy Relief Scheme Regulations.

The Commercial Tenancy Relief Scheme Regulations 2022 (CTRS 2022) are, in effect, very similar to the Commercial Tenancy Relief Scheme Regulations 2021 (CTRS 2021). These 2021 Regulations expired on 15 January 2022.

There are a few notable differences, being:

1. The rent relief period commences on 16 January 2022 and ends on 15 March 2022 (Extended Period).
2. A Tenant is required to make a new application for rent relief under CTRS 22 for the Extended Period. The amount of rent relief for the Extended Period may be different from the amount of rent relief provided to the tenant under CTRS 2021 because a separate decline in turnover test must be undertaken for the Extended Period.
3. An eligible lease now includes a retail lease or non-retail commercial lease or licence that is in effect on 16 January 2022. In other words, tenants of new leases that commenced this year are also eligible for relief, provided they are not excluded by Regulation 8 or 9 and meet the requirements of Regulation 25.
4. An eligible tenant (along with any related entities) must show that it records an aggregated turnover of $10 million or less during the financial year ending 30 June 2021, or based on current turnover projections, the tenant as an individual or its group of entities are likely to turnover $10 million or less for the financial year ending 30 June 2022.
5. The method used to calculate the decline in turnover test in both CTRS 2022 and CTRS 2021 is the same i.e. comparing the decline in turnover between the “turnover test period” and the “comparison turnover period”.
6. In CTRS 2022, the turnover test period is the month of January 2022 and the comparison turnover period is the month of January 2020. There are alternative comparison turnover methods available under the CTRS 2022 where such alternatives are required (which are set out further below).
7. If rent has been deferred due to existing rent relief agreements between the landlord and the tenant pursuant to previous Covid-19 Regulations and the tenant requests further relief under the CTRS 2022, then the landlord must not request payment of any part of the (old and new) deferred rent until after 15 March 2022.

Some obvious similarities between CTRS 2021 and CTRS 2022 are as follows:

1. If payment of rent is deferred due to a rent relief agreement, then a landlord must offer the tenant an extension to the term of their lease equal to the rent deferral period. For example, if 3 months’ rent is deferred, then 3 months must be added to the current term of the lease.
2. Deferred rent will be payable over the balance of the term of the lease or over a minimum period of 24 months, whichever is the greater.
3. If a tenant’s financial circumstances change after a rent relief agreement is made, a tenant may make a further request for relief to the landlord pursuant to Regulation 27.
4. There is a prohibition on rent increases at any time during the Extended Period.
5. Should the tenant not be able to run its business at the premises during the Extended Period, then a landlord must consider waiving recovery of any outgoing or other expense under the lease on pro-rata basis.

The landlord and the tenant must follow the process set out in Regulation 25 in relation to any rent relief request for the Extended Period.

In calculating the decline in turnover, some exceptions may apply to the general rule if a tenant finds itself under one of the following specific circumstances:

• The business began trading on or after 1 January 2020;
• There was a business acquisition or disposal that changed the tenant’s comparison turnover;
• There was a business restructure that changed the tenant’s comparison turnover;
• The business was affected by natural disaster;
• The tenant is a sole trader or small partnership which has been affected by sickness, injury or leave;
• The tenant temporarily ceased trading at the premises during the relevant comparison period – in this instance, the turnover test period which is applicable is the month of December 2021 wheras the comparison turnover period is the month of December 2019.

Before a rent relief agreement is made, a tenant is not in breach of any provision of the lease due to non-payment of full rent or outgoings during the rent relief period but only if it continues to pay a portion of the rent due under the lease which is reduced by the same percentage as the tenant’s decline in turnover.

If you are a commercial tenant….

As a tenant, it is important to act quickly and submit a new compliant request for rent relief to the landlord as soon as possible so that the tenant is protected under the prevailing Regulations. If you are in doubt whether you qualify for further relief under CTRS 2022, please contact one of our Commercial lawyers today to discuss your options without further delay.

If you are a commercial landlord….

For a landlord, you still need to respond and provide an offer for relief to the tenant within 14 days after receiving a compliant request along with the evidence required under the CTRS 2022. If you have received a request for relief and are unable to determine if it is compliant, one of our Commercial lawyers can help you with that.

Our lawyers will be able to assist to assess your, or your tenants, eligibility and prepare compliant applications or responses to non-compliant applications.

We can work with landlords who have tenants who may be falling behind in their rent payments and discuss the options available.

If you have any queries or need assistance handling a commercial lease dispute contact our commercial lease lawyers at PCL Lawyers.

We will provide commercially sound legal advice and work with you to achieve a quick and effective result.

Call a lease lawyer on 1300 907 305 or complete an online form.

About The Author - Marilyn Wai

Marilyn Wai is a Senior Associate in the Commercial and Commercial Property Department. Marilyn studied law at Monash University and obtained a Bachelor of Laws and was admitted into practice in...

About The Author - Chris Karatselios

Chris is an Accredited Commercial Law Specialist and a Partner at PCL Lawyers. Chris has approximately 30 years’ experience in commercial and property law. Chris has extensive expertise in complex...