The Minister for Small Business announced on Saturday that the Commercial Tenancy Relief Scheme (Scheme) will be extended to 15 March 2022.
The existing Scheme ended on 15 January 2022 and the extended Scheme will be retrospective from 16 January 2022. This will ensure that tenants who were receiving rent relief under the current Scheme, and who are still eligible under the extended Scheme, do not experience a gap in support.
However, at this stage, it is unclear what the exact eligibility criteria will be, and therefore difficult to determine what are the obligations/entitlements upon each landlord and tenant that are currently subject to a rent relief agreement.
What we know so far is:
- To be eligible for the extension, businesses must:
- have an annual turnover of $10 million or less.
- have experienced a drop in turnover of at least 30%.
- If a lease is eligible for the extension, landlords will be required to keep providing rent relief that matches the tenant’s drop in turnover. For example, a business with a turnover of 40% of what it was before the pandemic would only be charged 40% of its rent. Of the remaining 60%, at least half would need to be waived with the remainder deferred.
- The ban on rent increases and evictions will continue and landlords will not be able to evict tenants without undertaking mediation through the VSBC. It is unclear whether this applies to leases that were previously subject to rent relief arrangements or whether a lease will need to requalify as eligible.
- The VSBC website and the Minister’s statement both indicate that tenants and landlords should continue to abide by the conditions in their current rent relief agreements.
- If rent was deferred under an existing rent relief agreement, the tenant will have more time for repayments as a result of this extension.
- Eligible commercial landlords who provide rent relief under the extended CTRS will also continue to be eligible for relief under the $20 million Commercial Landlord Hardship Fund.
However, what remains to be seen is:
- Whether tenants will need to make a fresh application in order to access the extended Scheme, and/or requalify as an eligible lease, including passing any drop in turnover test.
- How the 30% drop in turnover will be calculated. This could either be by simply extending the Scheme to tenants who were previously eligible without having to make a fresh application, or by updating the turnover period and comparison turnover period and requiring a fresh application. What the relevant turnover period and comparison turnover period is will have a significant effect on whether a lease is likely to be eligible, in particular if the Government were to nominate the most recent completed quarter, being the quarter ending 31 December 2021 as the relevant turnover period
During this period of uncertainty, we suggest:
- Tenants with deferred rent repayment obligations from 16 January 2022 comply with those obligations unless agreed otherwise in writing with their landlord.
- Tenants continue to pay rent in accordance with the lease and any existing rent relief agreements until the Regulations for the extended Scheme are made available.
- Landlords do not take action against tenants for non-payment of rent or outgoings relating to the period during which the extended Scheme will apply, until the Regulations for the extended Scheme are made available.
Regulations for the extended CTRS are due to be released shortly and we will circulate a further update at that time. In the meantime, you can read more in the Minister for Small Business Jaala Pulford’s statement.
For any specific questions about your lease or rent relief agreement, please do not hesitate to contact our office.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.