In response to the ongoing economic impacts that Omicron has had on landlords and tenants, the Victorian and NSW Governments have extended their state rent relief programs. The extension of the programs will provide both landlords and tenants with significant levels of support through these unprecedented times, as businesses continue to struggle with staff shortages, on-site exposures and government restrictions.
Support for Struggling Victorian Landlords and Tenants
On Saturday 15 January 2022, the Victorian Government confirmed an extension to the Commercial Tenancy Relief Scheme until Tuesday 15 March 2022. The extension of the program will provide rent relief and much-needed protections for commercial tenants who have experienced significant hardship as a result of the latest Omicron wave.
Regulations will be made shortly and will operate retrospectively from 16 January 2022 in order to ensure there is no gap in support for tenants currently receiving rent relief, and those who will be deemed eligible under the extension of the Commercial Tenancy Relief Scheme.
Who is Eligible for the Commercial Tenancy Relief Scheme?
The scheme will be available to the following businesses:
- Businesses with an annual turnover of $10 million or less
- Businesses that have suffered a decline in turnover of at least 30% as a result of COVID-19
Eligible landlords that have previously received support under the Commercial Landlord Hardship Fund and provided rent relief to their tenants will continue to receive support if their tenants are deemed eligible under the extended scheme.
It’s important to note that rent relief must be proportional to the reduction in turnover. This means that a tenant with a 40% reduction in turnover would only be required to pay 40% of the rent. For the remaining balance, at least 50% must be waived, with the remaining value to be deferred.
Continued Freezes on Rent Increases to Support Tenants
Under the extension of the scheme, freezes on rent increases will also continue. As well as this, landlords will also be unable to evict tenants until they have participated in the mediation process through the Victorian Small Business Commission (VSBC). However, it’s important to note that landlords and tenants are required to comply with the conditions of their existing agreements.
In order to provide more support for struggling tenants, those with deferred rent under the current scheme will be granted a longer period to repay their deferred rent.
Support for Small Business Owners in New South Wales
The NSW State Government has taken similar steps to enable small businesses to access rent relief until 13 March 2022.
Which Businesses are Eligible to Access Rent Relief?
The latest extension of the scheme will only apply to businesses with an annual turnover of up to $5 million. Businesses must also continue to meet the eligibility criteria for the Micro-Business Grant and JobSaver.
Landlords are required to offer rent reductions to tenants that are proportionate to the decline in their trade. At least 50% of the rent reduction must be in the form of a rent waiver, and any deferred rent must be amortised over the greater of the balance of the lease term, or a 24-month period.
Tenants Protected by Rent Freezing and Rent Abatement Agreements
Similar to the conditions in Victoria, landlords in NSW must also freeze rent increases (except for rent that is based on turnover). Landlords should also note that reductions in statutory charges (including land tax or council rates) must also be passed on to tenants.
If a tenant is in rent arrears from any period from 13 July 2021 onwards as a result of COVID-19, the landlord cannot evict the tenant before first negotiating a Rent Abatement Agreement, and engaging in mediation.
Our team of Melbourne-based property lawyers will post details of the new Victorian Regulations, and what these mean for tenants and landlords, when more information becomes available. Reach out to our team of leasing experts and property lawyers for further clarification on the scheme, or to confirm your eligibility.