Important Commercial Tenancy Update (COVID-19) – By Jesse Rankine
The rights and obligations of landlords and tenants of commercial tenancies have been substantially altered due to the COVID-19 pandemic.
The changes started with the National Cabinet releasing a “Code of Conduct” (the Code). The Victorian government then passed the COVID-19 Omnibus (Emergency Measures) Act 2020 (the Act) and now the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (the Regulations).
Parties should not assume that the Code, the Act and the Regulations all contain the same wording and/or requirements as there are several important differences between the three (discussed below).
In Victoria, the provisions of the Regulations prevail over those found in the Code, so it is the Regulations that provides real guidance to landlords and tenants of commercial tenancies.
Notable differences between the Code, the Act and the Regulations include:
- The Code states it is applicable where the tenant is eligible for JobKeeper. However, the Act and Regulations apply where the tenant is eligible for and a participant in JobKeeper;
- The Code states that rental relief must be offered in proportion to the tenant’s reduction in trade. The Regulations however state that rental relief must be based on all of the circumstances of the lease. This means that there is increased room for negotiation from a landlord’s perspective;
- The Code states that that the tenant must abide by the other terms of the lease or risk forfeiting protections. There is no such requirement under the Act or the Regulations;
- The Code states that landlords are unable to charge punitive interest on deferrals. The Regulations state that no interest can be charged on deferrals;
- The Code makes several references that it is to apply “during the pandemic plus a reasonable subsequent recovery period”. However, the Act and Regulations specifically apply from 29 March 2020 to 29 September 2020 only;
- The Regulations allow tenants to make subsequent requests for rental relief, however the requirement that ‘waivers’ must make up at least 50% of the relief is removed in these circumstances; and
- The Regulations include a prohibition on landlords charging their tenants more than the tenant’s proportional share of outgoings.
Please do not hesitate to contact our office should you have any queries regarding the operation of the Code, the Act, and the Regulations, and how they collectively operate.