News & Insights

The Victorian Government has announced a $500 million rental relief package to support tenants and landlords during the COVID-19 pandemic, which covers to varying degrees residential and commercial leasing arrangements.

The Victorian Government’s measures are intended to give effect to the principles laid out by the National Cabinet’s Leasing Code of Conduct. The purpose of the Code is to preserve current tenancies and to mitigate the impact of COVID-19 on landlords and tenants during this difficult and uncertain time (outlined further in our earlier insight here).

Whilst specific legislative details remain to be confirmed, an emergency sitting of the Victorian Parliament has been called for next Thursday, 23 April 2020 to consider and pass the legislation.

Outlined below are some of the initiatives included in the relief package, together with some commercial issues it’s hoped are addressed by Parliament when giving effect to the measures next week.

rental relief and land tax savings

The package will assist tenants by:

• placing a temporary ban on eviction;
• pausing rental increases for six months;
• encouraging the provision of rent relief by landlords; and
• creating a rental assistance fund for renters facing hardship.

Landlords who provide rent relief to applicable business tenants will be eligible for a 25% reduction in the relevant property’s 2020 land tax assessment, and deferral of any remaining land tax until March 2021.

It remains to be seen how the impact of these measures will flow through to encourage negotiations between parties where the tenant is contractually responsible for land tax under the terms of the lease (applicable to most non-retail leases). We look forward to seeing how the Bill accommodates this scenario in which the landlord has no (or limited) practical economic drive to provide rent relief to the tenant.

dispute resolution service

In the event that negotiations for a rent reduction are unsuccessful, the Victorian Government has also announced a new dispute resolution service to assist. Tenants and landlords will now be fast-tracked to either Consumer Affairs Victoria or the Victorian Small Business Commission to ensure a fair agreement is ultimately reached.

eligibility

Some measures announced in the relief package (consistent with Commonwealth tax relief) require the tenant to satisfy certain eligibility requirements. Specifically, commercial tenants must be eligible for the Jobkeeper program, being tenants that have an annual turnover of less than $50 million per year and have experienced more than a 30% reduction in turnover due to the coronavirus crisis.

It is important that the parties are conscious of these eligibility requirements in negotiating variations to their lease, to ensure the variations actually achieve the relevant party (or both parties) financial relief outcome sought.

If you are in the process of renegotiating variations to your commercial tenancy, or want a better understanding of the draft legislation to be released over coming days, please contact us.

Macpherson Kelley’s Property and Tax Teams have in depth expertise in negotiating and dealing with complex commercial tenancy arrangements, and dealing with the State Revenue Office in relation to land tax objections and other concession matters.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.