Commercial Tenancy Relief Scheme 2.0 – a new variant for leasing lawyers

Covid has evolved. So has Victoria’s commercial rent relief scheme to deal with the pandemic’s consequences for commercial landlords and tenants. We now have the details of the latest version.

The new CTRS (perhaps we should christen it the CTRS’s Delta variant?) effectively became law yesterday. Here is a very brief introduction:

  1. The Commercial Tenancy Relief Scheme Act 2021 ostensibly creates the scheme but its real substance is contained in the Commercial Tenancy Relief Scheme Regulations 2021 proclaimed yesterday.
  2. Its broad aim is to entitle distressed retail and commercial tenants who have suffered a decline in turnover of 30 per cent or more since 1 April 2021 to obtain at least proportionate rent relief from their landlords.
  3. Eligibility for the CTRS is no longer tied to the Jobkeeper program (which has expired) but rather to a financial comparison of three consecutive months of trade to an earlier corresponding period.
  4. Some tenants are disqualified from the outset. Publicly listed corporations, major banks and beekeepers (yes, really!) are among the unwelcome (see regs 7 and 8).
  5. The scheme is complex and littered with exceptions, carve-outs, qualifications, and deadlines. No brief summary (including this one) can be relied upon as entirely accurate.
  6. Eligibility is not automatic. Among other things, eligibility requires a written rent relief request from a tenant to a landlord (reg. 27(1)) which sets out certain details (reg. 27(2)) and is supported by certain documentary evidence within 14 days (reg. 27(3)). A tenant who stuffs up these formalities three times will not be allowed a fourth bite of the cherry (reg. 26(6)).
  7. A landlord receiving a compliant rent relief request must within 14 days offer the tenant at least rent relief proportionate to the tenant’s decline in turnover. At least half of that relief must be by way of waiver of rent (reg. 27(8)) with the balance by deferral.
  8. A tenant receiving such an offer will be deemed to have accepted it 15 days later unless they have otherwise agreed or have already referred the matter to the Small Business Commissioner (reg. 27(11)).
  9. The period for which rent relief must be granted starts on the day the rent relief request is made unless that request is made before 30 September 2021 in which case the rent relief period commences on 28 July 2021 (note the retrospectivity) (reg. 28). (This will make 30 September 2021 an important deadline for some distressed tenants.)
  10. Where a landlord and tenant cannot agree on rent relief the Small Business Commission can impose a binding order on the parties (reg. 48) without a hearing (reg. 46) which can then be further litigated in VCAT (reg. 59).
  11. Eligible lease disputes can be litigated in VCAT or the Supreme, County or Magistrates’ courts but all require a gateway certificate from the Small Business Commission (regs 64 and 65).
  12. The regulations currently contemplate a ‘rent relief period’ from only 28 July 2021 to 15 January 2022 (see definitions at reg. 4) but remember that the end date of the original CTRS scheme was extended several times so this end date might eventually prove to be elastic too.
  13. During the ‘rent relief period’ it will be impossible for most landlords to increase their rents under eligible leases for any reason (reg. 35). Particularly for long term leases without ‘review to market’ rent review clauses, this ban has potential long term implications to the capitalization rates and hence the capital value of some rental properties.
  14. Unlike the earlier CTRS schemes, some tenants will be required to provide further financial information to their landlord even after a rent relief agreement has been entered into. Their rent relief entitlement might then increase or decrease automatically depending on that information (reg. 29).

Does this all sound simple, straight forward and convenient? If so, I haven’t explained it sufficiently and you should probably do some further reading.

Some useful resources for that purpose:

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