Almost a year after it was introduced, the Commercial Tenancy Relief Scheme ended on 28 March 2021
What is the Commercial Tenancy Relief Scheme?
The Victorian Government introduced the Commercial Tenancy Relief Scheme (CTRS) in response to the impact of the COVID-19 pandemic. The CTRS was seen as a saving grace for small businesses as it implemented various protections for eligible commercial tenants, aimed at easing the economic effect of the pandemic.
The CTRS consisted of Principal Regulations and other Amending Regulations. The Principal Regulations operated from 29 March 2020.
The terms of the CTRS proved difficult to navigate and have been a point of contention between contracting parties. Some recent Victorian Civil and Administrative Tribunal (VCAT) decisions highlight the issues.
What happens if the tenant has not complied with the Regulations? Are tenants required to make a second application for rent relief?
In February 2021, VCAT handed down its Filomeno decision, which demonstrated the importance of the tenant strictly complying with the requirements under the Regulations.
The tenant had failed to request rent relief in a way that complied with the Principal Regulations, and subsequently VCAT refused to grant rent relief. In this case, the requests for rent relief were made before the Amending Regulations.
In contrast, in the cases of Yarraville Business and R&D Health Clubs, VCAT decided that a second request for rent relief under the Amending Regulations was not required. The proviso was that the tenant must have already provided a compliant request prior to the introduction of the relevant Amending Regulations.
Is it unconscionable to refuse rent relief if a tenant is not eligible?
The short answer is no.
In the matter of PS Market, VCAT held that it is not unconscionable conduct for the landlord to refuse to provide rent relief if the tenant is ineligible. However, the question of whether a tenant is eligible is not always black and white.
We have noticed that tenants are raising the following eligibility arguments:
- Whether a tenant is entitled to JobKeeper if the tenant is a member of a group of companies and staff were employed by the tenant’s parent company
- Whether a tenant has an eligible lease because it is an eligible business participant in JobKeeper
- If a lease is granted to the agent of an undisclosed principal, whether the relevant entity that must participate in JobKeeper is the undisclosed principal, not the tenant
Some of these arguments have been rejected by VCAT or are otherwise awaiting determination.
Does the moratorium on re-entry prevent re-entry for any default or non-payment of rent?
The recent VCAT case of Karting Madness considered the re-entry issue: the tenant applied for an injunction to prevent the landlord from re-entering the premises on the basis of rent arrears (which accrued during the operation of the Principal Regulations), and a breach of planning rules.
The Amending Regulations revised the Principal Regulations from 29 September 2020. They limited the moratorium to only prevent re-entry for “non-payment of rent or outgoings”. However, the tenant argued that it was entitled to protection from re-entry under the Principal Regulations for any default, including termination for a breach of planning rules, provided the lease satisfied the regulations.
VCAT rejected this argument. It said that the moratorium on re-entry in the Principal Regulations only applied to rent arrears and did not prevent re-entry for other breaches.
We suggest all interested parties monitor VCAT decisions with caution, as this area of law continues to develop as more decisions are handed down.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can receive from marshalls+dent+wilmoth and other relevant experts.