On 24 April 2020, the COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic) came into effect (the Legislation) following similar legislation in other states.
This legislation provides for a range of measures to help Victorians cope with the impact of the Covid-19 crisis.
However, we are still not there yet in terms of complete clarity for commercial landlords and tenants as this Legislation does not make explicit how the National Cabinet Mandatory Code Of Conduct (Code) will be exactly translated into Victorian law.
In summary, the new Legislation simply provides a framework for certain temporary regulations to be created that can give effect to the Code. Whilst not a conclusive list, the Legislation provides that the regulations will be able to:
- prohibit the termination of an eligible lease;
- change a period in the lease in which someone must or may do a thing;
- change the duration of the lease;
- exempt a landlord or tenant from having to comply with a lease.
The Legislation does provide some guidance as to which ‘eligible leases’ the Regulations will apply. For example:
- As provided in the Code, the Regulations will apply to entities with a turnover of under $50m per annum (a standard which may be applied to eitherthe preceding financial year or this financial year).
- The Regulations will apply to a ‘retail lease’ (within the meaning of the Retail Leases Act 2003) as well as a non-retail leases or licences, where the tenant is a ‘participant’ in the JobKeeper scheme.
- The Regulations will be retrospective with effect from 29 March 2020 (meaning they will likely capture rental periods that have now passed).
- ‘Eligible leases’ will be those that are on foot on the first day in which the regulations come into effect. This would suggest that new leases presently being negotiated will not be impacted and so such tenants won’t be in a position to avail themselves of the Code concessions in the future (if for example they run into trouble in the coming months).
- The binding mediations contemplated by the Code will be conducted by the Victorian Small Business Commission (VSBC).
- The Legislation and regulations are intended to be temporary and thus are set to be repealed 6 months after commencement.
The Legislation however does not go so far as to address the more integral matters under the Code, such as the modes of calculation for rent waivers and deferrals (which will presumably be contained in the eventual regulations).
Under the Code tenants and landlords are encouraged to negotiate in good faith to come up with acceptable arrangements “taking into account their particular circumstances on a case-by-case basis.” Many tenants and landlords are thus already well advanced in coming to agreement on a suitable path forward. However, with the uncertainty that remains as to the precise formulation of the Victorian regulations, it may well be that some parties are hesitant to finalise any agreement until such time as the Victorian position is clarified; an unfortunate situation given the already abundant uncertainty at this time. Presumably though, the regulations will not be far off.
If you require advice in relation to commercial tenancy negotiations in the context of the Covid-19 crisis, don’t hesitate to contact a member of our team for on-point, practical guidance.
Joseph Carneli, Senior Associate