As a commercial landlord, you rely on your tenants paying their rent on time so you can meet your bills, balance your books and make a living. Normally, if your tenant stops paying rent, you have several legal remedies on hand, including terminating their lease and drawing on their security deposit to recover some of the funds.

But 2020 has been anything but normal – particularly here in Victoria.

Victoria’s extended coronavirus shutdowns and restrictions have left many commercial tenants struggling to pay their rent. Which, in turn, has put a considerable financial strain on you as a landlord.

To help alleviate some of the financial hardship caused by the second Victoria lockdown, the state government introduced a series of measures, known as the Commercial Tenancy Relief Scheme (the Scheme).

But what do these measures mean for you as a landlord when your commercial tenant has stopped paying their rent?

The Scheme in brief

In the words of Treasurer Tim Pallas, the Scheme strikes a balance between giving worried tenants security and “providing support and assistance to landlords who do the right thing by their tenants”.

As a result, the Scheme provides the following support for tenants:

  • Ban on evictions for the non-payment of rent for eligible SMEs until 31 December
  • Freeze on any rent increases until 31 December
  • Rent relief (deferral or waiver) in proportion with the fall in turnover experienced by eligible tenants

And for commercial landlords:

What this means for you

Under the Scheme, you can’t evict your tenants – or draw on their security deposit – if they can’t pay their rent because their turnover has been impacted by the pandemic.

Additionally, you are also required to provide them with rent relief – either in the form of a deferral or an outright waiver.

If you can’t come to an agreement with your tenant during rent relief negotiations, the Scheme offers free mediation through the Victorian Small Business Commission’s (VSBC) dispute resolution service.

Refuse mediation at your peril, because your tenant can then pursue the matter at the Victorian Civil and Administrative Tribunal – where decisions are legally binding.

So what’s in it for you?

In return for waiving a proportion of your tenant’s rent, you’ll:

  • Receive a reduction of up to 50% on the property’s 2020 land tax assessment
  • Be able to defer payment of the remaining tax to 31 March 2021

Additionally, if your property was tenanted in March 2020 but subsequently became vacant for a period of three months or more because of the pandemic, you may be eligible for a 25% reduction on the property’s 2020 land tax.

Unfortunately, the Fund has a 31 October 2020 deadline for applications.

Adam Zuchowski is a senior leasing lawyer at Sutton Laurence King Lawyers.

Need legal support for your property development business? Get the help you need by contacting Sutton Laurence King today or calling 03 9070 9810.