The Victorian Government has again extended the Commercial Tenancy Relief Scheme (CTRS) to support small to medium businesses. This version of the CTRS looks familiar, but there are some key differences to consider for landlords and tenants.
The Commercial Tenancy Relief Scheme Regulations 2022 (2022 Regulations) were brought into effect on 1 February 2022. The 2022 Regulations further extend the scheme to apply retrospectively from 16 January 2022 to 15 March 2022 (New Protection Period).
While the 2022 Regulations are substantially consistent with previous iterations of the CTRS (details of which are explained further in previous insights published by Russell Kennedy here), there are some key changes to the 2022 CTRS which landlords and tenants alike should understand:
- Continuity of the scheme – an eligible tenant who makes a compliant rent relief request will be entitled to rent relief backdated from 16 January 2022 until 15 March 2022. The intention is for the CTRS to provide ongoing protection to eligible tenants who may have received rent relief in previous iterations of the CTRS.
- Eligible lease – the 2022 Regulations will apply to leases which are in effect as at 16 January 2022. This may capture new leases which weren’t previously eligible for prior iterations of the CTRS.
- Eligible tenant – the 2022 Regulations make an important change to the definition of an “eligible tenant”. Where the previous rules required that an eligible tenant be ”an SME entity” – a business with an annual turnover of less than $50 million – the 2022 Regulations now require an eligible tenant to be ‘a small entity’, defined as a business with annual turnover of less than $10 million. This is a significant amendment that substantially limits medium-sized businesses’ eligibility for CTRS relief, and will mean a large number of previously-eligible tenants are now excluded from rent relief under the 2022 Regulations.
- Proportional relief based on turnover decline – eligible tenants must again demonstrate a decline in turnover of at least 30% during the relevant period. For most leases, this will be assessed on turnover in January 2022 against January 2020, unless an alternative comparison turnover test applies (such as if a business temporarily ceased trading for more than one week during January 2020).
- Applying for rent relief – eligible tenants must make a separate and further request to landlords for rent relief pursuant to the 2022 Regulations. However, a landlord and tenant can continue with a previous rent relief agreement for the New Protection Period by agreement.
- Moratorium on repayment of deferred rent – tenants cannot be required to repay deferred rent from previous rent relief agreements until after 15 March 2022. As per the previous iteration of the CTRS, any agreement to further defer rent means the lease must be further extended for the same length of time that rent is deferred (unless otherwise agreed).
- Moratorium on rent increases – any rent increases due to take place during the New Protection Period is void and cannot be enforced by the landlord (unless otherwise agreed between the parties).
Other aspects of the CTRS remain the same, such as the requirement for landlords to consider waiving recovery of any outgoings otherwise payable under the lease and the moratorium on tenant evictions who have made valid rent relief requests and otherwise complied with the CTRS.
How we can help
The CTRS is a complex framework and each iteration is slightly different. It is important for landlords and tenants to understand the new requirements of the 2022 Regulations, including how these new rules interact with previous rent relief arrangements agreed between landlords and tenants.
Russell Kennedy’s Property and Development team has dedicated expertise in commercial and retail leasing, and extensive experience advising landlords and tenants in navigating the CTRS. Please contact Mark McKinley, Emma Dunlevie, Samantha Taylor or Melanie Young for advice in relation to the CTRS.
This insight was co-written by Mark McKinley, Principal, Melanie Young, Associate and William Reid, Law Graduate.
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