July 28, 2021

2 Comments

A new rent relief scheme has been announced

The Victorian Government today announced a new/extended rent relief scheme for small to medium sized tenants in Victoria.

A copy of the press release is available here: https://www.premier.vic.gov.au/commercial-tenancy-relief-victorian-businesses

At this stage, there are more ‘unknowns‘ than ‘knowns‘, particularly as the previous scheme was tied to Jobkeeper, which is no longer in operation.

Here are a few of the things we do know:

  1. The scheme will be available to tenants with a turnover of less than $50M and have shown a 30% downturn in trade due to the coronavirus. We do not yet have details on how these thresholds will be defined and tested in the legislation.
  2. The proposed legislation will keep the requirement that landlords provide rent relief proportionate the tenant’s downturn in trade compared to pre-pandemic levels, at least half of which is by way of waiver and the remainder deferred.
  3. Mediation will be available.
  4. New legislation will give effect to the new/revived scheme, which will apply from today (28 July 2021).
  5. There will be an $80M hardship fund for landlords who provide rent relief. We do not have any details on this fund yet.

For those looking for a more detailed discussion of the ‘knowns‘ and ‘unknowns‘, have a look at the excellent post from Eastern Bridge Lawyers here: https://www.easternbridge.com.au/post/new-rent-relief-regime

As usual, I will post any information as soon to this log as it comes to hand.

March 5, 2021

1 Comment

VCAT finds that a head lease is not a retail premises lease under the RLA 2003

In another recent development, this time under the Retail Leases Act 2003 (Vic) (RLA 2003),[1] Senior Member Forde at VCAT has held that a head lease is not a lease of retail premises under that Act.

In Izett St Pty Ltd v Applgold Pty Ltd (Building and Property) [2021] VCAT 174, Senior Member Forde at VCAT heard as a preliminary quesiton in the proceeding arguments about whether a head lease could be considered a lease of retail premises under the RLA 2003.  

The head tenant’s main business was to sub-lease parts of the demised premises to retail tenants.  

The head tenant argued that the sub-tenants were the ultimate consumers of the sub-leased space and, as a result, the tenant was engaging in a retail supply, applying the reasoning from C B Cold Storage and similar cases.

The landlord argued that:

  1. a retail premises must be open to the public;  and 
  2. the head lease was not open to the public because the sub-tenants had exclsuive possession of those parts of the leased premises that they sub-leased.

The Tribunal rejected the landlord’s argument and held that:

44.    I am however satisfied that the Premises is ‘open to the public’ in the sense that between sublets it is possible for a member of the public to enter a space available for sublet. There is no evidence to suggest that any person is prohibited from subletting a space in the Premises. …

However, the Tribunal found for the landlord on a different basis.  Sub-section 4(1) of the RLA 2003 states that (emphasis added):

(1)       In this Act, retail premises means premises, not including any area intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for—

(a)       the sale or hire of goods by retail or the retail provision of services; or

(b)       the carrying on of a specified business or a specified kind of business that the Minister determines under section 5 is a business to which this paragraph applies

The Tribunal made the following findings:

49.    … Once the sublease is granted, the applicant is no longer able to ‘use’ the premises. It has given exclusive possession to a subtenant. The only space available for the applicant to use after the Premises is sublet is the communal kitchen facilities.

50.    Had the applicant offered licences to the public to use parts of the Premises it may have been more akin to the provision of services. Unlike a caravan park, serviced office, conference centre or cold storage facility, the applicant gave exclusive possession often for years at a time to its subtenants thereby giving away the right to use the Premises. 

51.    Subletting premises is not the provision of a service in the sense required by the RLA. If that were the case every sublet premises could be classified as a retail premises. The provision of kitchen facilities by the applicant does not make the Premises retail premises. Unlike the tenant in Fitzroy Dental or Stringer, the applicant is not integral to the operation of the subleases once granted. 

52.    When all the features of the Premises are taken together as required by Cold Storage, the conclusion must be that the Premises is not retail. 

Practitioners should be aware of this decision in case it is suggested that a head lease falls under the RLA 2003.


[1] It’s been so long since I have done a post about the RLA 2003 that I feel that I must redefine the term!

March 5, 2021

0 Comments

Another decision from VCAT about the CTRS Regs

VCAT has recently handed down another decision about the CTRS that readers should be aware of.

The first thing to note is that the decision was on an application for an interlocutory injunction.  That means that the applicant (in this case, the tenant) needs to show an arguable case (also known as a serious question to be tried or a triable issue) in order to be entitled to an interlocutory injunction.   Once that is established, the Tribunal makes orders to preserve the status quo and final determination of the triable issue is put off to a later date (usually 6 to 12 months away).  Consequently, as far as arguments under the CTRS are concerned, a decision in an application for an interlocutory injunction will only determine whether a particular case is arguable or unarguable.  At this stage, the Tribunal will usually not determine whether or not an argument is correct.

So, bearing that short lecture in mind, the recent case is Karting Madness Pty Ltd v Daniel Terrence Pty Ltd (Building and Property) [2021] VCAT 159, was heard and determined by Member Kincaid at VCAT, with reasons published on 26 February 2021.  In that case, the landlord served a default notice and attempted to re-enter the premises on the basis of:

  1. rent arrears that accrued during the operation of the CTRS;  and
  2. alterations to the leased premises that the landlord said breached planning laws.

The tenant argued that:

  1. the tenant’s protections from re-entry for non-payment of rent under regs 9(2) and (3) of the Principal Regulations was an accrued right that survived the amendment of the Regulations on 29 September 2020 and was not extinguished by those amendments;
  2. the landlord and tenant had entered into an agreement for rent relief during the first version of the CTRS Regs that operated between 29 March 2020 and 29 September 2020 (referred to in the reasons as the Principal Regulations) and was continuing to comply with that agreement.  As a result, the tenant argued that it was entitled to protection from re-entry during the COVID period under regs 9(2) and (3) for any default, including termination for the alleged breaches of planning rules;
  3. it was unclear on the evidence whether the works that were alleged to breach the planning restrictions were the tenant’s fitout or the landlord’s works and there were defects in the landlord’s default notices that prevented the landlord from re-entering in reliance on those notices;  and
  4. it was unconscionable conduct in breach of s 77 of the RLA 2003 for the landlord to re-enter in the particular circumstances of this case (discussed further below).

The Tribunal made orders for an interlocutory injunction and included the following interesting findings.

First, the Member held that it was arguable that the tenant’s protection from re-entry under the Principal Regulations survived the subsequent amendments to those Regulations. Member Kincaid provided the following reasons (footnote from original):

111.     I note however, that it is clear that Parliament may by an Act of Parliament, in respect of the promulgation of delegated legislation under that Act, as it has done in respect of any regulations made under the Act, grant a power for such regulations (whether amending or otherwise) having a retrospective effect, such as may (in the case of amending regulations) affect rights and obligations acquired under previous iterations of those regulations.[1]  

112.     Pursuant to section 15(4) of the Act, regulations made under section 15 of the Act may “[have] retrospective effect to a day not earlier than 29 March 2020”.

113.     Moreover, regulation 3 of the Principal Regulations’ Amendments, demonstrating a clear statement against an assumption that may otherwise be made against any retrospective operation of the Principal Regulations’ Amendments, imposes a retrospective operation of the Principal Regulations’ Amendments, as follows:

3   Commencement

These Regulations are taken to have come into operation on 29 March 2020.

114.     This provision is of course exactly the same provision as appeared in the Principal Regulations.

115.     Section 3 of the Principal Regulations’ Amendments must be presumed to have been intended by Parliament, but to what end, it may be considered. It is difficult to accept, for instance, that Parliament intended for tenants, having entered into an agreement under regulation 10(6) of the Principal Regulations, and having complied with regulations 10(1)–(5) of the Principal Regulations, to be required to enter into a new agreement for the same “relevant period” under the materially different provisions contained in regulations 10(1)–(5) of the Principal Regulations’ Amendments.[2]

116.     It is also difficult to consider that the law is other than that if, as I suggest, a tenant has a right under regulation 9(1) of the Principal Regulations not to be considered in breach of the eligible lease if, having complied with regulations 10(1)–(5) of the Principal Regulations, it pays the amount of rent otherwise required to be paid under the eligible lease during the relevant period, the tenant’s right not to be evicted under regulations 9(2) and 9(3) of the Principal Regulations, as properly construed, also subsists. To have the benefit of one of the rights conferred by the Principal Regulations — regulation 9(1) — by having complied with regulations 10(1)–(5) of the Principal Regulations, and not to also have the benefit of the concomitant rights granted by regulations 9(2) and 9(3) of the Principal regulations (both of which must be taken to refer to regulations 10(1)–(5) of the Principal Regulations), might be thought to be illogical.

117.     Against this, however, it may be contended that given the expressed retrospective nature of the Principal Regulations’ Amendments, the seemingly broader rights granted in favour of a landlord by regulations 9(2) and 9(3) of the Principal Regulations’ Amendments to evict a tenant or to otherwise re-enter or recover premises (that is to say, a landlord is expressly entitled to evict or recover premises for reasons other than the “non-payment of rent or outgoings”) enure to the benefit of the landlord from 29 March 2020.  

118.     I have concluded that, on the basis of the legislation and authorities, there is a serious question for hearing as to the proposition that the right accruing to the tenant under regulations 9(2)–(3) of the Principal Regulations, however that right is to be construed, subsists in favour of the tenant, by reason of the tenant having complied with regulations 10(1) to (5) the Principal Regulations, and notwithstanding the promulgation of the Principal Regulations’ Amendments by which regulations 9(2)–(3) of the Principal Regulations were amended.

It appears that the tenant did not make an application for rent relief for the period 30 September 2020 to 31 December 2020, or for the period 1 January 2021 to 28 March 2021, so the decision only considers whether the moratorium created by the Principal Regulations survived the amendment of the Regulations and the Tribunal was not required to consider any further issues about retrospectivity of the CTRS Regulations or their extended application.

Sub-regs 9(2) and (3) were amended from 29 September 2020 to expressly limit the moratorium to the prevention of re-entry for non-payment of rent or outgoings, so the tenant’s argument does not arise after those amendments.

Secondly, the Tribunal held that the moratorium on re-entry in the Principal Regulations only applied to rent arrears and did not prevent re-entry for any other alleged default.

Reg 9 of the CTRS Regs states that:

9            Non-payment of rent during relevant period

(1)          A tenant under an eligible lease is not in breach of the eligible lease if they do not pay the amount of rent required to be paid under the eligible lease during the relevant period and only if they—

(a)          comply with regulation 10(1) to (5) during the relevant period; or

Note

A tenant under an eligible lease will also need to comply with regulation 10(1) to (5) during the relevant period every time they request rent relief in the circumstances provided for under regulation 11.

(b)          during the relevant period, pay an amount of rent in accordance with—

(i)           any variation to the eligible lease mentioned in regulation 10(6)(a); or

(ii)          any other agreement mentioned in regulation 10(6)(b).

Note

An eligible lease has effect subject to subregulation (1)—see section 17(1) of the Act.

(2)          A landlord under an eligible lease must not evict or attempt to evict a tenant under the eligible lease to whom subregulation (1) applies.

Penalty: 20 penalty units.

(3)          A landlord under an eligible lease must not re‑enter or otherwise recover, or attempt to re‑enter or otherwise recover, the premises under an eligible lease if the tenant under the eligible lease is a tenant to whom subregulation (1) applies.

Penalty: 20 penalty units.

The tenant argued that the literal meaning of sub-reg 9(2) and (3) means that a landlord is not entitled to terminate a lease for any reason, provided that the lease satisfies sub-reg 9(1).

The Tribunal rejected that construction of the lease as unarguable and provided the following reasons (emphasis added, footnote from original):

123.     The only act by a tenant of an eligible lease which would otherwise be a breach of the eligible lease, but in respect of which the tenant is expressly given statutory protection by regulation 9(1) is, therefore, the non-paying of rent otherwise required under an eligible lease. In my view, it follows that the preventing of a landlord from evicting a tenant or re-entering premises imposed by regulations 9(2) and 9(3) respectively extends only to the circumstance that a tenant has not paid the amount of rent required under an eligible lease. The proposition that the effect of regulation 9(2) and (3) is to extend, by implication, a statutory protection to a tenant against eviction and re-entry respectively in respect of all breaches of an eligible lease, whether it is in respect of the non-paying of rent or otherwise, is not in my view reasonably arguable. 

124.     I also consider that a literal construction of regulations 9(2) and (3), without reading it in the context to which I have referred would, in the case of a tenant of an eligible lease who, having complied with regulation 9(1) of the Principal Regulations, would obtain a statutory right not to be evicted for any other breach, no matter how gross or repugnant. I am of the view that a literal construction of regulations 9(2) and (3), as propounded by the tenant, would be modified so as to avoid that absurdity.[3]

125.     It follows, from my preferred construction of these provisions, that where a tenant pays the rent and outgoings required to be paid under an agreement pursuant to regulation 10(6)(b) of the Principal Regulations, but otherwise breaches a term of the lease for which eviction or re-entry is prescribed under the lease or allowed at law, there is no serious question to be tried as to whether regulations 9(2) or 9(3) of the Principal Regulations prevent eviction or re-entry consequent upon such breach. 

Thirdly, the Tribunal held that the tenant established a triable issue over whether the works alleged to be in breach of planning laws were the result of the tenant’s fitout or landlord’s works and that the landlord’s default notice failed to describe the alleged breaches with sufficient particularity.  

It is beyond the scope of this post to detail those arguments, but interested readers are referred to paragraphs [126] to [135] of the judgment.

Fourthly, the Tribunal held that the tenant had established an arguable case that the landlord was engaging in unconscionable conduct, stating that:

150.     It is plain from the evidence, therefore, that between 24 September 2020, when the landlord agreed in principle to the tenant adopting a course which may have achieved compliance with the Building Order and 14 October 2020, when the landlord serving the default notices, the landlord’s position towards the tenant had changed.

151.     The tenant contends that there is a serious question for hearing whether the real reason that the landlord wished to forfeit the lease was not primarily because of the reasons expressed in the default notices, but because it wished to rid itself of a tenant with whom Covid-19 rent relief negotiations had stalled, and because it latterly decided that it wished to repair the roof of the premises without giving the requisite notice six months’ notice under the lease. Given also the obligation on the landlord, implied at law, to do all things necessary on its part to enable the tenant to have the benefit of the lease,[4] I have concluded that there is a serious question to be tried whether such circumstances, if proved at the final hearing, is conduct that amounts to unconscionable conduct within the meaning of section 77 of the Retail Leases Act 2003, and within the meaning adopted by the Court of Appeal in Jams 2 Pty Ltd.

Summary.  The take-home points about the CTRS from this case are that the Tribunal held that:

  1. the prohibitions on re-entry in regs 9(2) and (3) of the Principal Regulations (ie the CTRS Regulations that were in force between 29 March 2020 and 29 September 2020) only prevent re-entry for non-payment of rent and do not prevent re-entry for other breaches;  and
  2. it is arguable that the moratorium on re-entry that accrued under the Principal Regulations is an accrued right that survives amendment of those regulations.

[1]        See Pearce and Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 8th ed, 2014) at [10.11].

[2]            See observations of Senior Member Forde’s in Filomeno Nominees Pty Ltd v Crown Group Pty Ltd (Building and Property) [2021] VCAT 81 at [30].

[3]        See Grey v Pearson (1857) 6 HLC 61 at 106; 10 ER 1216 at 1234 and Australian authorities referred to in Pearce and Geddes, Statutory Interpretation in Australia (Lexis Nexis Butterworths, 8th ed, 2014) at [2.4].

[4]            See Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1997) 144 CLR 596 at 602, 606–7, and cases referred to in Cheshire and Fifoot Law of Contract, (LexisNexis Butterworths, 11th ed (Australian), 2017) at [10.41].

February 9, 2021

0 Comments

And another thing…

… for those interested in the PS Market decision referred to in my last post, you can see another detailed discussion here: https://www.easternbridge.com.au/post/update-11-effects-of-covid-19-on-commercial-tenancies

… and for those interested in the C B Buffet decision from late last year, you can see another detailed discussion here: http://melbournepropertylaw.blogspot.com/2021/01/are-there-any-cases-about-victorian.html

As usual, I will try to forward copies of relevant material as it comes to hand.

February 9, 2021

0 Comments

Welcome back to 2021 and to two decision from VCAT about the CRTRS

Welcome back to everyone.  I hope you all had a good break and that 2021 is as interesting as 2020 – but hopefully less stressful!

Since my last post there have been two new cases from VCAT considering application of the CTRS.  The short points are:

  1. in PS Market Pty Ltd v Brijcam Nominees Pty Ltd (Building and Property) [2020] VCAT 1468 Member Kincaid held that a tenant was not entitled to protection from re-entry under Reg 9 of the CTRS Regulations because the tenant was not entitled to JobKeeper and, in those circumstances, it was not unconscionable conduct for the landlord to refuse to provide rent relief;  and
  2. in Filomeno Nominees Pty Ltd v Crown Group Pty Ltd (Building and Property) [2021] VCAT 81, Senior Member Forde held that the tenant was not entitled to protection from re-entry under reg 9 of the CTRS Regs because it had not made an application for rent relief that complied with the requirement of Reg 10(2).

The cases are discussed in more detail below.

PS Market Pty Ltd v Brijcam Nominees Pty Ltd (Building and Property) [2020] VCAT 1468

Member Kincaid at VCAT published reasons on 24 December 2020 refusing to grant an injunction to a tenant that was not entitled to Jobkeeper, and accordingly was not entitled to rent relief under the CTRS.  The tenant also argued that it was unconscionable not to be given rent relief. 

In refusing the application, the Member made three important findings.

First, the tenant itself was not an employer of staff in the relevant business.  In this case, the tenant was a member of a group of companies and staff were employed by the tenant’s parent company.  

This is an issue that seems to have come up in quite a few CTRS negotiations and there are a number of possible ‘work-arounds’.  

In this case, the Tribunal considered and rejected two of the possible arguments as follows:

43        I take one of his submissions during argument to the effect that if another entity (in this case, the alleged parent company14) in a group of companies of which a tenant is part is entitled to a jobkeeper payment under section 6 of the Jobkeeper Rules, then the tenant should, in effect, be regarded as being entitled to a jobkeeper payment under section 6 of the Jobkeeper Rules. I cannot accede to this argument, having regard to the plain meaning of the words of Regulation 4A of the Amended Regulations and Section 6 of the Jobkeeper Rules, which make it clear that it is the relevant tenant that it is required to be the entity, as an employer, entitled under Section 6 to a jobkeeper payment.

44        Mr Levine’s written submissions also rely on Section 6(b) of the Jobkeeper Rules, stating that the applicant also “qualifies for the jobkeeper scheme at or before the end of the fortnight” within the meaning of section 6(b) of the Jobkeeper Rules because the applicant has satisfied the decline in turnover test at or before the relevant time within the meaning of Section 7(1)(b) of the Jobkeeper Rules. He submitted that the decline in turnover is in the current circumstances assessed on a group basis pursuant to the provisions of section 8A of the Jobkeeper Rules. I reject this argument. Section 8A simply provides a modified test for assessing the relevant decline in turnover required by Section 7(b) of the Jobkeeper Rules in order to qualify for the jobkeeper scheme within the meaning of section 6(b) of the Jobkeeper Rules.

Secondly, the Tribunal also considered an argument that the tenant was an eligible business participant and rejected that argument because of difficulties in the tenant’s affidavit material (see paragraphs [53] to [60] of the Tribunal’s reasons).

Thirdly, the tenant argued that it was unconscionable for the landlord to refuse to provide rent relief during the pandemic, even if the Code and the CTRS did not strictly apply.  The argument was put on the following basis:

69        The applicant submits that the Notice of Default was served in breach of the standards of behaviour established by the Code of Conduct and the Covid-19 legislation promulgated, it is submitted, in order for parties to all commercial leases to work together in an unprecedented crisis caused by the Covid-19 pandemic, and has thereby engaged in conduct that is unconscionable. It also submits that the respondent has acted unconscionably in failing to recognise the damage that will be caused to the tenant and “its related group entities” by re-entry, when “the respondent itself will be able to avail itself of relief from statutory charges and mortgage payments”.

70        The applicant also submits that the Code of Conduct is an “applicable industry code” within the meaning of Section 77(2)(g) of the RLA providing a set of principles to which regard should be had when evaluating whether there has been unconscionable conduct on the part of the respondent.

The Tribunal rejected these arguments, holding that:

71        The Code of Conduct states:

This Code comes into effect in all states and territories from a date following 3 April 2020 (being the date that National Cabinet agreed to a set of principles to guide the Code to govern commercial tenancies as affected by the COVID-19 pandemic) to be defined by each jurisdiction, for the period during which the Commonwealth JobKeeper programme remains operational (emphasis added).

72        The proposition that notwithstanding that the tenant was in substantial arrears in respect of rent from 1 April 2020, and there being no serious question as to its not being entitled under the Covid-19 legislation to rent relief, the respondent was acting unconscionably by serving the Notice of Default cannot, without more, be sustained. I find on the evidence that there is no serious question to be tried concerning the alleged unconscionable conduct of the respondent in serving the Notice of Default.

I make the following observations about this decision:

  1. the tenant’s case that it is has eligible lease under the CTRS because it is an eligible business participant in Jobkeeper was rejected largely because of shortcomings in the tenant’s affidavit material.  Consequently, we will need to wait for another case to find out the Tribunal’s view on whether a business participant in Jobkeeper is entitled to rent relief; 
  2. it is well-established that a lease may be granted to the agent of an undisclosed principal.  Arguments about agency are being used in many CTRS cases in response to perceived problems with eligibility.  So far as I am aware, the role of agency principles in the CTRS is yet to be considered in any cases;  and
  3. I am aware of a number of tenants pressing arguments that it is unconscionable to deny relief to a tenant whose lease is not eligible under the CTRS, so the effect of the third finding is likely to be significant.  However, a decision of a VCAT member is not binding, so I suspect that we may see that argument arising again in the not-too-distant future.

Filomeno Nominees Pty Ltd v Crown Group Pty Ltd (Building and Property) [2021] VCAT 81

In this case the tenant had not paid rent or outgoings since 1 April 2020.  The landlord served a notice of default alleging non-payment of rent on 30 September 2020 and re-entered the leased premises on 9 October 2020.

The tenant sought an injunction to restore its possession of the premises, arguing that it was entitled to protection from eviction under Reg 9 of the CTRS Regulations.  

The tenant relied at the hearing on three different requests for rent relief.  

Most readers will recall that Regs 10(1) and (2) of the first version of the CTRS Regulations state that:

(1)       A tenant under an eligible lease may request rent relief from the landlord under the eligible lease.

(2)       A request under subregulation (1) must be in writing and be accompanied by—

(a)       a statement by the tenant that the tenant’s lease is an eligible lease and the lease is not excluded from the operation of these Regulations under section 13(3) of the Act; and

(b)       information that evidences that the tenant—

(i)        is an SME entity; and

(ii)       qualifies for, and is a participant in, the jobkeeper scheme.

Most readers will also recall that Reg 10(2) was substantially amended when the CTRS Regulations were amended on 29 September 2020.  

Each of the requests for rent relief considered by the Tribunal were made before the second version of the CTRS Regulations were published, so the Tribunal considered whether the requests complied with the original version of Reg 10(2).

One argument that has been in circulation is that the September 2020 version of the CTRS Regs have retrospective effect because the amended Regs appeal, on their face, to have a start date of 29 March 2020.  That argument always had difficulties.  Senior Member Forde made the following remarks about that argument:

[30]     The effect of the commencement date in reg 3, being 29 March 2020, is to make the operation of the amendments to the Regulations seemingly retrospective. It is impossible for a tenant to comply with the requirements of the amended reg 10 before they were introduced in September 2020. It would defeat the purpose of the legislation if tenants who complied with the original regulations were defeated of the protection afforded by the Regulations for not complying with the Amending Regulations. To do so would take away existing rights. 

After considering the evidence in detail, the Tribunal made the following findings:

[61]     At no time before the 30 September 2020 Notice of Default was issued and Filomeno re-entered possession of the premises on 9 October 2020 had Crown Group made a request for rent relief which complied with reg 10. 

[62]     Crown Group did not: 

a.         a accompany any of its requests with a statement that its lease is an eligible lease and not excluded from the operation of the Act; 

b.         provide information that evidences it is a SME entity; or 

c.         provide information that evidences it qualifies for and is a participant in the Jobkeeper scheme. 

[63]     At no time on the evidence before the Tribunal did Crown Group made a request for rent relief which complied with the amended reg 10. 

[64]     Crown Group did not: 

a.         accompany any request with a statement that its lease is an eligible lease and not excluded from the operation of the Regulations; 

b.         provide a statement setting out its decline in turnover that is associated with the premises; 

c.         provide information that evidences it is a SME entity; or 

d.         provide information that evidences it is an entity entitled to Jobkeeper payments in compliance with reg 10(2)(b)(ii). 

[65]     The protection afforded by reg 9 is dependent upon compliance with reg 10. 

I make the following observations about this case:

  1. practitioners should expect the Tribunal to require strict compliance with Reg 10(2) before the tenant is entitled to protection from re-entry;  and
  2. the amendments to the CTRS Regs on 29 September 2020 do not appear to have retrospective effect.

Finally, there is an interesting question about whether a tenant who has not made a request for rent relief (or has not made a compliant request) can make a request now that has retrospective effect back to 29 March 2020.  The first version of the CTRS Regs clearly contemplated requests for rent relief with retrospective effect because the Regs were published on 1 May 2020 but provided for rent relief from 29 March 2020.  However, neither this case nor any other case of which I am aware, consider whether:

  1. the amendments to the CTRS Regs prevent a new request for rent relief to be made with retrospective effect; or 
  2. the right to make a retrospective request under the first version of the Regs is an accrued right that is protected by s 28 of the Interpretation of Legislation Act 1958 (Vic).  

We may need to wait for more litigation to determine that question!

December 28, 2020

0 Comments

More information on the extended CTRS … and farewell for the year 2020 …

The amendments to the CTRS Regs that came into effect last week are small in number and most of the procedures will be familiar to most readers by now.  However, there are a couple of things about the CTRS Regs 3.0 that are worth noting.

First, a consolidated version of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) reflecting the amendments as at 22 December 2020 is now available on the Victorian Government website here: https://content.legislation.vic.gov.au/sites/default/files/2020-12/20-31sra003%20authorised.pdf

Thanks to Gary Prince for sending that link to me this afternoon.

Secondly, the OSBC’s website has been updated to reflect the CTRS Regs 3.0. 

The OSBC’s FAQs are available here: https://www.vsbc.vic.gov.au/fact-sheets-and-resources/faqs/#commercial-tenancy-relief-scheme-support-for-tenants-and-landlords-in-response-to-coronavirus-covid-19-faqs

The website contains the basic information that landlords and tenants require when dealing with a request for further rent relief.

I believe the OSBC’s website also has an updated precedent letter for requesting rent relief for the period 1 January 2021 to 28 March 2021 that tenants can use to expedite the process.

Thirdly, there is an argument that a request for rent relief made on or before 31 December 2020 allows a tenant to seek rent relief based on its figures from the last completed quarter (ie the quarter ending September 2020).  For many tenants, those figures will show a greater downturn than trade figures over the quarter ending December 2020.  However, the argument is not available if tenants make the request on or after 1 January 2021 and a request made on or after 1 January 2021 would be based on December quarter figures.

The argument has not been tested yet, and questions of statutory interpretation like this are notoriously difficult.  However, it would be prudent for a tenant to make an application now to at least leave the argument open.

Fourthly, as with the second version of the CTRS Regulations, a request for rent relief for the period ending 28 March 2021 only gives the tenant an entitlement to rent relief from the date of the request – it does not operate retrospectively.  Consequently, if the tenant makes a request on 15 January 2021, the tenant is only entitled to rent relief from 15 January to 28 March 2021, not from 1 January 2021.  Again, this is a good reason for tenants to make their request for rent relief before the end of the year (or as early as possible in 2021).

Finally, I would like to thank all of my subscribers for your support over the last hair-raising year.  Special thanks go to Justice Croft, to Alan Wein (mediator and retail guru), to Mark Schramm (from the Office of the Small business Commission) and to Jamie Bedelis, Malwina Peacock, Paul Nunan and Peter Lowenstern (all from the Law Institute of Victoria’s Leases Committee), who have been an amazing source of information and discussion as the law has emerged and evolved this year.  I’m sure we are all looking forward to a much calmer and more stable 2021.  

Happy New Year everyone!

December 22, 2020

0 Comments

CRTS extension has been gazetted and published

The new regulations extending the CTRS to 28 March 2021 have now been published and gazetted.

A copy of the new regulations is available here:

The Gazette entry is available here: http://www.gazette.vic.gov.au/gazette/Gazettes2020/GG2020S687.pdf

The new regulations appear to simply amend the end date of the existing regulations from 31 December 2020 to 28 March 2020.

It might take a few days to work through any kinks that arise as a result of the amendments and I will post anything as and when it comes to hand.

For now, I think it would be prudent for tenants who are still tenants of eligible leases to make a fresh request for rent relief from their landlords for the period 1 January 2021 to 28 March 2021 before the year end, bearing in mind that:

1. the tenant’s previous request probably only applies to the period ending 31 December 2020; and

2. applications under the current version of the regulations only operate from the date the request is made.

Another issue is whether the tenant’s application for rent relief for the period 1 January 2021 to 28 March 2021 needs to be based on its financials for the quarter ending 31 December 2020 or whether the tenant can rely on the previous quarter’s financials. The amendments have only just been published, so I haven’t had a chance to work through that yet – and the kids need dinner! I will post something about this as soon as I get a chance to work through the amendments more fully.

In the meantime, given the proximity to Christmas, it might be worthwhile for tenants of eligible leases to contact their accountants tomorrow and request an expedited set of December 2020 quarter financials, just in case…

Thanks to Mark Schramm for alerting me to the Regs being passed.

December 11, 2020

0 Comments

Breaking news – the CTRS in Victoria is to be extended…

The following was posted on the Minister Pulford’s Facebook page about an hour or two ago (emphasis added):

So many small businesses have done an amazing job to get through a tough year – and they’re looking to a strong recovery and a very different 2021.

We’ve been proud to stand with businesses and our support does not end with the closing of 2020.

The existing Commercial Tenancy Relief Scheme will be extended to provide support for small businesses that need it – to 28 March 2021 and in line with the Mandatory Code agreed by National Cabinet.

That means freezes on rent increases and bans on evictions for eligible small businesses that have requested rent relief will continue until that date.

Commercial landlords are required to provide rent relief in proportion to the tenant’s fall in turnover while the Victorian Small Business Commission is on hand to provide free mediation to resolve disputes.

Support for landlords will also be extended.
Commercial tenants and landlords can get more information at vsbc.vic.gov.au

The Ministers Facebook page is here: https://www.facebook.com/JaalaPulfordMP/

I will post more details as they come to hand.

December 3, 2020

0 Comments

Materials on COVID-19 and residential tenancies in Victoria

My good friends David Lloyd, Bill Rimmer and Antony Berger have recently presented an online CPD through Greens List about COVID-19 and residential tenancies.

Attached to this post is a copy of their excellent paper and PowerPoint presentation that readers of this blog might find useful.

I expect that a video recording of their CPD will soon be posted on Greens List’s website (see https://www.greenslist.com.au/CPD-Online-Library).

November 5, 2020

0 Comments

First VCAT decision about the CTRS…

The first decision that I have seen from VCAT about the CTRS has been published today. The facts are very similar in substance to the Sneakerboy case.

The tenant operates a Chinese buffet restaurant and its trade was adversely affected by COVID-19 as early as January 2020. It fell into rent arrears and the landlord terminated the lease for non-payment of rent on 27 March 2020.

The tenant argued that the lease was an eligible lease under the CTRS and that it was protected from re-entry by reg 9 of the Regulations. Member Kincaid rejected that argument to the basis that the lease was terminated on 27 March 2020 and the CTRS was not in effect at that time, so could not have prohibited the re-entry.

In the alternative, the tenant sought relief from forfeiture. The tenant argued that relief from forfeiture should take into account the tenant’s entitlement to rent relief under the CTRS. However, Member Kincaid rejected that argument and required the tenant to pay all rent payable under the lease as a condition of the grant of relief from forfeiture, holding that (omitting footnotes):

72.      I accept the evidence of the applicant’s director Mr Chi to the effect that the applicant is enrolled in the JobKeeper Scheme, and that Mr Chi is an “eligible business participant” engaged in the business of the applicant and entitled to receipt of the Jobkeeper payment. I also accept for present purposes that the applicant qualifies for the JobKeeper Scheme, as “carrying on business” in Australia on 1 March 2020 notwithstanding the respondent having taken possession of the premises on 27 February 2020.

73.      However, in regard to the applicant’s obligation to pay rent and other amounts in arrears as a condition of the granting of relief against forfeiture, I find that there is no serious question as to whether the applicant is entitled to take advantage of the rent relief provisions contained in the Covid-19 legislation. I accept the respondent’s submission that the lease is not an “eligible lease” within the meaning of section 13 of the Act because, for the reasons I have found, there is no serious question as to whether it was in effect on 29 March 2020. The applicant will therefore not, in my view, be entitled to any rent relief or relief from and liabilities under the Covid-19 legislation. 

Unfortunately, it appears that Member Kincaid’s attention was not drawn to the Sneakerboy decision, discussed here, in which Robb J in the NSW Supreme Court held that the grant of relief from forfeiture revives the lease and that the tenant whose lease is terminated before the Code was published is still entitled to rent relief over the period after termination but before relief from forfeiture is granted.

A copy of VCAT’s decision is available here: