August 4, 2020

0 Comments

Stage 4 lockdown social distancing gazette entry

Readers might also be interested in the Victorian Government Gazette entry for stage 4 social distancing rules.

This is the Gazette entry for the social distancing measures that were announced by the Premier on Sunday (ie stage 4 social distancing, 5km rule, etc), not the Gazette entry that records yesterday’s announcement of business closures.

I expect that the Gazette entry for business closures will be published either today or tomorrow and I will post a copy as soon as I see it.

Thanks to my friend and colleague Peter Lowenstern for forwarding this to me.

August 3, 2020

0 Comments

Details about stage 4 lockdowns

The main issue that comes out of today’s announcements is the question of which industries must close, which can open and which can continue with restricted operations.

For those trying to work this out, you might want to have a look at this link to the Premier’s website that contains:

  1. the Premier’s press statement on business restrictions;  and 
  2. a link to a table detailing the restrictions (a copy of which is available by clicking on the button below).

The table contains a detailed list of the restrictions that apply to each industry and then to each sector within the industry.  However, I suggest that you read the Premier’s statement first, then review the table.

Practitioners should also be aware that the Government has set up an Industry Coordination Centre within the Department of Jobs, Precincts and Regions to consider cases that do not fit neatly into the categories in the Premier’s three list and the attached table.  I couldn’t find reference to the Centre on the website for the Department of Jobs, Precincts and Regions, but I expect that it will go up in the next day or so.  Please send me a link or post it in the comments section below if you find it.

Some extracts of the Premier’s statement relevant to leasing lawyers are as follows (emphasis added):

Today I can announce three lists that will apply during Stage 4 restrictions.

First: supermarkets, grocery stores, bottle shops, pharmacies, petrol stations, banks, newsagencies, post offices —plus everyone involved in our frontline response — will continue to operate.

Second: Industries where onsite operations will have to cease for the next six weeks including retail, some manufacturing and administration. These businesses will all need to close by 11:59pm Wednesday 5 August, unless they have specific circumstances that mean they need longer to shutdown safely.

Retail stores will be permitted to operate contactless ‘click and collect’ and delivery services with strict safety protocols in place, and hardware stores can remain open onsite, but for tradespeople only.

The third and final list is made up of industries that are permitted to operate — but under significantly different conditions.

All open businesses and services will have until 11:59pm Friday 7 August to enact a COVIDSafe plan focused on safety, prevention and response in the event that coronavirus is linked to the workplace — because beating this virus requires a rapid response wherever it rears its head.

In industries that can’t close, but where we’ve seen a number of cases or emerging new risks, we’ll be making some big changes to make these workplaces safer — for workers and for their families.

That includes mandated reductions to the number of workers onsite. In the meat industry — and based on the minimum required to operate safely onsite — the workforce will be scaled back to two-thirds. Unlike other changes, and recognising the risk these sites have posed here and around the world, this will apply to abattoirs in Melbourne and across the state.

Warehousing and distribution centres in Melbourne will be limited to no more than two-thirds the normal workforce allowed onsite at any one time.

Our construction sector, the lifeblood of our economy, will also move to pilot light levels. This will allow the industry to keep ticking — while also making sure we limit the number of people onsite.

For major construction sites, that means the absolute minimum required for safety — but no more than 25 per cent of the normal workforce onsite. Small-scale construction will be limited to a maximum of five people onsite.

These workplaces that are continuing to operate will also have additional requirements including extra PPE, staggering shifts, staggering breaks, health declarations and more support for sick workers to ensure they stay home.

And for those businesses and industries that fall into grey areas when it comes to their operation, the dedicated Industry Coordination Centre within the Department of Jobs, Precincts and Regions will consider their cas

August 3, 2020

0 Comments

Lockdown Mark 2, stage 4 and the CTRS

In 48 hours of announcements that just seemed to get worse and worse, the ever-diligent young property barrister Callum Dawlings caught the Premier’s only reference to the CTRS in light of Lockdown Mark 2.  

In answer to a question about the Government’s tenancy protections, the Premier was heard to say:

‘We will have more to say about tenancies soon.’

So you should expect to hear something soon. Watch this space and I will post anything I hear about changes to the CTRS as soon as it comes to hand.

July 19, 2020

0 Comments

Lockdown mark 2 …

Hi all and welcome to lockdown mark 2.

I am not yet aware of any new measures for landlords and tenants coming out of the second wave of this awful pandemic.  Practitioners already operating in this area should be familiar by now with the basic layout of the Commercial Tenancy Relief Scheme and the materials that are available.

However, with the new lockdowns there are likely to be more tenants seeking rent relief and more practitioners being asked to help their clients through this process.

As a reminder for those already practicing in the area, and to assist those who are just entering the fray, the basic materials consist of:

  1. The National Cabinet Mandatory Code of Conduct.
  2. Part 2.2 of the COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic).
  3. The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic).
  4. The Ministerial policy guideline titled Victoria’s commercial tenancies relief scheme: Policy guidance on eligible participants and documentation requirements.
  5. The Office of the Small Business Commission’s FAQ’s, which are being regularly updated as the situation evolves.

Also, a link to a CPD and paper that I presented to the LIV outlining the scheme and some of the issues associated with it is available here.

This blog is Victorian-based, so takes a Victorian perspective on these issues.  However, the lawyers at Minter Ellison have published an excellent compendium of Victorian and  interstate legislation that gives effect to the Code, available here.

There is only one part of the Regulations that I want to highlight at this stage, and that’s reg 11, which states that:

(1)  If the financial circumstances of a tenant under an eligible lease materially change after a variation to the eligible lease has been made or an agreement has been reached as mentioned in regulation 10(6)—

(a)  the tenant may make a further request to the landlord under that lease for rent relief under regulation 10;  and

(b)  subject to subregulation (2), the landlord and the tenant must follow the process set out in regulation 10 in relation to that request.

(2)  A landlord’s offer of rent relief need not comply with regulation 10(4)(b).

Note

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

The upshot is that:

  1. a tenant who has already reached agreement about rent relief with their landlord can start the process again and request more rent relief if their financial circumstances materially change;
  2. the process is the same as previously, save that the landlord is not required under regulation 10(4)(b) to provide a minimum level of rent relief by way of waiver, suggesting that further deferrals are expected (if warranted in the circumstances);  and
  3. the Regulations do not provide any guidance on what is a ‘material change’ in the tenant’s financial circumstances.  Practitioners should expect to hear more about this in the coming weeks.

As usual, I will try to update everyone on developments as they occur.

June 19, 2020

0 Comments

Retail Leases Amendment Bill 2019 passed though the lower house and tabled before the upper house

Remember the Retail Leases Act 2003 (Vic)?  We used to talk about it a lot in the good old days …

… anyway, reminiscing aside, in a welcome break from all things COVID-19 in the world of commercial and retail tenancies, the Retail Leases Amendment Bill 2019 (Vic) passed the lower house of Victorian Parliament on 4 June 2020 and was introduced into the upper house on the same day.

I am reliably informed that the bill has been tabled for debate in the upper house over the last few days, but is yet to be reached.

To refresh your memories, the Bill is intended to amend the RLA 2003 as follows:

(i)  to clarify the obligations of landlords and tenants under retail premises leases in respect of essential safety measures; and

(ii)  to require landlords to give information to tenants under retail premises leases in a more timely manner; and

(iii)  to clarify the timeframe within which landlords must return security deposits to tenants under retail premises leases; and

(iv)  to create a new early rent review process for tenants under retail premises leases; and

(v)  to establish a cooling off period for the renewal of retail premises leases in certain circumstances.

For further discussion, refer to my earlier post here: https://samhopperbarrister.com/2019/10/30/retail-leases-amendment-bill-2019-tabled-before-parliament/ 

For the real lease-nerds:

Thanks to Peter Lowenstern for letting me know of the Bill’s progress.

June 19, 2020

0 Comments

Webinar: The Impact of COVID-19 on the Legal Obligations of Parties in Property Transactions

On 2 June 2020 I presented a seminar on the Code, the Act and the Regulations for the LIV that has been made available to subscribers to this blog.

My colleague David Lloyd also spoke about the impact of COVID-19 on other real estate transactions, so you guys might be interested that too.

I have attached a link to the video stream and attached a copy of the materials from the presentation as well.

Unfortunately, something went wrong with the first 10 minutes or so of recording.  If you want to watch the presentation, I suggest that you read some of my materials first.  My note start at p 12 of the attached materials and my presentation follows the order of those notes.  The video stream starts when I am at around paragraph 9(d), so I suggest you read paragraphs 1 to 9(d) or so before you start watching the video so that you have some idea of the parts of the presentation that are missed from the recording. (I have highlighted paras 1 to 9(d) in the copy of the materials below to make it easier for you.)

The video stream is available here:

The Impact of COVID-19 on the Legal Obligations of Parties in Property Transactions

Password: LIVCPDP2020!

The materials are here: Materials LIV CPD 2 June 2020

June 12, 2020

0 Comments

Victorian Government guidance on the Code, the Act and the Regulations (a.k.a. the CTRS)

The Victorian Government has published a guidance note that addresses some of the key areas of debate arising out of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Regulations) and the Act and Code that preceded it.

A copy of Victoria’s commercial tenancies relief scheme: Policy guidance on eligible participants and documentation requirements is available here: Guideline.

It is a mercifully short document, so practitioners should take the time to read it in full.

My preliminary comments on the Guideline are:

  • The Code, the Act and the Regulations are referred to as the Commercial Tenancy Relief Scheme (CTRS).  Expect to see this terminology used frequently in the coming months.
  • It is unclear what weight will be given to the Guideline.  It is not a Parliamentary document and post-dates the CTRS.  However, it is published by the Victorian Government and has clear statements of the Government’s intentions with respect to the CTRS and is published only a few weeks after the Regulations were provided.  Consequently, I think it is prudent to assume that it will be taken into account by the Courts or VCAT in cases applying the CTRS.

On the question of how much information the tenant must or should provide to its landlord under the CTRS, the Guideline says:

  • The Victorian Government considers excessive requests for documentation to verify financial positions are not in keeping with the spirit of the Code.  Requests for information should be kept to a minimum to avoid imposing additional burden on tenants that might already be in financial distress.
  • A commercial tenant may provide one of the following documents for the purpose of demonstrating the reduction in their financial circumstances and their capacity to meet payments for a nominated period:
    • information extracted from an accounting system, such as the current cashflow statement
    • information extracted from a Business Activity Statement (BAS)
    • information provided to a financial institution.
  • The tenant can choose to provide further documentation if they feel this would assist their request for rent relief.
  • It is not considered necessary for landlords to request the following documents from tenants to demonstrate a reduction in turnover:
    • financial information for periods other than the ‘relevant period’ being the period nominated by the tenant as the period for a reduction in turnover
    • future cash flow projections
    • balance sheets, profit and loss, year to date financials
    • bank balance details
    • requiring the financial information to be verified, examined, assured or audited by a third party such as an accountant
    • requiring the financial information be provided by an accountant.
  • … it is not the intent of the Victorian Government that tenants be required to engage third parties to provide or verify information.

On the question of how much rent relief should be offered by a landlord, the Guideline says:

  • There is an expectation that rent relief should be provided in proportion to the decline in the tenant’s turnover. When determining the amount of rent relief to be provided, all of the circumstances of the lease should be considered, including the landlord’s and tenant’s individual financial circumstances.

Importantly, the Guideline also introduces an expectation that landlords provide financial information to tenants in some circumstances, stating that:

  • If a landlord offers rent relief that is not in proportion to the tenant’s decline in financial circumstances, the landlord should provide documentation of their financial position to the tenant to justify the amount of rent relief offered.

These last two statements suggest that the decline in the tenant’s turnover is the primary consideration for the landlord when considering the amount of rent relief offered to a tenant.

Other highlights of the Guideline are:

  • … the Code does not draw a distinction between businesses that have had to cease operating or change their operations directly as a result of a directive from the Chief Health Officer, or those which might have done so on a voluntary basis due to impacts of the coronavirus (COVID-19) pandemic.
  • … landlords should not base offers for rent relief on whether the business made the voluntary decision to reduce operating hours or close as a result of coronavirus (COVID-19) restrictions. Offers should be based on the financial information provided by the tenant.
  • Non-employing sole traders are eligible businesses under the Commercial Tenancies Relief Scheme (CTRS).
  • The CTRS applies to franchises at the franchisee level with a turnover up to $50 million and are participating in the JobKeeper payment scheme.
  • Payments that a tenant receives from their participation in the JobKeeper scheme should not be included in turnover calculations to determine the proportion of rent.
  • If a tenant’s financial circumstances deteriorate after an agreement has been made, Regulation 11 allows for the tenant to make a further request to a landlord for additional rent relief.  If a tenant’s business improves during the coronavirus (COVID-19) pandemic, it is not the Government’s intent that a new negotiation is required.

May 15, 2020

0 Comments

Small Business Commission FAQs about the Regulations published

The Victorian Small Business Commission has published a FAQ guideline on the operation of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic).

The Commission’s FAQs are available here: https://www.vsbc.vic.gov.au/fact-sheets-and-resources/faqs/

The FAQs address many the important questions that practitioners are asking about the Regulations.  All practitioners dealing with applications for rent relief (whether for a landlord or a tenant) should be familiar with the FAQs and should consider providing them to their clients.

A lot of practitioners have been asking what information a tenant must provide to their landlord in their application for rent relief.  The FAQs contain the following questions and answers:

What turnover information is appropriate for a landlord to request from the tenant to help inform their offer of rent relief?

A landlord can ask the tenant for information:

      • extracted from an accounting system
      • extracted from BAS
      • provided to a financial institution.

What turnover information is not appropriate for a landlord to request from a tenant to help inform their offer of rent relief?

A landlord should not:

      • request future cash flow projections
      • request balance sheets, profit and loss or year to date financials
      • request the tenant’s bank balance
      • require the financial information to be verified, examined, assured, audited or provided by a third party such as an accountant
      • require an accountant to provide a letter of comfort or similar on the financial information.

The answers to those questions provide useful guidance on what information is expected to be provided.  However, a tenant may choose to provide more information if it wants to.  The decision about whether to provide more information and, if so, what information to provide is a difficult one that needs to be assessed on a case-by-case basis.  Experienced lawyers can provide valuable advice to their clients by guiding them through the difficult decisions that their client’s need to make.

May 11, 2020

0 Comments

Update on the new Regulations – landlord’s requirement to offer an extension of the lease term under the Regulations

In an earlier note I suggested that the landlord needs to offer to its tenant an extension of the lease term by up to 24 months.  However, it has been pointed out to me that the extension that the landlord needs to offer may be less than that.

Regulation 13 states that (emphasis added):

Extension of the term

(2)       If the payment of any rent is deferred by variation of an eligible lease or an agreement mentioned under regulation 10(6), the landlord under the eligible lease must offer the tenant under the eligible lease an extension to the term of their eligible lease on the same terms and conditions that applied under the eligible lease before the commencement of these Regulations.

(3)       The extension offered under subregulation (2) must be equivalent to the period for which rent is deferred, unless a landlord and a tenant agree in writing that this regulation does not apply to their eligible lease.

Regulation 16 states that:

Payment of deferred rent

(2)       If any rent is deferred by variation to the eligible lease or an agreement as mentioned under regulation 10(6)—

(b)       a landlord and tenant must vary the eligible lease or otherwise agree so that tenant must pay the deferred rent to the landlord amortised over the greater of—

(i)         the balance of the term of the eligible lease, including any extension to that term, as provided under regulation 13 or otherwise; and

(ii)        a period of no less than 24 months.

The issue is what is meant by the phrase ‘the period for which the rent is deferred’.  The better view is probably that the period for which the rent is deferred is the deferral period (ie the period during which the rent is not paid), not the repayment period.  Consequently, if the rent is deferred over a six month period but repayable over a 24 month period, the tenant is entitled to an extra six months in its lease term.

Consider this example:

  1. The tenant has a lease that expires on 30 June 2023.
  2. Landlord and tenant agree on 70% rent relief for the six months of the Regulations (half of which is deferred), with the deferred rent being payable by equal monthly instalments from 30 September 2020 until 30 June 2023.
  3. Under reg 13, the landlord must offer to the tenant an extra six months on its lease term, extending the term until 31 December 2023.
  4. The deferred rent is payable by 31 December See regulation 16(2)(b)(i).

Also, consider this example:

  1. The tenant has a lease that expires on 31 December 2020.
  2. Landlord and tenant agree on 70% rent relief for the six months of the Regulations (half of which is deferred), with the deferred rent being payable by equal monthly instalments from 30 September 2020.
  3. Under reg 13, the tenant must be offered an extension of its lease by six months, being an extension to 30 June 2021.
  4. Under reg 16(2)(b), the tenant has until 30 September 2022 to repay the deferred rent.

The second example means a tenant still paying the deferred rent after the lease has ended (see reg 16(2)(b)).

Thanks to Mark Schramm from the Small Business Commission for his assistance, and to Abilene Singh and Jamie Bedelis.