COVID-19 | VIC Government introduces new legislation to regulate commercial leasing arrangements during the COVID-19 pandemic

Following the Mandatory Code of Conduct released by the National Cabinet on 7 April 2020 (Code), the Victorian Parliament passed the COVID-19 Omnibus (Emergency Measures) Bill 2020 (Vic) (COVID-19 Bill) to introduce a range of temporary measures to provide urgent relief for commercial tenants in response to the COVID-19 pandemic.  It also contains provisions for residential tenancies and amendments to other Victorian property legislation to allow key functions to continue in an online environment, such as planning applications and local council meetings.

Once the COVID-19 Bill becomes law, the Governor in Council, on recommendation from the Minister for Small Business, can make regulations which:

• prohibit the termination of an eligible lease;
• extend the term of an eligible lease;
• imply terms into an eligible lease;
• modify the operation of an eligible lease or a related agreement;
• impose new obligations on landlords or tenants under an eligible lease;
• change any period under an eligible lease in which someone must or may do something;
• change or limit any other right of a landlord under an eligible lease or a related agreement;
• exempt a landlord or tenant under an eligible lease from having to comply with an eligible lease; and
• set out a mechanism for resolution of any disputes between landlords and tenants relating to those regulations.

The Minister’s broad power to recommend regulations is limited to only those regulations that the Minister considers reasonably necessary for responding to the COVID-19 pandemic.

When announcing the COVID-19 Bill, the government has said that the regulations to be adopted in Victoria were intended to implement the Code.  However, at this time, it is unclear how closely the regulations will follow the Code.

Which tenancies will the COVID-19 Bill apply to?

The regulations will only apply to:

• a lease of retail premises within the meaning of the Retail Leases Act 2003 (Vic) (Retail Legislation); or
• a commercial lease under which the premises are let for the sole or predominant purpose of carrying on a business at the premises (commercial lease); or
• a commercial licence under which a person has the right to occupy, non-exclusively, a part of premises for the sole or predominant purpose of carrying on a business at those premises (commercial licence),

that is:

• in effect on the day the first regulations made come into operation; and
• a tenant/licensee who is an SME entity (being an annual turnover which is likely to be less than $50million) and an employer who qualifies for the JobKeeper scheme and is a participant in the JobKeeper scheme.

When will the COVID-19 Bill come into effect?

The COVID-19 Bill is currently awaiting Royal Assent and will come into effect once the COVID-19 Bill is signed by the Governor.

Once the COVID-19 Bill becomes the law, the emergency period is backdated to commence on 29 March 2020 and continues for a period of 6 months until 29 September 2020.

Resolving disputes

Where landlords and tenants of an eligible lease are unable to reach agreement, the COVID-19 Bill permits the making of regulations for the resolution of those disputes which may include requiring the parties to participate in a mediation arranged by the Small Business Commission.

Going forward

The regulations are yet to be released and are not expected to be introduced until next month.  As the regulations will set out rent relief and other key aspects from the Code, both landlords and tenants should keep an eye out for our further updates on this issue.

For details of all our COVID-19 tips and updates, visit the Gadens COVID-19 Hub.

Authored by:

Shanna Livingstone, Special Counsel
Michael Mercier, Associate