Victoria’s COVID-19 Omnibus (Emergency Measures) Bill 2020 - Commercial/Retail landlords and tenants

In brief - Purpose of the Bill is to provide a response to the COVID-19 pandemic, including for "eligible" retail and non-retail commercial leases and licences

On 23 April 2020, the Victorian Government passed the COVID-19 Omnibus (Emergency Measures) Bill 2020. 

In addition to defining what constitutes an "eligible lease", the Bill provides for: 

• regulations to be made in respect of eligible leases, including regulating the rights and obligations of landlords and tenants

• the functions and powers of the Small Business Commission in relation to the connection to the Bill and regulations made under it.

The provisions relating to eligible leases will be repealed (cease to have effect) in 6 months' time.

What is an "eligible lease"? 

Retail leases and non-retail commercial leases or commercial licences may be considered "eligible leases". 

Non-retail commercial leases are defined as leases which include premises that are let for the sole or predominant purpose of carrying on a business at the premises. 

An eligible lease under the Bill applies to tenants that are suffering financial stress or hardship that: 

• have an annual turnover of up to $50 million, and 

• are an eligible business for the purpose of the Commonwealth Government’s JobKeeper program. For these tenants, assuming they are not charities, this means that the business has lost 30% or more of its revenue compared to a comparable period a year ago

As outlined in our previous COVID-19 Insight, National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles During COVID-19, the $50 million annual turnover threshold will be applied. 

However, even if the above criteria is met, certain retail leases or non-retail commercial leases will not be an eligible lease, including where: 

• the tenant is a member of a group of entities and the aggregate turnover of the group exceeds a certain threshold amount

• the tenant has a relationship or connection with another entity under the lease or licence, and the aggregate turnover of the tenant and the other entity exceeds a certain threshold amount

• an entity has a certain method of control or influence, through holding certain interests, rights or powers in relation to acts or decisions relating to the ownership, management or affairs of a tenant under the lease or licence that is a body corporate

Further detail will be required in the regulations to identify with certainty the leases and tenants that will be excluded under the above provisions (e.g. details of the type of group entities, monetary thresholds and methods of control/ types of interests etc.). However, these provisions seem consistent with the National Cabinet Mandatory Code of Conduct (Code of Conduct), which provides that the $50 million turnover threshold is to apply in respect of retail corporate groups at the group level (rather than at the individual retail outlet level).

Regulation of eligible leases

The Bill itself does not lay down substantive rules of law governing the practical issues experienced by landlords and tenants through the coronavirus pandemic, but merely provides for the passage of subsequent regulation dealing with those issues in relation to eligible leases.

One of the policy objectives noted in the Bill's explanatory memorandum is to provide a legislative framework to facilitate the implementation of the good faith leasing principles provided in the Code of Conduct.

 The powers will allow regulations to be made that will:

• prohibit the termination of an eligible lease 

• change any period under an eligible lease under which someone must or may do something 

• change or limit any other right of a landlord under an eligible lease 

• exempt a landlord or tenant under an eligible lease from having to comply with an eligible lease 

• modify the operation of an agreement related to the eligible lease 

• extend the period during which an eligible lease is in effect 

• imply terms into an eligible lease

• modify the application of the common law to an eligible lease

• impose new obligations on landlords and tenants under eligible leases, including mediation arranged by the Small Business Commission 

• require landlords and tenants to mediate before commencing proceedings in VCAT or an eligible court 

• require landlords and tenants to seek leave of a court prior to commencing court proceedings, and

• confer jurisdiction on VCAT to hear and determine disputes about the terms of an eligible lease that is a retail lease 

The Bill empowers the Small Business Commission to:

• make arrangements to facilitate the resolution by mediation of disputes between landlords and tenants under an eligible lease about the terms of the lease

• monitor compliance with the regulations

• commence proceedings for offences under the regulations

What does this mean for landlords and tenants?

Although the Bill provides a general definition of what is considered an "eligible lease", further details are required of "corporate group" and other arrangements that might exclude certain occupancy arrangements from being an "eligible lease". 

Moreover, the Bill does not provide any further certainty in respect of the adoption of the Code of Conduct. 

The regulations are eagerly awaited in Victoria (as they are in Queensland), given the need for certainty for all parties.