The Victorian Parliament passed the COVID-19 Omnibus (Emergency Measures) Act 2020 (Act) on 23 April 2020 to enable, (amongst other things), the creation of regulations reflecting the Mandatory Code of Conduct (Code) created by the National Cabinet.
The regulations have not yet been made and the proposed regulations have not been released however we expect that it will reflect parts of the Code as detailed in our article dated 9 April 2020.
The Act provides for the following:
- Allows the regulations to apply to not only leases but also licences to occupy premises for business purposes. Some examples include:
- a licence granted instead of a lease where a franchisor holds the lease and licences the right to occupy the premises to a franchisee;
- licences of rooms in medical practices; or
- the licensing of office spaces.
- An ‘eligible lease’ is defined as a lease which is in existence when the regulations come into operation and where the tenant is an SME entity (including sole traders) and an employer that qualifies and participates in the Jobkeeper Program.
- The lease will not be an ‘eligible lease’ if:
- The tenant is a member a group of entities with an aggregate turnover above the amount to be prescribed by the regulations; or
- The tenant has a relationship or connection with another entity and the aggregate turnover of the tenant and other entity is above the prescribed amount; or
- An entity has a prescribed method of control or influence through the holding of a prescribed interest, right or power in relation to the acts and decisions relating to the ownership, management or affairs of the tenant.
Note that the regulations need to define numerous aspects of the above, but it is clear that the Act is addressing the issue of tenants being subsidiaries and part of a group company structure.
- The regulations are able to deal with various different matters, the most notable being:
- prohibiting the termination of eligible leases;
- changing timeframes under an eligible lease in which a party to that lease must or may do a thing;
- extending the term of an eligible lease;
- changing, limiting or exempting parties from compliance with an obligation under an eligible lease or legislation;
- imposing new obligations on landlords and tenants under an eligible lease, including requiring them to negotiate amendments to an eligible lease; and
- modifying or exempting compliance with eligible leases and agreements related to them.
- Allows for the regulations to require mediation to take place before court proceedings can be initiated and can impose penalties for non-compliance with the regulations.
- The Act will operate for a period of 6 months.
We note that many parties to leases (both landlords & tenants) have been holding off negotiations in the expectation that the government would ‘set the boundaries’ yesterday. Unfortunately, we are now waiting for the regulations to be passed but parties are still encouraged to negotiate in the meantime. Tenants should immediately make arrangements to participate in the Jobkeeper Program, if they qualify, to ensure that they have the benefit of the regulations when passed.
We will keep you updated and notify you once we have more information on the regulations and how they will operate.