A Commercial Rent Relief Agreement is a legal contract between a Landlord and a Tenant (also known as a Lease Variation Deed) that varies the rent the Tenant is required to pay for a specific period during the COVID-19 pandemic. It also deals with rent deferrals, outgoings and other issues pertinent to the pandemic.
There is a difference between a "commercial" rent relief agreement and a "residential" rent relief agreement. The former applies to a property that is leased to a business. This also includes retail premises that are subject to the Retail Leases Act 2003 (Victoria). Meanwhile a different set of rules applies when it comes to negotiating a rent discount for a tenant living in a home, known as residential premises.
The template we offer is for rent relief agreements made under the legal framework that applies to commercial premises located in Victoria, Australia. The relevant laws include the:
- the <a href="https://www.legislation.vic.gov.au/as-made/statutory-rules/covid-19-omnibus-emergency-measures-commercial-leases-and-licences">COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020</a>. These Regulations came into force in Victoria on 1 May 2020; and
- the <a href="https://www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf">Australian National Cabinet’s Mandatory Code of Conduct: SME Commercial Leasing Principles during COVID-19</a>. This is simply referred to as the National Code.
You can find useful information and updates to the relevant law at <a href="https://www.vsbc.vic.gov.au/your-rights-and-responsibilities/retail-tenants-and-landlords/">Victorian Small Business Commission</a>
When a tenant is given rent relief, it important to vary the Lease in an official manner. To do so, the Landlord and the Tenant must sign a formal document recording the terms of the Agreement and noting that the new terms override the existing terms in the Lease. This is commonly referred to as a Lease Variation Agreement or a Deed of Variation.
While a Lease can be varied for a number of reasons, a Rent Relief Agreement Template deals with specific amendments to the Lease that are intended to address issues raised by the pandemic. These include, in most cases, a waiver of the rent and/or deferral of part of the rent until the tenant's business recovers from the affects of the pandemic. It could also cover issues like an extension of the duration of the lease to give the tenant longer to pay any deferred rent.
Why is it important to have a formal Agreement in place to vary the Lease? Can't the Landlord simply send revised invoices with the reduced rent stated on them. Taking short cuts like this in an important legal matter can lead to disputes down the track.
You should be aware that without an Agreement in place, the tenant is at risk because even if they pay the reduced rent invoiced by the landlord, there's nothing to stop the landlord from pursuing the tenant at a later date for payment of the rent that was temporarily waived. This is likely to be a real problem if, for example, the landlord transfers the property and the new landlord refuses to honour the earlier agreement.
Similarly, a binding Rent Relief Agreement is important for the landlord. It assists them to evidence the terms of a deal. With a binding Agreement in place for payment of reduced rent, the landlord can enforce their rights against the tenant and ensure they receive payment.
Given the moratorium on evictions, without such an Agreement in place, the landlord does not have strong rights against the tenant. Indeed, a commercial landlord is now forced to negotiate with a tenant. It's only after the tenant has accepted and offer, and the landlord has confirmed the revised lease terms, that the landlord can pursue the tenant for payment of outstanding rent.
