Update 11 – effects of Covid-19 on commercial tenancies

Extension of Regulations

Although somewhat old news now, further to our note dated 14 December 2020, we can confirm that the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 were officially extended on 22 December 2020 on the same terms as was expected. They operate as follows:

• to require tenants to make a new rent relief request relating to the period post 31 December 2020 (including by provision of evidence of decline in turnover for the quarter ending 31 December 2020);

• to entitle tenants to post-31 December 2020 relief only from the date the new request is made;

• to require landlords to offer rent relief the date of request and 28 March 2021 that is at a minimum proportional to the tenant’s decline in turnover in the December 2020 quarter; and,

• to push back the commencement date for repayment of any deferred rent so that repayments commence 29 March 2021.

For more detail on the operation of the Regulations please see our Updates 8 and 9 (Update 8 – (the commercial leases Regulations amendments) - effects on commercial tenancies) and (Update 9 – (the commercial leases Regulations amendments) - effects on commercial tenancies).

Recent decision – related party Jobkeeper participants

A recent VCAT (“Tribunal”) decision has clarified whether a tenant that has a related party that is entitled to a Jobkeeper payment can itself also be considered to be participating in the Jobkeeper scheme under Regulation 4A of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (“Amended Regulations”) and Section 6 of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (“Jobkeeper Rules”), and so be eligible for rent relief.

In very brief summary – the answer is no. The tenant itself must be the employer participating in the Jobkeeper scheme.

Employing Entity

In PS Market Pty Ltd v Brijcam Nominees Pty Ltd (Building and Property) [2020] VCAT 1468 (24 December 2020) the applicant relied on the fact that its parent company, which employs all staff within the group (including the applicant’s), qualifies for Jobkeeper assistance on behalf of the group of companies. The applicant claimed that the applicant itself was therefore also eligible for rent relief and the lease in question was subsequently an ‘eligible lease’.

Section 6 of the Jobkeeper Rules notes that “an entity (the employer) is entitled to a Jobkeeper payment for an individual for a fortnight” if they comply with the various requirements of the Jobkeeper Rules (emphasis added).

The applicant confirmed that it itself has no employees.

Paragraph 43 of the judgement notes that Regulation 4A of the Amended Regulations and Section 6 of the Jobkeeper Rules “make it clear that it is the relevant tenant that it is required to be the entity, as an employer, entitled under Section 6 to a Jobkeeper payment.”

The Tribunal therefore rejected the applicant’s claim to be entitled to a Jobkeeper payment within the meaning of Section 6 of the Jobkeeper Rules, as well as the applicant’s claim to make the lease an eligible lease under Clause 4A of the Amended Regulations.

The applicant was therefore ineligible for rent relief.

The applicant’s alternative position was to rely on Section 11 of the Jobkeeper Rules, under which an applicant is entitled to a Jobkeeper payment as an “eligible business participant”. A requirement of being an ‘eligible business participant’ under Section11.(1)(c) of the Jobkeeper Rules is that the applicant qualifies for the Jobkeeper Scheme.

However, for the reasons set out previously regarding the applicant’s claim under Section 6 of the Jobkeeper Rules, the Tribunal was not satisfied the applicant qualified for the Jobkeeper Scheme. They therefore did not satisfy the requirements of being an “eligible business participant”.

PS Market ultimately confirms that an entity seeking an entitlement under the Amended Regulations must satisfy the conditions of the Jobkeeper Rules as set out in Section 6, including, specifically, that the entity must be the employer and not simply a related party to the employer.

Matt Francis

Lawyer

Jack Kelly

Lawyer