Commentary on Commercial Tenancy Relief Scheme

This article was written prior to the press release by the Premier’s Office on 20 August 2020. That press release indicates that at least some of the uncertain matters raised below will be clarified by amending Regulations.


Legislative background


On 7 April 2020 the Office of the Prime Minister published the ‘National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles during COVID-19’ (“the Code”). The Code set out a range of principles intended to guide the relationship between landlords and tenants in the context of COVID-19. Having been published by the Office of the Prime Minister the Code did not carry any legal effect, with each state being required to pass legislation to give effect to any change.


On 23 April 2020 the COVID-19 Omnibus (Emergency Measures) Act 2020 (“the Act”) was passed by the Victorian Parliament. The Act came into effect on 25 April 2020. The Act, to the extent it related to commercial leases, set out a number of relevant definitions (perhaps most importantly the definition of an “Eligible Lease”) and empowered the Governor in Council, on the recommendation of the Minister for Small Business, to make regulations concerning landlords’ and tenants’ rights and obligations under an Eligible Lease.


On 1 May 2020 the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (“the Regulations”) were brought into effect in Victoria by Government Gazette S216.


Small Business Commissioner ‘frequently asked questions’ and Victorian Government ‘policy guidance’


Subsequent to the publication of the Regulations myriad articles have been published online exploring the effect and detail of the Act and the Regulations (including ours here) – the purpose of this article is not to explore the Act or the Regulations (or the Code for that matter) in any detail.


The publications that carry perhaps the most significance are the “frequently asked questions” (and their responses) published by the Office of the Victorian Small Business Commission (“the SBC FAQs”) here and the Victorian Government’s Policy Guidance (“the Policy Guidance”) published here.


Those articles carry apparent weight, due to the nature and role of the entities publishing them, however they are not law and to the extent they purport to interpret the Act and Regulations they are not without failing.


Areas of uncertainty


The author’s key issue with the SBC FAQs and the Policy Guidance is that they treat uncertain matters with certainty. This is new legislation with, as at the date of writing, no judicial determination to assist in interpretation. This article does not seek to say what the law is, simply to point out what it might be (and what it is not).


The Code


The Policy Guidance commences “On 7 April 2020 the National Cabinet announced a Mandatory Code of Conduct SME Commercial Leasing Principles During COVID-19 (the Code). In Victoria, these leasing principles have been given effect through the COVID-19 Omnibus (Emergency Measures) Act 2020 and the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (the regulations), as the Commercial Tenancy Relief Scheme (CTRS)”.


That is to say the Policy Guidance treats the Code as having been given effect in Victoria and takes that position as its starting point.


The Code is not mentioned, anywhere, in the Act or in the Regulations. There is a single mention of the Code in the second reading speech to the Act, but only to note that Section 15 of the Act would “enable” regulations to give effect to the Code.


We note that there might be an argument, having regard to the community expectations set by the Prime Minister’s publication of the Code and associated press conferences, that the Act and the Regulations should be interpreted by reference to the Code. There is, however, an equally strong argument to say that Parliament in passing the Act and the Minister for Small Business in passing the Regulations chose (or, more accurately, on an objective view might be considered to have chosen) to deliberately leave reference to the Code out of the Victorian law.


In our view to treat the Code as have been given effect in Victoria is an incorrect starting point in interpreting the state of the law in Victoria.


Proportionality


The SBC FAQs state “[t]here is an expectation that rent relief should be provided in proportion to the decline in the tenant’s turnover”.