Update 7 (Amendment of COVID-19 Omnibus (Emergency Measures) Act) – effect on commercial tenancies

This is update 7 of 9 - for our latest article on this topic see here.

On 3 September 2020 the COVID-19 Commercial and Residential Tenancies Legislation Amendment (Extension) Bill 2020 was read in the Victorian Parliament for the first time. Debate on the Bill is to be completed by Friday 4 September 2020. The current version of the Bill can be found here.

This article deals with the Bill in the form in which it is currently before Parliament and only focuses on the changes made in respect to retail and non-retail commercial tenancies (the Bill also amends residential tenancy legislation).

The Bill extends the legislative framework enacted by the COVID-19 Omnibus (Emergency Measures) Act 2020 (Omnibus Act) to 26 April 2021. This is a 6 month extension on the original date by which the Act was originally to expire. It will mean that the measures will be in place for a total of 12 months (subject to any further extension).

There were two further substantive amendments made to the Omnibus Act.

‘Eligible Lease’ – Meaning

The Bill amends the Omnibus Act to repeal the definitions of ‘qualifies for the JobKeeper scheme’ and ‘SME entity’ and to remove these terms from the definition of ‘eligible lease’. It also gives the Minister for Small Business the power to define what an eligible lease is.

The effect of this is that an eligible lease is no longer defined in legislation. Rather, the Minister will have the power to define by regulation what constitutes an eligible lease and, as a result, what leases are captured under the Omnibus Act. This has far-reaching consequences and essentially allows the Minister to solely determine the scope of the Act and, by extension, what leases can be captured by their regulations.

The definition of ‘eligible lease’ was previously pegged to eligibility for the JobKeeper scheme. Where the JobKeeper scheme may see a tightening of the eligibility requirements (determined by the Federal Government), the move to have eligibility set by regulation removes the possibility of having the scope of the legislation changed without the input of the Victorian Government. It is also designed to allow greater flexibility and responsiveness to changing economic conditions, as per the Explanatory Memorandum.

There is the possibility that what constitutes an eligible lease will be further updated at any time by regulation prior to the expiry of the Bill.

Section 13(3) of the Omnibus Act remains unchanged. That means that existing exclusions to what constitutes an eligible lease, such as aggregate turnover thresholds, will stay in place. However, these thresholds are themselves set by regulation and may be amended at any time.

Binding Orders

The Bill amends the Omnibus Act to give the Minister the power to make regulations relating to ‘binding orders.’ These binding orders are orders directing landlords under eligible leases to give or agree to give specified rent relief to tenants in certain circumstances.

The regulations will set the circumstances, processes and evidence that must be produced before binding orders will be granted. This includes the criteria which will be applied in deciding rent relief applications.

The Bill does not state where this power to make binding orders is to be conferred. However, the statement of compatibility presented to parliament indicates that the power to grant binding orders will be given to the Victorian Small Business Commission.

The Minister will also have the power to make regulations conferring on VCAT the power to review the making, amendment or revocation of a binding order.

Eastern Bridge will publish further commentary once the regulations are enacted.

Jack Kelly

Lawyer