Frequently asked legal questions
Can this product be used if a landlord and tenant agree to offer rent relief by consent and the relief is not a legislative entitlement (e.g. COVID-19 relief)?
Yes the product is drafted on the basis that it can be used for all commercial leases, whether or not the tenant / lease is entitled to rent relief under the various regimes in each State/Territory. This allows the deed to be used where relief is granted in circumstances where the rent relief is not a legislative entitlement but a commercial agreement between landlord and tenant.
If the Landlord is the Trustee of an SMSF, and the Tenant is a related party, then in order to use this product, the Tenant must be entitled to COVID-19 rent relief - otherwise entry into this deed would contravene super law.
What kind of relief does this product allow the Landlord to give the Tenant?
- Allows deferral or a partial waiver of outgoings;
- Allows deferral, partial waiver or full waiver of rent payments; and/or
- Provides that where a deferral of rent is being provided, an extension of the lease term can also be agreed. The extension of the term must be at least equal to the duration of the period that the rent is deferred or such longer period as selected.
The product does not impact on any other lease payments that must be made by the tenant.
I am using this product to reflect a change in lease terms as part of COVID-19 rent relief agreed between the parties. How do I know if the Tenant can qualify for COVID-19 rent relief in my State/Territory?
Each State / Territory has slightly different requirements governing the eligibility of a tenant to seek COVID-19 rent relief. The principal requirements in most States / Territories is that the lease is for retail, commercial or industrial purposes (agricultural or pastoral leases are generally not covered, and residential leases are in most cases covered by a separate regime), the Tenant is a participant in the JobKeeper scheme, and has an annual turnover of less than $50 million.
The specific legislative provisions in each State / Territory will need to be consulted if there is any doubt as to whether the statutory entitlement to claim rent relief applies to a particular tenancy.
Will this deed of variation to the lease bind future landlords?
Yes the deed of variation provides that if there is a change in landlords, the departing landlord must notify the incoming landlord and obtain the incoming landlord's agreement to the terms of the deed of variation.
Do I need my bank's (mortgagee) consent before varying the terms of the lease?
If the property is mortgaged then you should obtain the consent of the Mortgagee to the deed of variation before signing the documents. You would typically need to order the product first and then provide the Mortgagee with a copy of the deed. You should speak to the Mortgagee for their exact requirements.
Do I need to register this Deed of Variation in my State/Territory on the relevant register?
If the property is located in Victoria: there is no requirement to register a lease and it is not usual to do so.
If the property is not located in Victoria: When ordering this product you can select whether the parties agree to an extension of the lease term. If there is no extension of the lease term, the deed does not need to be registered in any State/Territory. Even if a short extension of the lease is granted, given the short term nature of any extension, it would be simpler and cost effective not to register the variation in those States where leases are commonly registered. Not registering an extension will not affect the enforceability of the deed as between the landlord and tenant. The only risk is that the extension may not be binding on a mortgagee or subsequent purchaser of the land. If you wish to register this deed, then you will separately have to prepare the appropriate forms to register the deed and comply with the applicable registration requirements in the relevant State / Territory.
How do I calculate the rent relief to be provided?
The amount of the rent being waived should be determined primarily by reference to the decrease in turnover of the Tenant from the premises and can be an amount up to 100% of the total Rent otherwise payable (which is a full waiver) or can be a partial reduction of the total Rent otherwise payable (which is a partial waiver). You should note that at least half of the value of the total rent relief being provided must be provided by waiving the rent. The remainder of the value of the rent relief can be by deferral of rent. For example if the Landlord is reducing the monthly rent by $10,000: the full $10,000 can be waived or if the full $10,000 is not being waived then at least half (i.e. $5,000) must be waived and the remainder can take the form of a deferral of rent.
What date does the agreement need to be entered into by?
There is no specified date by which any agreement must be entered into. Because the relief relates to a tenant who is impacted by COVID-19, the date of the agreement should be within the period during which the tenant is suffering from those impacts, so as to provide the intended relief. However, there is no restriction on the agreement being entered into at a later date with any relief agreed being granted from an earlier effective date, and adjustments being made with the tenant for any rent or other payments made by the tenant prior to entry into the agreement.
Can the deed have an effective date?
Yes, the parties can agree the effective date from which the rent repayment relief applies. This allows the parties to properly document the terms of an agreement they have already reached, regarding rent repayment relief.