The phrase “unprecedented event” has circled the media since the World Health Organization deemed the Coronavirus a Pandemic. With an unprecedented event comes unprecedented circumstances, one being, the closure of many businesses across Australia. These closures have particularly affected many Tenants who are no longer able to afford rent repayments due to mandatory closure of business or due to a downturn in revenue as a direct result of COVID-19. Since the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (the “Regulations”) came into force in May 2020, De Marco Lawyers have assisted several clients with rent relief initiatives. Here, De Marco Lawyers outlines a case study of an all too common occurrence with rent relief initiatives.
CASE STUDY: BILL, TENANT
Bill owns a restaurant in Melbourne, due to Stage 3 Stay at Home Directions imposed by the Government, Bill is only able to operate his restaurant by way of take-away only. As Bill does not have his usual influx of diners per night, Bill is struggling to pay the rent, his staff, and other outgoings under his current Lease. Bill is eligible for JobKeeper and is already enrolled in the program.
Initially, Bill wrote to his Landlord requesting relief. His Landlord responded requesting financial information to prove a decline in turnover and proof that he was enrolled in the JobKeeper program. Understandably, Bill was unsure of his legal obligations to provide this documentation to the Landlord and whether the Landlord was within his right to request the financial information.
Bill approached De Marco Lawyers for assistance in understanding his rights under the Regulations and in negotiating rent relief from his Landlord. De Marco Lawyers reviewed Bill’s Lease and explained his obligations under the Regulations. With assistance from Bill’s accountant, De Marco Lawyers negotiated with the Landlord’s Solicitors to determine an ideal and lasting outcome for both parties involved. By having De Marco Lawyers assist in the negotiations, Bill was able to focus his time on other aspects of his business that required attention due to the Stage 3 Stay at Home Directions.
Bill and his Landlord agreed to waive 25% of rent and defer 25% to be repaid over a period of 24 months. Due to Bill’s take-away sales, Bill was satisfied that he could still repay this reduced rent which meant that the Landlord was still receiving an income from the property. The agreement was documented by De Marco Lawyers by way of a Deed of Variation of Lease to outline the obligations of both parties up until September 2020.
If the above scenario sounds all too familiar and you require assistance from De Marco Lawyers, please click the below link to our COVID-19 Leasing and Financial Restructuring Services page and complete the form:
What if I am still unsure whether the above relates to me?
We note the above circumstances may not relate to each and every scenario, or you may be confused whether the above relates to you. Although your options will largely depend on JobKeeper eligibility and other criteria under the Regulations, we recommend that you seek legal advice if you are unsure of your obligations. Should you need assistance, please do not hesitate to contact our Miss Bronte Strong on (03) 9304 9500.
This information is current as at 12 July 2020. Given the rapidly evolving circumstances surrounding COVID-19, additional information may affect this article. To see whether this information relates to you, we ask that you ring our office on (03) 9304 9500.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from De Marco Lawyers and other relevant experts.