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TENANT ASSERTS THAT IT IS PROTECTED FROM EVICTION UNDER THE COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020

Filomeno Nominees Pty Ltd v Crown Group Pty Ltd (Building and Property) [2021] VCAT 81  (5 February 2021)

This case involves the tenant asserting that it is protected from eviction despite non-payment of rent under the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020.  The landlord disagrees contending that there was no valid request for rent relief by the tenant as required by the regulation.

Facts:

In 2016, Crown Group Pty Ltd leased premises owned by Filomeno Nominees Pty Ltd in Tullamarine, Victoria (the premises) for two years. Crown Group exercised an option to renew for a further term from 1 March 2018. The parties have not executed a written lease for the further term.

Crown Group has not paid any rent or outgoings since 1 April 2020. In its application to the Tribunal, Filomeno seeks orders for Crown Group to give up possession of the premises and to refrain from entering the premises.

On 30 September 2020, Filomeno issued a Notice to Remedy Breach of Lease to Crown Group for the non-payment of rent and outgoings. Crown Group did not make any payment. Filomeno re-entered possession on 9 October 2020. Later that day, Crown Group broke into the premises and has remained in possession.

Crown Group says it is protected from eviction by regulation 9 of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (the Regulations).

Issue: Is Crown Group protected from eviction by regulation 9 of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020?

Analysis:

On 7 April 2020, the National Cabinet announced a Mandatory Code of Conduct SME Commercial Leasing Principles During COVID-19. These leasing principles were given effect in Victoria through the COVID-19 Omnibus (Emergency Measures) Act 2020 (the Act) and the Regulations.

The Regulations provide a mechanism whereby a tenant with an “eligible lease” as defined in S.13 of the Act, is entitled to avail itself of a rent relief regime and protection from eviction in certain circumstances.

Regulation 9 prohibits a landlord from evicting a tenant for non-payment of rent and outgoings during the relevant period if the tenant has complied with reg 10(1)–(5).

  • COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 Regulation 9- Non-payment of rent or outgoings during the relevant period 

(1) tenant under an eligible lease is not in breach of any provision of the eligible lease that relates to payment of rent or outgoings if they do not pay the amount of rent or outgoings required to be paid under the eligible lease during the relevant period and only if they— (a) comply with regulation 10(1) to (5) during the relevant period; or (b) during the relevant period, pay an amount of rent or outgoings in accordance with— (i) any variation to the eligible lease mentioned in regulation 10(6)(a); or (ii) any other agreement mentioned in regulation 10(6)(b) 

(2) A landlord under an eligible lease must not evict or attempt to evict a tenant under the eligible lease because of non-payment of rent or outgoings if subregulation (1) applies.

(3) landlord under an eligible lease must not re‑enter or otherwise recover, or attempt to re‑enter or otherwise recover, the premises under an eligible lease because of non-payment of rent or outgoings if subregulation (1) applies.

(4) A landlord under an eligible lease must not have recourse, or attempt to have recourse, to any security relating to the non-payment of rent under an eligible lease by a tenant under the eligible lease because of non-payment of rent or outgoings if subregulation (1) applies. 

  • COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 Regulation 10- Rent Relief

(1) A tenant under an eligible lease may request rent relief from the landlord under the eligible lease.

(2) A request under subregulation (1) must be in writing and be accompanied by— (a) a statement from the tenant— (i)that the tenant's lease is an eligible lease; and (ii) that the lease is not excluded from the operation of these Regulations under section 13(3) of the Act; and setting out the tenant's decline in turnover that is associated with the premises (and no other premises); and (b) information that evidences that the tenant— (i) is an SME entity; and (ii) is an entity entitled under section 6, 11 or 12A of the jobkeeper rules to a jobkeeper payment

(3) On receipt of a tenant's request under subregulation (1) which conforms with subregulation (2), a landlord must offer rent relief to the tenant under an eligible lease within— (a) 14 days after receiving that request; or (b) a different time frame as agreed between the landlord and the tenant in writing.

(4)A landlord's offer of rent relief under subregulation (3) must be based on all the circumstances of the eligible lease

(5) Following receipt of a landlord's offer by a tenant, the tenant and the landlord must negotiate in good faith with a view to agreeing on the rent relief to apply during the period starting on the date of the tenant's request under subregulation (1) and ending on 28 March 2021.

To be eligible for Jobkeeper payments, a business must have submitted to the ATO evidence of a comparative shortfall in turnover from March 2019 to March 2020 of at least 30%.

In September 2020, the business must have again submitted financial evidence of a comparative shortfall in turnover from September 2019 to September 2020 of at least 30%. Again, it will then be entitled to receive Jobkeeper payments for the period from 1 September 2020 to 31 December 2020.

The protection afforded by reg 9 is dependent upon compliance with reg 10.

Evidence of Crown Group’s sales shows a decline in turnover in 2020 compared with 2019. The decline in sales for April to October 2020 compared with the previous year was less than 30%. It is unnecessary to consider whether rent relief was available to Crown Group. It did not take the necessary steps to have its request considered by Filomeno.

Crown Group says Filomeno failed to respond to it with an offer or proposal for rent relief. For the reasons stated, there was no obligation on Filomeno to do so. It had not received a request compliant with reg 10.

Conclusion: Hence, Filomeno was entitled to terminate the lease and retake possession and that Crown Group has no right to possession of the premises and had no right to re-enter the premises.

 

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