TENANT DENIED BY THE LANDLORD OF RENT RELIEF FOR NOT STRICTLY COMPLYING WITH THE REGULATIONS
Tzilantonis v S & C Thomas Holdings Pty Ltd (Building and Property) [2021] VCAT 486 (20 May 2021)
In this case, the tenant alleges that he had been denied rent relief granted to him under the COVID-19 Omnibus (Emergency Measures) Act 2020 by the landlord. The latter submits that such tenant is not entitled to such relief for not strictly complying with the regulations.
Facts:
The Applicant (‘the Tenant’) is the tenant of retail premises located in Ferntree Gully (‘the Premises’). The Premises are owned by the Respondent as landlord (‘the Landlord’). The Premises are used to conduct a legal practice, known as Zenith Lawyers and Consultants from the front of the building (‘the Law Practice’).
Like many businesses affected by State government restrictions imposed due to the COVID-19 pandemic, the Law Practice suffered a downturn in business revenue from June 2020 until November 2020,[2] and to a lesser degree, continuing until February 2021.
By reason of the Law Practice suffering a downturn in revenue, the Tenant made several requests for rent relief, said to have been made pursuant to the rent relief scheme under the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (‘the Regulations’).
The Landlord contends that the Tenant is not entitled to any waiver of rent or outgoings because he failed to make any request for rent relief which complied with the Regulations.
The tenant submits that he made a request in a statement to the Landlord’s Agent CVA on 29th of April 2020 and again on 4th of May 2020 confirming satisfaction of the requirements in S10(2)(a) & (b). Furthermore, he also made to further requests and a statement to the landlord via the landlord’s solicitors for further rent relief on 5 October 2020 and on 31 December 2020 in satisfaction of the requirements.
The landlord submitted that the emails dated 24 and 29 April and 4 May 2020, even if read collectively, did not satisfy the requirements under reg 10(2)(a) and (b) because: (a) they did not state that the lease was not excluded from the operation of the regulations under S.13(3) of the Act; and (b) they did not contain information evidencing that the Tenant was an SME entity and qualified for or was a participant in the jobkeeper scheme .
He pointed to the words adopted by the Tenant in the 4 May 2020 email to highlight that they do not expressly state that the lease is excluded from the operation of the Regulations. That email only stated that the lease is an eligible lease under Section 13(3) of the Act. The email fails to expressly state that the lease is not excluded from the operation of the Regulations.
The tenant submitted that strict adherence to the precise words in reg 10(2) of the Regulations was not required. He argued that the provision ought to be construed such that compliance with the prescribed form is not necessary as long as the substance of the provision has been complied with.
Issue: Should the tenant be granted rent relief despite failure to expressly state and prove that the lease is not excluded from the Regulations?
Law:
- Regulation 10(2) of the Regulations states: A request under subregulation (1) must be in writing and must be accompanied by (a) a statement by the tenant that the tenant’s lease is an eligible lease and the lease is not excluded from the operation of these Regulations under section 13(3) of the Act; and (b) information that evidences that the tenant (i) is an SME entity; and (ii) qualifies for, and is a participant in, the jobkeeper scheme.
Analysis:
Reg 10(2)(b) requires more than a mere statement that the Tenant is an SME entity and qualifies for, and is a participant in, the jobkeeper scheme. The requirement to provide information is a requirement to provide some corroborating material. If that were not the case, then the regulation would be expressed as merely requiring a statement, as is the case with reg 10(2)(a). What constitutes adequate corroborating material will depend on the circumstances of each case. It may be as simple as providing Business Activity Statements, a tax return or some other information which evidences that a tenant is an SME entity. Similarly, receipts or other documentation from the Australian Taxation Office may be sufficient to evidence that a tenant is a participator in the jobkeeper scheme.
In this case, there is no evidence that any documentation, other than the business receipts report was provided around the time when the first request for rent relief was made. In those circumstances, the court does not accept that reg 10(2)(b)(i) or (ii) of the Regulations has been satisfied.
Consequently, the first rent relief request, constituted by the 24 and 29 April and 4 May 2020 emails, even if read collectively, do not comply with reg 10(2)(b) of the Regulations, entitling the Tenant to rent relief.
However, the second relief request dated 31 December 2020 stated a decline in turnover has been calculated substantially consistent with the actual decline in turnover test in accordance with reg 10(2A) of the Further Amended Regulations, albeit that it was calculated on the first financial quarter in 2021, rather than the second financial quarter in 2021. Nevertheless, financial documents were provided to substantiate the decline in turnover over the financial quarter ending on 31 December 2020, consistent with what is required under the Jobkeeper Rules cited above.
Consequently, the Tenant is entitled to a reduction in rent of 62.2%.
Conclusion: The Applicant is entitled to rent relief representing 62.2 percent of the rent that would have been otherwise payable over the period 31 December 2020 until 28 March 2021.
