Temporary Stay on Rental Evictions
Whilst legislation has not yet been passed, the Government has announced a temporary stay on rental evictions for tenants that cannot afford to pay their rent. The announcement is aimed at relieving the financial stress of individuals and businesses as a result of a loss of income or employment related to COVID-19.
Who is Covered?
The Governments announcement stated that the moratorium would apply to both commercial and residential tenants.
How Long will it Last?
As the law relating to tenancies is governed by the states and territories, each state and territory is responsible for enacting its own legislation.
Whilst Victoria is expected to pass legislation for the stay on evictions to last the next 6 months, other states have chosen to reduce the length of the stay. For example, Tasmania has already enacted legislation to stay evictions which will cease on 30 June 2020. However, the Tasmanian Parliament may exercise its discretion to extend this date.
What will the Stay Involve?
The stay is likely to mirror the legislation passed in Tasmania which provides that any notices to vacate by landlords will not have any affect until after the stay is lifted. Whilst it is still open to landlords to follow up overdue payments, they have limited rights of recourse to recoup those overdue payments. Accordingly, it is expected that landlords will draw on the bond as a means to assist their cash flow.
Liability of Tenants
It is important for both landlords and tenants to be aware that rental payments continue to become due and payable during the moratorium. This means that the landlord can issue a notice to vacate or take steps to vacate the tenant if the funds are still overdue after the 6 month period.
If tenants are considering ceasing to pay rent, we recommend that they:
- Check their lease to see if they will be liable to pay interest on any overdue payments;
- Compare their lease with the new legislation to see whether they are liable to pay a further bond if the landlord draws on the original bond;
- Ensure that they comply with the lease in every other aspect;
- Try to negotiate a resolution that is agreeable to the landlord in an effort to maintain a good relationship; and
- Seek advice as to whether the failure to pay rent will constitute a breach of the lease when exercising an option to renew.
Government Principles for Commercial Tenancies
In addition to the rental moratorium, the Government has agreed to a set of principles which “underpin and govern intervention to aid commercial tenancies”. We recommend that commercial landlords and tenants are familiar with these principles, some of which include:
- Encouraging tenants and landlords to agree to temporary amendments to leases (including rent relief);
- That tenants may seek mediation or conciliation to resolve any dispute with their landlord;
- That landlords and tenants not significantly affected by the crisis are expected to honour the terms of their lease; and
- That landlords and tenants consider cost-sharing losses.
The Government is considering which commercial tenants the principles will apply to. However, the Government has foreshadowed that the principles will apply to small to medium sized businesses with an annual turnover of up to $50 million with a reduction in revenue of 30% (making them eligible for the JobKeeper payment).
Options to Terminate a Lease
If you are a tenant looking to terminate your lease, we recommend seeking legal advice. You may have a ‘force majeure’ clause which may allow you to terminate the lease or you may have a fixed term lease which allows you to terminate the lease for ‘severe hardship’.