Government rent relief scheme – not quite ready to roll

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GOVERNMENT RENT RELIEF SCHEME STILL UNDER DEVELOPMENT

In June 2020, the Government announced a package of measures directed at alleviating the cost of lease rent and outgoings. The proposed scheme would provide a process to determine the level of rent relief available to small businesses and a mechanism to resolve lease disputes between landlord and tenant. While some businesses are eager to put it to use, it has not actually been enacted yet, as law makers grapple with the complexity of establishing clear rules and guidance.

What will the scheme do?

The scheme in its proposed form would only apply where:

  • a tenant business has 20 or fewer full time equivalent staff per lease site / premises, and
  • the tenant and their landlord have not already reached an agreement for rent relief.

The intention of the scheme is to provide for a fair proportion of rent and outgoings to cease, where the tenant’s business has suffered a material loss of revenue because of COVID-19 response restrictions. Calculating what is a fair proportion of rent and outgoings can be difficult, and it is anticipated that there will be rules put in place around the important factors to consider when making this calculation.

Limitations

It is apparent that the scheme, in its current form, has some limitations:

  • Many tenants and landlords will have already reached an agreement and if so this scheme will not be available to them.
  • The scheme appears to be quite narrow in its focus which may mean that it will only apply in limited circumstances – and we have yet to see the finer details of the scheme.
  • Implementing a scheme that will be fair to be both tenants and landlords, and which will be flexible enough to apply to many different circumstances, will likely be difficult given its very wide ranging intentions.

Dispute resolution

However the scheme is refined, the process for calculating a fair proportion of rent and outgoings is likely to remain contentious.  It is proposed that if the tenant and landlord cannot agree or there is any dispute as to the terms of the scheme, this must be settled by mandatory arbitration. The arbitration will be subsidised by the government up to the amount of $6,000.

If implemented, this is a would be a worthwhile and positive step as the cost of resolving such disputes can be prohibitive, and is often a barrier to a party enforcing their legal entitlements or to reaching a mutually acceptable arrangement.

While businesses are keen to use the scheme, at this stage is still very much in development. It is clear that it is not an straightforward task to establish clear guidance on this issue.

We will provide a further update when any progress has been made.

Our thanks to Jared Cains for writing this article.