Update - Victorian status of the National Cabinet Mandatory Code of Conduct for Commercial Tenancies
In early April, the National Cabinet released the Code.
Subsequently, the Victorian government passed the Omnibus (Emergency Measures) Act 2020 (Act). The Act serves to temporarily amend certain Acts and allow the making of regulations in response to the COVID-19 pandemic.
In relation to the Code, the Act defines an eligible lease as a retail lease or non-retail commercial lease or licence that is in effect on the commencement of regulations (which may be backdated to 29 March 2020). The tenant must be an SME entity (presumably having an annual turnover of up to $50 million) and be an employer that qualifies for and is participating in the Job Keeper scheme. Tenants who have an aggregate turnover above the ‘prescribed amount’ (presumed to be $50 million in line with the Code) are excluded from the regulations; as are entities with a prescribed method of control or influence over an eligible lease or licence that is a body corporate.
The Minister for Small Business, in consultation with the Minister for Jobs, Innovation and Trade, may only make recommendations that regulations be made if the Minister is of the opinion that the regulations are reasonably necessary for responding to the COVID-19 pandemic.
The Act allows the Regulations to include provisions such as:
Prohibiting termination of an eligible lease;
Changing the period under an eligible lease in which someone must or may do something;
Changing or limiting any other right of a landlord under an eligible lease;
Changing or limiting any other right a person who is a landlord under an eligible lease has under an agreement related to that eligible lease;
Modifying the operation of an eligible lease or an agreement related to that lease;
Extending the period during which an eligible lease is in effect;
Deeming a provision of the regulations as forming part of an eligible lease;
Imposing new obligations on landlords or tenants under an eligible lease, including requiring them to negotiate amendments to the lease;
Requiring landlords and tenants under an eligible lease who are in dispute about the terms of an eligible lease to participate in mediation organised by the Small Business Commission:
Requiring a mediation certificate before commencing proceedings in VCAT or a court in relation to the dispute;
Requiring the leave of a court to commence proceedings in relation to the dispute;
The conduct of mediation including fees and expenses; and
Conferring jurisdiction on VCAT to hear and determine disputes about the terms of an eligible lease (retail lease).
Regulations must not:
Require a landlord or tenant who are in dispute about the terms of an eligible lease to participate in mediation if either party has commenced proceedings in VCAT or a court in relation to that dispute; or
Have the effect of preventing a landlord or tenant who are in a dispute about the terms of an eligible lease from commencing proceedings in a court in relation to that dispute at any time.
Scope is given for the regulations to be general or limited, differing according to time, place and circumstances etc. The regulations are allowed to impose penalties not exceeding 20 penalty units (currently equivalent to $3,304.40).
The Small Business Commission will serve to make arrangements to facilitate mediation between landlords and tenants, monitor compliance with regulations, commence proceedings for offences against regulations, and any other power granted to it by the regulations.
No compensation will be payable by the State for any loss, damage or injury as a result of the making of regulations.
The regulations are yet to be enacted and drafts have not been circulated. However, it seems likely they will be in line with the Code.
It should also be noted that the Act and regulations are to be repealed six months after the commencement of the Act (sunset clause) and may be disallowed by either House of Parliament.
We are keeping a close eye on further developments.