On 23 April 2020, the Victorian Government introduced the COVID-19 Omnibus (Emergency Measures) Bill (COVID Bill) (along with other related legislation) for the purpose of putting into place temporary emergency measures to deal with the effects of the current pandemic. The COVID Bill has passed Parliament and is awaiting assent to become law.

The COVID Bill provides for significant alteration to the law in relation to commercial and retail leases and licences. The provisions do not stipulate specific rights or responsibilities, but provide for the creation of regulations which will do so. The proposed regulations have not yet been released. The provisions will remain in force for six months from commencement.

It is expected that the COVID Bill will be used to implement the National Cabinet Mandatory Code of Conduct for leases into the law of Victoria.

What do the provisions apply to?

The provisions apply to ‘eligible leases’ which are defined as ‘retail leases’ or ‘non-retail commercial leases or licences’ (each of which are defined in the COVID Bill) which fulfil the following requirements:

  1. The lease/licence must already be in effect on the day the first regulations made under the COVID Bill come into operation (including agreements for lease); and
  2. The tenant, either upon or after the regulations come into effect, is:
    1. an ‘SME entity’ – which is defined in section 4 of the Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response package) Act 2020 (Cth) (see below definition details), and
    2. an employer who qualifies for the JobKeeper scheme and is a participant in the JobKeeper scheme.

However, ‘eligible leases’ do not include leases or licences:

  1. Of a class prescribed by the regulations, or
  2. Where the tenant is a member of a group prescribed under the regulations and the turnover of the group exceeds the amount prescribed by the regulations, or where there is a relationship between the tenant and such a prescribed entity, or where an entity controls the tenant in a way prescribed by regulations.

Putting aside this exclusion, a closer look at how eligible leases are defined under the COVID Bill clearly demonstrates the Government’s intention to cover all types of occupation (whether lease or licence, retail or non-retail) for the purposes of carrying on business.

Powers granted to government

The COVID Bill provides the Victorian Government with sweeping powers to make regulations (which may be retrospectively applicable to any day not earlier than 29 March 2020) in relation to ‘eligible leases’, including to:

  1. Prohibit termination of an eligible lease
  2. Change any time period under the eligible lease or under legislation relating to the eligible lease
  3. Change the rights of landlords
  4. Exempt a landlord or a tenant from having to comply with an obligation
  5. Extend the term
  6. Incorporate terms into eligible leases
  7. Impose obligations on landlords or tenants, and
  8. Require referral of disputes to the Small Business Commissioner before issuing proceedings.

However, the regulations must not require a landlord or a tenant to participate in mediation if either party has commenced proceedings in VCAT or a court, or which otherwise have the effect of preventing a landlord and tenant from commencing proceedings in court.

What does it all mean?

As can be seen, the legislation provides the Victorian Government with significant powers, well beyond the usual scope of regulations. The likely reason for proceeding in this way is to allow greater flexibility to the Government to make quick decisions in an ever-changing and volatile pandemic, rather than requiring the proposed measures to be subject to the sometimes time consuming and complex parliamentary processes.

This does however, at least for the time being, present to landlords and tenants some degree of uncertainty as to how the Government will implement the measures. We expect that further clarification will be given once the regulations are introduced.

In the interim, the COVID Bill has gone a long way to defining to whom the regulations will apply. A further update will follow once the regulations have been introduced.

The above content is commentary rather than legal advice and was prepared on the basis of applicable legislation, government programs and initiatives that were in place as of the date of publication. Given the ongoing evolution of both the COVID-19 pandemic and frequent consequential changes to the various laws and programs within all Australian states and territories, readers should seek legal advice on the current situation as applicable to their specific circumstances before taking any action in relation to the above.