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The Victorian government has announced further relief for commercial tenants struggling with rent payment as part of its “new and improved” Commercial Tenancy Relief Scheme.
Under the new regulations, small and medium-sized businesses with an annual turnover of less than $50 million that have experienced a loss in turnover of more than 30 per cent during the pandemic will be given “broadened eligibility”.
That means they can now choose three consecutive months between 1 April and 30 September 2021 to compare to their turnover in the same three months in 2019.
“We know businesses are doing it tough — that’s why it’s important that we continue to back them with practical measures, including rent relief,” according to Minister for Small Business Jaala Pulford.
Eligible businesses will be provided with financial relief in the form of a proportionate reduction in rent.
For example, a business with a turnover of 40 per cent of pre-pandemic levels can only be charged 40 per cent of its rent. Of the balance, at least half must be waived while the remainder will be deferred.
New businesses will also be protected under the scheme, with any business open since April 2019 eligible for assistance.
The revised scheme will apply retrospectively from 28 July 2021 and will run until 15 January 2022.
The announcement of the broadened eligibility comes after the Victorian government reintroduced the Commercial Tenancy Relief Scheme, which was ultimately approved by the Parliament on 5 August 2021.
“The passing of this legislation provides peace of mind for small businesses who are struggling to pay the rent, giving them the security they need,” Ms Pulford said.
Landlords will continue to be compensated for offering rent relief in the form of land tax relief of up to 25 per cent, in addition to any previous relief, which brings the value of support up to $100 million.
Additionally, small landlords who can demonstrate acute hardship will be eligible to apply for payments as part of a $20 million hardship fund.
Landlords bear the brunt
Despite the assistance offered to landlords, Real Estate Institute of Victoria (REIV) president Leah Calnan slammed the Commercial Tenancy Relief Scheme for being “lopsided” and ignoring the plight of everyday mum and dad investors.
According to Ms Calnan, the land tax concessions — although welcome — offer little compensation compared to the financial loss that small and medium-sized property owners incur through waived rents of their commercial tenants.
This could ultimately lead to several owners being forced to sell their investment properties just to make ends meet, she said.
“While tenants will not be required to repay waived rents, many others are unlikely to have the capacity to repay any of the deferred rents in the near term, if ever,” the president added.
Further, Ms Calnan explained that the suspension of mortgage repayments will do little to alleviate financial hardship as they are only deferral on repayments, which means that, unlike rent reductions, mortgages still need to be repaid with interest regardless of the property owner’s reduced income.
“Many of these Victorian [landlords] are self-funded retirees who have endured a reduced capacity to support themselves over the past 18 months,” she said.
“The one-sided support program will likely see a significant number of small and medium-sized property owners enter financial distress.”
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