A member of Victoria’s upper house is lobbying for commercial tenants, who have limited prospects of reopening for business after the pandemic has passed, to seek early termination of their leases.
This comes a week after similar legislation in Western Australia was put on the back burner following intense opposition from the property industry.
Fiona Patten, a Victorian upper house MP and leader of the Reason Party, said draft copies of Victoria’s rental relief legislation failed to allow businesses that were unlikely to reopening post-pandemic from terminating their lease.
“I think that’s an oversight in many ways because there’s a lot of commercial, small businesses that did it very tough over summer with the fires, and now with COVID-19 on top they are not going back [to operating] and they need to have some assistance in terminating their businesses,” she said.
She said she had been approached by “five to six” small businesses who had indicated they had limited chance of reopening in the next few months.
“They are saying, ‘No amount of rent relief is going to get us through’. Particularly for the hospitality businesses which were the first to close and likely the last to reopen. I think for some of those businesses who were really struggling this is it.
“They are grateful for the assistance they have received, but [they’re saying] it’s just too much, 2020 has just been too hard.”
Ms Patten had approached Treasurer Tim Pallas about the issue and would consider moving an amendment to enable early termination when the legislation is brought to the Victorian Parliament this Thursday.
Tenants wishing to opt out of a lease presently face a lengthy and potentially costly process.
Any legislation to allow for early termination would need clear parameters defining the extent of financial hardship a business would need to be experiencing in order to qualify for the provisions, Ms Patten said.
“I will consider putting an amendment up on this but I think it’s something that the government should consider and look at ways they can allow a painless exit for landlords and tenants,” she said.
WA legislation stalls
A bill introduced to the WA Parliament last week intending to make it easier for tenants facing financial difficulty to break their commercial lease has faced strong opposition from the state’s peak real estate agent body.
The legislation, the draft of which is the Commercial Tenancies (COVID-19 Response (Early 3 Termination)) Act 2020, was introduced to Parliament last week along with a separate bill that enacted the national cabinet’s commercial tenancy code of conduct.
If enacted, it would have allowed for a tenant facing severe financial hardship who, even with rent waivers and deferrals, “is not, or will not at some later time, be in a position to perform the tenant’s obligations under the commercial lease” to seek an early termination of the lease with 21 days’ notice unless the landlord applied to the State Administrative Tribunal to determine the case.
Real Estate Institute of Western Australia president Damian Collins said the bill was a huge concern.
“That was a very big concern and we lobbied heavily against it. The early termination bill was put up at the same time as this bill and it was basically a bill that said if a tenant had significant hardship and couldn’t come to agreement with a landlord, they could terminate the lease,” Mr Collins said.
Mr Collins said the proposed bill would have given tenants the upper hand in negotiations.
“That was very problematic for the property industry because it allowed the tenant to pull the pin.”
Landlords who had recently signed a lease would be particularly disadvantaged, according to Mr Collins.
“Often landlords give a lot of incentives upfront, at the start of the lease term,” he said.
He said it was unlikely that the bill would have cleared the state’s upper house based on the numbers, but in any case it appeared that the government had decided to put the bill to one side for the time being.
The WA government has been contacted for comment.
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