NFPs – Do I qualify for Rental Relief?

By Steve Schmidt, Space Man at BRM

The Federal Government has passed the COVID-19 Omnibus Bill which includes important commercial and residential tenancy changes. The code comes into effect in all states and territories after 3 April 2020 for the period during which the Commonwealth JobKeeper program is operational.  

When the JobKeeper was originally released, the mechanisms for a NFP to qualify where not properly considered. As a result, a secondary test has been included and to further assist the application of the JobKeeper program and how it relates to NFPs (excluding charities) Treasury have released a supplementary fact sheet.

Read our summary of the key aspects of the legislation and the eligibility of NFPs for JobKeeper in this article.

We've summarised the key aspects of the legislation regarding commercial leasing (which will be available to all tenants who apply and meet to JobKeeper requirements):
• A six-month moratorium on commercial tenancy evictions for the non-payment of rent
• A freeze on rent increases during the moratorium
• A rental payment waiver or deferral in regard to the tenants’ income reduction due to COVID-19, to be negotiated between the tenant and landlord
• A mediation service for commercial tenants and landlords, accessed through the VSBC, to support fair tenancy negotiations.
Read more about the Code of Conduct here
Read the entire Omnibus Bill here

When the JobKeeper was originally released, the mechanisms for a NFP to qualify where not properly considered. As a result, a secondary test has been included and to further assist the application of the JobKeeper program and how it relates to NFPs (excluding charities) Treasury have released a supplementary fact sheet.

In general, a NFP will be eligible for the JobKeeper Payment if, at the time of applying: 
• they have an aggregated turnover of less than $1 billion (for income tax purposes) and they estimate their GST turnover has fallen or will likely fall by 30 per cent or more; or 
• they have an aggregated turnover of $1 billion or more (for income tax purposes) and they estimate their GST turnover has fallen or will fall by 50 per cent or more. 

Read the full fact sheet here

So you qualify for rental relief – but what’s next?

Here are some points to think about before starting the conversation with your landlord.
 
1. Start thinking of options – Some organisations, particularly with a the retail outlet, will be suffering from unexpected cash flow issues. Now is the time to draw up a strategy to help you gain immediate rental relief.

2. Start a dialogue – don’t go quiet on your landlord. Instead, paint a picture of your current situation. Have you moved the team to begin work from home? Have you let staff go over the last few days? What are the impacts of these changes? Keeping your landlord informed will set you up for what you’re going to propose to them.

3.Make a reasonable offer – Tenants and landlords have never looked out for each other. Now, for the first time in history, they have an need to work together as they both stare into the unknown. Ensure your offer is as fair as possible to both parties. Your relationship with your landlord is paramount in normal circumstances. Now it matters more.

4.You can’t simply stop paying rent – Despite the legislation working in the tenant’s favour, the worst thing right now would be to stop paying altogether. This will only fracture the existing relationship and may cause future negotiations to be jeopardised.

5.Understand your landlord’s position – It’s not in any landlord’s interest to lose a tenant in the current market and while it seems to be tipping in the tenant’s favour, it is necessary to know what advantages your landlord will have leading into negotiations.

An important point to note, whilst tenants and landlords should commence negotiations and attempt to come to a temporary arrangement, remember that your circumstance may change so don't finalise everything now.

The agreement should be based on what is known now, with further conversations to take place in the months to come and when individual circumstances become clearer.

YOU'RE NOT ALONE!
Tenants globally are in the same boat!

BRM is here to answer your questions, help you understand the government initiatives and ensure you are in the best position for the immediate, short and mid term as we trade out of this crisis together.

​Contact our expert Property Team to discuss your specific leasing situation