Benefits of entering into a Deed of Variation of Lease
- Certainty: Creates more certainty for the parties, for example making it clear that mandatory obligations contained in the Regulations form part of the Lease and the Lease is so varied for the relevant period.
- Intention: Clearly captures the intention of the parties.
- Legally Binding: Creates a legally binding and enforceable agreement, where there is no consideration to be exchanged between the parties.
- Commitment: Signals the commitment of the parties, by the express act of signing, to their respective enforceable obligations.
- Authorised: By the execution of the Deed, ensures that the parties are legally authorised to bind the respective landlord and the tenant entities.
The Code of Conduct
By way of background, in our earlier articles we wrote about the good faith leasing principles under the Mandatory Code of Conduct released by the National Cabinet and its legislative implementation in Victoria. The large proportion of the legislative detail is contained in the COVID-19 Omnibus (Emergency Measures) (Commercial Leases & Licenses) Regulations 2020 (Vic) (Regulations), made on 1 May 2020.
The Regulations came into operation on 29 March 2020 and end on 29 September 2020 (Relevant Period).
Many landlords and tenants will still be in the process of negotiating rent relief terms, some having more complex considerations than others.
Document your agreement by way of deed for legal certainty
Legal certainty is required by way of documenting any agreement reached. Whether you are a landlord or tenant we recommend you document the terms of your agreement in a deed that records your variation of the lease.
What do the Regulations require?
Regulations 10(6)(b) and 9(1) refer to the giving effect to rent relief and the compliance with terms agreed by:
- any variation to the eligible lease (Lease); or
- any other agreement between the parties that gives effect to the rent relief, either directly or indirectly.
A tenant will not be in breach of the Lease (e.g. for non-payment of rent) if it complies with the Regulations and with the agreed terms given effect by a variation of the Lease or any other agreement. The Regulations do not specify that the agreement must be in writing or that any documented agreement must be executed by the parties as a deed to be enforceable.
What are the benefits of entering into an agreement in writing that is executed as a deed of variation of the Lease?
The agreed rent relief terms and the parties’ obligations under the Regulations are best contained in a variation of the Lease, documented and executed as a deed. Depending on the terms agreed, a deed of variation of the Lease will not necessarily be complex or costly. The benefits will outweigh any uncertainty surrounding informal written or verbal agreements.
Whilst an agreement that is contained in one or more emails or a verbal agreement is not void or unenforceable,
a deed ensures far more certainty and clarity than if the terms are agreed verbally or sought to be contained in several emails, in which case the agreed terms are potentially open to interpretation or dispute.
Any agreement reached on rent relief terms is best to be:
- in writing;
- contained in one legally binding agreement;
- in the form of a variation of the Lease; and
- documented and executed as a deed, to ensure the agreement of the parties is legally binding and enforceable.
Electronic signing and remote witnessing during the period of COVID-19
Each Australian state and territory has legislation that sets out specific requirements for executing a deed.
At Burke & Associates Lawyers we understand the requirements for execution of deeds and that they will vary depending on the types of entities that are a party to the deed.
We are also abreast with new temporary measures allowing electronic signing of deeds and remote witnessing by audio visual link.
The COVID-19 Omnibus (Emergency Measures) (Electronic Signing and Witnessing) Regulations 2020, amend sections 9 and 10 of the Electronic Transactions (Victoria) Act 2000, giving effect to these temporary measures, until 24 October 2020. The electronic signing of deeds by corporations is covered by the Commonwealth Government’s Corporations (Coronavirus Economic Response) Determination (No.1) 2020.
Review and documentation by legal professionals
Burke & Associates Lawyers regularly prepare deeds to vary a lease to document new arrangements between a landlord and tenant. So, if you have reached agreement for rent relief terms, we are able to assist in documenting these into a legally binding agreement, advise you on your rights and obligations of the parties under the Regulations and ensure effective execution by the parties.
If you require assistance with tenancy law, or the preparation of a deed of variation of your lease, please contact our Property Team at Burke & Associates Lawyers. To discuss further, please contact Kristy Muhlhan, Principal, who heads our Property and Property Development Team or Stewart Davis, Lawyer.