The coronavirus epidemic is putting financial strain on landlords and tenants across Australia. It may be, your tenant is struggling to pay their rent, putting pressure on you as a landlord if you're still bound by mortgage payments and outgoings. What’s more, governments have issued a moratorium in most states preventing you from evicting your tenant for six months.
The good news is, there is help available to both landlords and tenants to ease the squeeze.
Here we explore the restrictions in action across each state, the support measures available and what to do if your tenant is struggling to pay their rent.
A state-by-state summary of the Covid-19 regulations and support measures
Each state is enacting the moratorium differently, putting their own relief measures in place for both residential and commercial landlords and tenants.
- Temporary ban on rent increases and rent evictions for six months
- Renters encouraged to continue paying their full rent until they reach a written agreement with their landlord
- Tenants in financial stress should contact their landlord to arrange a payment plan
- A 25% discount on land tax if you provide your (eligible) tenant with rent relief. Any remaining land tax can be deferred until March 2021
- An $80 million rental assistance fund to help renters pay their rent. To be eligible, renters will need to have registered their revised agreement with Consumer Affairs Victoria or have gone through mediation, have less than $5,000 in savings and still be paying at least 30% of their income in rent
- A fast-tracked dispute resolution service if you can’t reach an agreement with your tenant that’s mediated by Consumer Affairs Victoria
New South Wales
- Six-month moratorium on evictions for households that have lost at least one-quarter of their income
- Tenants’ landlords expected to negotiate rental payments on good faith
- Unpaid rent on the newly negotiated amount will accrue in arrears
- Once moratorium ceases, landlords can issue an eviction if they are facing financial hardship, but tenants will not be blacklisted
- Up to 25% off your 2020 (calendar year) land tax if you negotiate a rent reduction agreement with your tenant. Commercial tenants are eligible for a rent reduction if they have a turnover of less than $50 million and experience a 30% or more reduction in revenue as a result of Covid-19
- A further land tax deferral is available for landlords for any outstanding amounts for a three-month period if you claim the land tax concession
- Increased mediation and advisory services for landlords and tenants through the NSW Small Business Commission
- Six-month moratorium on evictions for renters facings financial hardship as a result of Covid-19
- Renters and landlords expected to come together and negotiate an interim plan. Unsettled disputes need to refer to the Residential Tenancies Authority for mediation
- Tenants are not liable to repay the difference on agreed reduced rental payments
- The Covid-19 Rental Grant - a one-off payment of up to four weeks rent (maximum $2,000) to eligible renters who have lost their job as a result of the pandemic, and receiving no other financial assistance
- Six-month moratorium on rental evictions for tenants who have lost employment or income due to Covid-19
- If tenants and landlords can’t reach an agreement, landlord must apply to the South Australian Civil and Administrative Tribunal, which has the authority to order an eviction
- Renters warned they will have to repay unpaid rent eventually
- No rental relief scheme has been announced in SA and tenants are encouraged to maintain a ‘rent first’ approach and pay any amount they can towards their rent obligations
- Tenants can request to enter into a payment plan for utility bills
- WA Government still in the process of amending its tenancy laws to enact the moratorium on local evictions
- Tenants are encouraged to pay whatever rent they can
- Tenants and landlords encouraged to negotiate alternative payment plans until moratorium is formally enacted
- Rent waived for six months for small business and not-for-profit groups who are tenants in government owned buildings
- Emergency period introduced into Residential Tenancy Act until 25 July, extendable by a further 90-day increment if necessary
- Tenants cannot be evicted for falling into arrears during emergency period, but landlords can issue a notice to vacate after this period if rent has fallen into arrears
- Leases can be terminated during emergency period if tenant agrees, or if tenant or landlord is granted a hardship application
Australian Capital Territory and Northern Territory
- Neither the ACT or Northern Territory have enacted the moratorium into their laws
Can landlords still carry out property inspections?
As a property manager or landlord, you can still conduct routine private inspections, however you should ask that your tenant(s) not be present and take extra safety precautions, such as wearing protective gloves, sanitising door handles and surfaces and minimising contact. As always, give your tenant 24 hours' written notice of your intent to carry out an inspection.
What should you do if your tenant can’t pay their rent due to Covid-19?
Through no fault of our own, we are all impacted by the Corona Crunch to some level. It’s important we support each other, while doing our best to protect our financial security and considering the help available to us.
Refrain from putting pressure on your tenant or offering financial advice. The Australian Securities and Investments Commission has warned real estate agents or landlords could face fines and even jail time for offering unlicensed financial advice to tenants struggling to pay their rent amid the COVID-19 crisis.
During this unstable period, you’re unable to evict your tenant and it could prove difficult finding another tenant. But remember, your tenant is obligated to try and meet their rental payments to the best of their ability, and it’s in your best interest to negotiate a new payment arrangement, so you receive at least part of your rental income.
3 financial relief options available for landlords
Before you begin negotiations with your tenant, it’s worth exploring the help available to you as a landlord.
- Apply to your bank to have your mortgage repayments deferred (or partially deferred) for six months. Most banks are offering this to support customers facing financial hardship as a result of Covid-19. However, interest and repayments will be added to the length of your loan period. Your bank is likely to want proof of loss of rental income.
- Confirm whether your landlord insurance covers rental loss due to Covid-19. Under usual circumstances, loss of rent is usually covered by landlord insurance for a certain period, but insurance policies may not provide cover for lost income in this new climate where tenants can no longer be evicted. The good news is, most insurers are standing behind their policies with existing terms and conditions not altered by the pandemic.
- For newer apartment complexes, you may be covered by a rental guarantee. Check your contract of sale.
Negotiating a payment plan with your tenant
If your tenant has approached you asking for a rent reduction, try to stay calm and remember that you need to work together to establish a plan that will support you both through this period of uncertainty.
We recommend following this course of action as a guideline:
Confirm your tenant’s eligibility for rent relief
During times of panic tenants can be tempted to make false claims of hardship. To be eligible for a rent reduction in most states, your tenant needs to meet the following criteria:
- They have lost their employment due to Covid-19
- Their earnings have decreased by 30% or more due to Covid-19
- They have less than $5,000 in savings in the bank
To ensure they meet these requirements, we recommend sending your tenant a brief email requesting the following:
- A letter from their ex-employer confirming their cease of employment
- Bank statements to show balances and loss of income
- Evidence of applications for Centrelink (if your tenant is going to benefit from the Job Seeker or Job Keeper schemes, they should be able to keep paying their rent)
Tenants are not legally required to pass on financial information to you as their landlord, but they may be required to give it to their state mediating authority.
Come to an agreement that works for you both
When negotiating a payment plan with your tenant, remember that this is an interim solution to navigate the unstable six-month period stipulated by state governments. Once this period is over, your tenant is no longer eligible for rent reduction and, in some states, is expected to pay back the shortfall in rent.
Before negotiating with your tenant, consider your own financial pressures and those of your tenant. Try to work out a reasonable compromise based on the answers to these questions:
What mortgage relief are you experiencing either from a drop in interest rates or by deferring your loan repayments?
Does your landlord insurance cover rental loss?
Is your tenant earning or receiving government assistance?
When negotiations fail
During a pandemic, stress levels can be high. It may be that negotiations break down and you and your tenant are unable to reach an agreement for a new rental payment plan. If this is the case, it’s best to seek mediation from your state Rental Authority or Tribunal.
Please note, the information in this article is intended to be used as a general guideline only. Before taking any course of action, we recommend you confer with your local real estate institute or fair trading commission.