The New COVID-19 Regulation for Property Owners and Tenants – Simplified
It’s been a big week… I’m sure you’re all keen to hear our response to the new Residential Tenancies Amendment (COVID-19) Regulation 2020. Although it’s a bit of a mouthful, the document itself is just a few pages. Simple right?… I will say that we feel fortunate to have been given a way in which to qualify those requesting rental relief.
The New Regulation by Fair Trading Regarding COVID-19
I’ve copied the link to Fair Trading’s explanation which also includes a couple of flow charts which does make it look relatively simple. https://www.fairtrading.nsw.gov.au/resource-library/publications/coronavirus-covid-19/property/moratorium
The New Coronavirus Regulations Simplified:
- To qualify for the right to enter into rent relief negotiations, a tenancy must demonstrate that the household has experienced a loss of 25% or more in household income as a result of COVID-19.
- For those who meet this criteria and agreement is reached between owner and tenant as to how rent will be paid, there is a 6 month moratorium on an eviction due to rental arrears.
- There is an interim 60 day stop on owners issuing termination notices or applying to NCAT for eviction orders due to rental arrears, where tenants meet the COVID-19 affected criteria. This interim stop is to allow time for owners and tenants to be able to establish the amount of financial support they will receive and for good faith negotiations between owners and tenants to occur.
- Where agreement cannot be reached, either the owner or tenant is able to make a complaint to Fair Trading who will then try to mediate an outcome. Fair Trading has no power to make a binding ruling so if this fails, the next step would be to attend NCAT.
- Tenants who do not qualify are still under the same legislation as they were previously. We are able to issue a termination notice when rent is in arrears by more than 14 days and a tenant can be evicted as a result but this must be ordered by NCAT. Of course an application for hearing needs to be made to NCAT and subsequent hearing would take place.
- Rent continues to be due and payable unless a mutual agreement is reached to reduce the rent either by abatement or deferment.
- The regulation extends the notice periods for certain other lease termination reasons to 90 days. Examples would be to terminate a tenancy at the end of a lease or a terminate a tenancy on a periodic agreement or for a breach of the agreement other than non-payment of rent.
- At any time owners can still apply to the Tribunal to take possession of a property if they are suffering undue hardship.
Complications with Rental Tenants
One of the biggest issues right now is that the money is still not flowing from Centrelink and therefore we are unable to establish if a household qualifies for rent relief negotiations. We are assuming that they will and commencing negotiations but will only be able to confirm any rent relief agreement when the proof of 25% reduction in household income is provided. In the meantime, we are asking tenants to pay what they can, and as such any unpaid rent becomes rental arrears which is required to be paid. That may change if for example a rent abatement is agreed. In this case, the tenant would not be required to pay an agreed sum of rent.
Government Support For Property Owners
It is clear when reading government announcements that they expect owners to approach their lender to freeze payments on their mortgage for a period of time in order to be able to offer rent relief to tenants. In addition, landlords will be eligible for a land tax waiver or rebate of up to 25% if they pass the saving on to tenants in financial distress. This doesn’t appear to amount to much since only 16% of landlords in NSW pay land tax.
We are concerned that some landlord insurance policies will not respond where a tenancy ends and rent is still outstanding. Normally we have to issue a termination notice when a tenant is 15 days or more in arrears and apply to Tribunal for an eviction. With the interim stop on issuing termination notices, this creates a gap that may be used by an insurer to decline a claim. Some insurers have announced that a termination notice is not required for a claim to progress. We await responses from other insurers as to how they will manage this but our understanding at this stage is that we must show firstly if the tenant qualifies or does not for rent relief negotiations. Then we must follow a process to mitigate any loss. We have just a few tenancies at the moment where they are more than 14 days in arrears so if your tenancy is one of those, we will have contacted you already.
Some Good News
Despite the government and media warning of rental properties with no tenants and no rent being paid, we have good enquiry on available rentals generally. Our leasing team have done an exceptional job adapting to the changes and in fact this week we were able to secure deposits on 8 properties. I’m not saying that rental prices have not been affected but for properties that are new to the market or being relet, there are tenants available.
We’ll contact you if your tenant has approached us for rent relief to discuss the information we have at that time and what the next steps might be. Each situation is different. We have been contacted by some tenants to let us know they are ok and will continue to be able to pay rent. We’ll let you know if this happens too.
The team and I would like to thank you all for your support and understanding in these difficult times. As you can imagine, due to the sheer volume of communication we are dealing with, our response times are a bit slower than usual. That said, please feel free to call us if you have any questions or concerns.