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Investment property owners & COVID-19 rent relief – know your options

The NSW government has introduced measures to help landlords and residential tenants work together during the COVID-19 pandemic. The 6-month package is designed to support tenancies to continue wherever possible. This month the NSW Government announced an interim 60-day stop on landlords seeking to evict tenants due to rental arrears as a result of COVID-19. Although this has provided comfort to tenants, it has led to anxiety among landlords who rely on rental income to pay their property expenses and loans.

To be impacted by COVID-19, tenants need to have suffered a 25% or more reduction in household income (after tax, and inclusive of any government assistance), caused by:

  • lost employment, income or work hours due to COVID-19 business closures or stand-downs, or
  • had to stop working or reduce their work hours due to illness with COVID-19, or due to COVID-19 carer responsibilities for household or family members.

If your tenant is not impacted by COVID-19, they are expected to honour their existing tenancy agreements, including paying all rent and charges in full.

Here are some frequently asked questions and some helpful information to assist owners of investment properties and their tenants.

Do the new guidelines mean residential tenants can not be evicted?

Tenants still have to uphold their obligations to allow inspections, maintain the condition of the property and adhere to all other legislative requirements. But, if they can-not cover their rental payments as per their usual arrangements, a landlord will not be able to evict them on this basis.

What information does a tenant have to provide to stop paying rent in NSW? 

To show that they are impacted by COVID-19, the tenant will need to provide documents that show proof of:

* Job termination/stand-down, or loss of work hours
* Government income support
* Prior income (after tax)

Does the tenant need to pay back the rental arrears or will the amount be waived

The amount of rent arrears accrued by a tenant who has negotiated reduced rent will not automatically be waived. Whether rental arrears will be waived is subject to negotiation between the tenant and the landlord (with assistance from Fair Trading’s dispute resolution process if required).

What if the tenant’s request is unreasonable and we cannot reach an agreement?
The landlord and tenant should both attempt in good faith to negotiate a reduction in rent. NSW Fair Trading provides a dispute resolution process that landlords and tenants can use if they can’t reach an agreement themselves. Fair Trading will request evidence from the tenant about their previous income and current income from all sources, including any Government income support. Information will also be sought about any application the tenant has made for income support.

Tenants need to have an idea of how much rent they can pay when considering negotiations. Fair Trading will then contact the landlord to seek a mutual agreement on a temporary arrangement for the payment of rent.

Who else can help?
Residential and commercial tenants and landlords alike can certainly go to their managing agent, assuming the property is not privately managed. However, it is important for tenants, and commercial tenants in particular, to remember that the managing agent is paid to look after the best interest of the landlord. So, it is certainly advisable that tenants seek advice from their own independent source or advocates. Residential tenants have their relevant state’s Governing body such as Fair Trading or Consumer Affairs to assist them, whereas commercial tenants do not have this type of guidance.

Landlords can also contact their insurers – if they hold Landlord Insurance they may have “Rent Default” cover that provides cover for loss of rent if the tenant defaults on their payments.

Landlords with mortgages have the option to seek help from their bank or lender – options include renegotiating the interest rate on your loan (or locking in a low fixed rate), reducing repayments to the minimum, making interest only repayments or requesting a repayment holiday in the case of financial hardship. We consider the repayment holiday option a last resort – in this case interest would be capitalised (added to the loan amount owing) during the period of no repayments, resulting in increased debt levels and higher interest charges.

Further information

The following links to the NSW Fair Trading website provide further information on the recently announced six month moratorium on residential tenancy evictions during COVID-19:

If you need any further advice or assistance, please contact your financial adviser, or if you wish to discuss your mortgage options please contact Kristi, our Lending Associate at kristi@evalesco.com.au.

I have an amazing opportunity in my financial advisery role to make a difference to people’s lives by helping them to achieve what’s important to them.