It has been a long and difficult wait for landlords, tenants and real estate businesses alike over the past weeks as the economy has deteriorated significantly and many Government assistance measures have been announced.
Until recently, there had been next to no mention of how landlords, tenants, and real estate agencies should navigate this challenging time. Finally, clarity has been delivered via a media release from the NSW Government on Easter Monday 13th April.
The Rental Situation to Date
Up until now, much of the media reporting and public assumption around how residential tenancy agreements would be affected by COVID-19 has centred around incorrect interpretation of comments made by the Federal Government. For example, the Prime Minister’s mention of a moratorium on evictions was misinterpreted by some to mean that rent would not be payable for a 6 month period.
Furthermore, some parties had misunderstood that comments from the Federal Government specific to commercial tenancy agreements related also to the residential tenancy space.
All the while, mainstream media air time and social media space was giving life to the rather one-sided and anarchic idea of a 6 month “rent strike”. Again, this “solution” was fuelled by an incorrect assumption that many landlords would be financially better off than tenants during these times, due to assistance measures put in place by banks to minimise impact to investors unable to meet their mortgage repayment obligations.
In summary, there had been a lot of misinformation and a lack of clarity around how rental agreements would be affected during COVID-19. Until now.
Rental Measures Clarified by NSW Government
While full details of the NSW Government’s measures are outlined on the NSW Fair Trading website, the following provides a summary and covers the areas of most concern that we have seen in conversations with landlords and tenants over recent weeks.
1. 60 Day Stop on Termination Notices
The NSW Government has declared a 60 day stop on landlords issuing termination notices or applying for NSW Civil and Administrative Tribunal (the Tribunal) eviction orders due to rental arrears, where tenants are financially disadvantaged by COVID-19.
This period has been specified to allow time for Government financial support to reach those who need it and to limit social movement in order to minimise public health risks during the COVID-19 pandemic.
Importantly, the Government has clearly defined the circumstances under which households are deemed to be financially impacted (as covered below).
2. Landlords Required to Negotiate Rent With Tenants In Good Faith
Where tenants are eligible, landlords are required to negotiate rent reduction measures with the tenant in good faith in the first instance, and can only seek to give a termination notice or apply for an eviction after the interim 60-day stop if it is fair and reasonable in the circumstances of the specific case.
3. Extension of Notice Periods For Some Lease Terminations
Along with these calls for negotiation and restrictions on evictions for rental arrears, the Government will be extending the notice periods for certain other lease termination reasons to 90 days.
Eligibility Criteria To Determine COVID-19 Affected Households
Tenants as a household must demonstrate that they are impacted by COVID-19 in order to be eligible for the 60-day stop on evictions, the longer 6-month restriction on evictions due to financial hardship from COVID-19, and to be eligible for an alternative rent arrangement to be agreed with the landlord.
A household is deemed COVID-19 impacted if:
a) one or more rent-paying members of a household have lost employment or income (or had a reduction in employment or income) due to COVID-19 business closures or stand-downs,
b) one or more rent-paying members of a household have had to stop working or reduce work hours due to illness with COVID-19 or due to COVID-19 carer responsibilities for household or family members,
the above factors result in a household income (inclusive of any government assistance) that is reduced by 25% or more.
Households who have not experienced a reduction in weekly income of 25% after tax or more are not deemed eligible for these assistance measures and must keep paying rent per their existing tenancy agreement or risk termination of tenancy.
Further clarity around these measures and the eligibility criteria is documented in the following flowcharts issued by NSW Fair Trading:
Evidence Required From A Tenant to Show They Are Impacted
NSW Government has outlined the following documents that the tenant can provide show that they are impacted by COVID-19:
Does Rent Need to Be Paid Back If An Arrangement Is Made?
One of the most frequently asked questions in recent times relates to repayment of rental arrears. i.e. if an eligible tenant has negotiated a reduced rent period with their landlord, will the amount of reduced rent need to be repaid or is this amount waived?
The NSW Government has stated “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 as required)”.
Will Landlord Insurance Cover Rental Losses?
Advice from the NSW Government is that landlords should check their insurance policy to see whether they are covered for rental losses during these times. Different policies will have different limits and requirements. Many insurers are adopting new procedures to deal with the impacts of COVID-19, and may require evidence that the landlord has attempted to negotiate with the tenant.
Further detail about these measures can be found on the NSW Fair Trading website.
Carnelian Property Management Newcastle NSW
We are a family-owned and run Charlestown real estate agent offering expert property management across Newcastle and Lake Macquarie.