Contrary to the general perception that landlords only care about rental profits, the landlords that we work with tend to care very deeply for their tenants.
Tenants unable to pay rent is a concern for landlords right now, and it’s clear they wish to help out. The flip side is that landlords are facing a myriad of payments hanging over them themselves, including mortgages which don’t just disappear.
Following COVID-19 lockdowns all over Australia, the immediate ramifications have been a jump in unemployment and significant loss of income.
A lot of property investors were left wondering whether their tenants would be able to pay their rent, with stress coming from all sides of the coin.
The federal government has announced plans on an assistance package for tenants and landlords. The government has decided to earmark $440 million to provide relief to those tenants and landlords affected by the government enforced lockdown.
The aim is to ensure that over the next six months, tenants can continue to reside in their property. A moratorium has been placed on any forced eviction resulting from rental arrears for the next six months as well.
How the Relief Package Works
The government has decided to split the relief package half way between residential and commercial renters. Each sector is granted $220 million each.
The method laid out by the government asks the landlord or property manager to start negotiations with tenants unable to pay rent because of financial trouble.
The NSW Civil and Administrative Tribunal will oversee all applications related to tenant eviction, and the tenants will be protected from eviction until the tribunal feels the negotiations between the tenant and the landlord have been finalised.
Tenants will eventually have to pay this rent, but later on. Other States are following similar lines of action with more details to be announced.
Landlords are provided a land tax waiver or a 25% rebate. Landlords will be able to recover their properties from tenants if they are facing financial hardships but not before 60 days have passed and the evicted tenants won’t get a black mark against their names.
The government has emphasized that both landlord and tenant should attempt to honor their rental agreements, and that only tenants that have lost 25% of their income are eligible for this relief package.
There are several misconceptions in the rental market that should be cleared. The moratorium from eviction does not translate to rent-free living for the tenants. Any and all unpaid rent will be accrued to be paid at a later date.
Queensland Relief Package
The government of Queensland has decided to earmark $400 million to help tenants and landlords during this troubling time. A one-off payment for a month’s rent will be provided for tenants and granted to their landlords directly, the amount is capped at $2000.
Who is Eligible for This?
Only residents of Queensland are eligible, and only for tenants who have applied to Centrelink after losing their income but their applications have not been processed yet.
The tenants must have bonds with the Residential Tenancies Authority and possess less than $10,000 to qualify for this relief package.
How to Handle Tenants
It’s a tough time for all the stakeholders. This is the time to be compassionate, understanding, flexible, and accommodating. As a landlord, you have to find a solution that is a win-win for everyone.
However, it is best to let a property manager manage the negotiations on your behalf. Heed their professional advice, since they know your current and future impending financial hardships.
Your property manager probably knows how to guide your tenant to benefit government relief packages, and they can ensure the tenant is in fact eligible for the relief.
It is also pertinent to mention that if a tenant doesn’t qualify for the relief packages, he should be honouring the rent agreement.
As a landlord you have to ensure all of your deserving tenants get relief, so you have to ensure no one abuses the new rules. If the rules are abused, actual tenants suffering from financial issues will suffer the most.
It is important you don’t do anything that jeopardizes your landlord insurance, specifically reducing rent which would lead to the landlord unable to claim losses on his insurance policy.
Good news for landlord, insurance companies have declared that a global pandemic withstanding, the policy will cover what it was designed for.
You are highly advised against reducing rent, it will jeopardize a landlord’s insurance policy, and it could also potentially risk any benefits the government plans to announce for the tenant and the landlord.
Most banks have agreed to graciously pause loan repayments for up to six months. Discuss with your bank in detail, you might be eligible for a government relief package.
It is important to understand that the bank is merely deferring your payment, not waiving it off. Landlords will have to pay it back.