Australia’s residential landlords are in need of assistance from the Australian Government during this Covid-19 pandemic, to enable them to provide the relief that is expected of so many to their tenants. The Chairperson of the Property Investors Council of Australia (PICA) has confirmed this highlighting that many landlords are simply “everyday Australians” and require some assistance and relief just like everybody else.
As of Saturday 4th April 2020, the number of cases in Australia is 5,454 and expected to continue to climb further. While many of the announcements from the Australian Government, particularly the JobKeeper payments, will allow many Australians to keep their jobs, there will continue to be many more who will lose their gainful employment and experience some degree of financial stress. This impacts Australians of all walks of life, and it’s important that we respect each other and treat each other with compassion especially during this difficult time.
This week we’re exploring the commonly asked questions from residential landlords when it comes to their rights as property owners. We have seen many headlines and media regarding the loss of ability to evict tenants even if they don’t pay their rent, so we’d like to set the record straight on many of these items.
What is the Moratorium on evictions?
On Sunday 29 March 2020, Prime Minister Scott Morrison announced that all Australian states and territories would move to put a 6 month moratorium on evictions of residential tenants for anyone negatively impacted by Covid-19. Simply put, this means that residential landlords are not allowed to evict tenants who are experiencing severe financial hardship during this time period.
To be clear, this does not mean that tenants can simply stop paying rent because they don’t want to. They must continue to pay rent if they can afford to, and if necessary, can discuss any financial difficulty with the property manager and landlord, which will generally result in the rent payable accruing to be paid once they are in a stronger financial position.
It’s also important to bear in mind that the process for evicting a tenant would always take at least 1.5 months anyway, and it could be extremely difficult to fill a vacant residential property during this time. Our advice is for both landlords and tenants to respect the position of each other and only if required, seek to reach a mutually beneficial outcome so that we can all come out of this in a sound financial position.
What are the options for tenants who are in a difficult position and can’t pay rent?
For those tenants who are genuinely in a financial position where they can no longer pay their rent, then it’s important that they notify the property manager and/or landlord as soon as possible. As the landlord, you can then explore whether you offer a rent-free period, a reduced rent for a period of time, or reach a mutual agreement that you will in fact terminate the lease. In the event that an agreement can not be reached, then it’s important that the termination process follows the relevant legislation.
Can I ask for proof as the landlord that my tenants have lost their job?
Yes, as a landlord you can request proof that your tenant has in fact lost their job or seen a significant reduction in their hours. This is a perfectly reasonable request, particularly during this difficult time for everyone. What is not allowed is a request to see your tenants’ bank statements to confirm that they don’t have any savings or other liquid investments.
What if I lose my job as the landlord?
Of course, there is every possibility that you as the landlord could also lose your job or see a significant loss in your overall revenue. If this does occur and you’re worried about being able to maintain your loan repayments, particularly if your tenant is also experiencing financial difficulty, then you can contact your bank to discuss a repayment holiday on your mortgage, or even seek to reduce your repayments. You can explore the recent responses from some of the key lenders here.
We expect that there should be further relief announced by the Australian Government for residential property landlords, such as bringing forward depreciation deductions or otherwise, to ensure that landlords are not the only ones to carry the burden of this pandemic. As residential landlords, we have already been through the increased difficulty of securing finance over the last few years, so we belief many would suggest enough is enough.
Will my tenant have to repay any unpaid rent?
Unfortunately, there is no clarity on this one just yet, as to whether any unpaid rent from tenants would actually have to be repaid in future once they are employed again or see a rise in their household income. If there is little in the way of relief provided for residential landlords, then we would expect any unpaid rent to have to be recovered in future, otherwise landlords are left carrying the burden alone.
What if my tenants are in self-isolation?
Any tenants who are in self-isolation for 14 days due to overseas travel or otherwise should immediately notify their property manager and landlord. This could significantly impact any plans for inspections, viewings or otherwise. It’s also important that your tenants notify anybody else living in the property also.
What do we expect the Government to do for landlords?
There are many options available for the State and Federal Governments to action to provide relief for landlords. This could come in the form of reducing Land Tax, which is often the most significant expense for many residential landlords, particularly if they are foreign owners and faced with land tax surcharges. We could also see lending conditions relaxed, which would allow landlords to refinance their loans to not only much lower rates, but also to extended terms and even to interest-only repayments to ease the financial burden during these times. We may also see further relaxation in terms of depreciation claims, which could allow residential landlords the ability to bring forward loan repayments.
What should I do as a landlord now?
It’s important that you review your current financing structures now. While your job may be certain at this stage and your tenant may not be faced with any worries about their job, there is a great deal of uncertainty about how long the economic impact of the virus will last, as well as how long companies can face reduced revenue without needing to cut costs further.
If you have the opportunity to reduce your interest rate, shift to interest-only repayments, or extend the term of your loan for now to reduce the financial burden, we would suggest reviewing this sooner rather than later, as it’s likely that many lenders will tighten their criteria over the coming weeks and months to reduce their own risk.
If you have any questions about your rights as a residential landlord, or you want to explore ways to improve your financing, reach out to our team today.
LoanSuite Pty Ltd is your lending partner for all of your home loan, investment property, business and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.
Book an obligation-free, complimentary consultation here today.
LoanSuite Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.