As Australians' jobs vanish thanks to COVID-19, many are still asking themselves: what happens if I can't pay my rent?

At the beginning of April, The National Cabinet announced a moratorium on evictions (effective from 15th April 2020) in response to the COVID-19 pandemic but what does this actually mean and where does this leave both tenants and landlords?

"States and territories will be moving to put a moratorium on evictions of persons as a result of financial distress if they are unable to meet their commitments. And so there will be a moratorium on evictions for the next six months under those rental arrangements.”

Below we’ve outlined some popular questions to assist both tenants and landlords, however, at the bottom of this post, you will also locate a range of resources and additional information to assist you.

What Is A Moratorium?

A moratorium means a temporary hold on something. Often that’s a legal obligation, like following a contract and paying your rent.

Can My Landlord Evict Me?

Following the NSW Government’s announcement tenants in financial hardship due to COVID-19 were encouraged to have an open conversation about their situation with their landlords and that between tenants and landlords they could negotiation a mutual agreement, but there are some guidelines.

A landlord is required to enter into negotiations on rent reductions in good faith with tenants and if in the event that they are unsuccessful at reaching a mutually agreed outcome either tenant or landlord can seek further assistance from The Department of Fair Trading and only if negotiations have failed can a landlord seeks to terminate the agreement.

In NSW the Civil and Administrative Tribunal have the discretion to assess whether it is fair and reasonable to evict in the circumstances of each case.

I Have Lost My Income

For tenants to be protected by the 60-day stop on evictions and the longer six-month restrictions, your household needs to be able to demonstrate and one or more rent-paying members of the household have:

Lost employment or income as a result of the impact of the COVID-19 pandemic, or had a reduction in work hours or income as a result of the impact of COVID-19 pandemic, or
Had to stop working, or materially reduce the member’s work hours, because of the member’s illness with COVID-19, or another member of the household’s illness with COVID-19, or the member’s carer responsibilities for a family member ill with COVID-19
And as a result of the above factors, the weekly household income for the household has been reduced by at least 25% compared to the weekly household income for the household before the occurrence of any of the matters

So What Should I Do Now?

The message is still to be proactive and negotiate. If you’re facing that task with your landlord because you can’t pay your rent, there are few things tenant advocates say to keep in mind:

Keep your landlord or rental agent in the loop
Be transparent about your situation
Get anything you agree on in writing
Be reasonable about what you’re asking for
Get some independent advice

What About The Landlord?

Are you wondering what to do if your tenant can’t pay or has already indicated that they’re unable to pay their rent due to COVID-19? It’s only natural and it’s a common concern amongst most if not all property investors.

There is no doubt that the economic fallout and job losses caused by COVID-19 will affect all of us to some degree and whilst there has been a lot of media focus on what happens to the tenant, but what about the landlord?

In Australia, there are some 2.5 million property investors, who are everyday mum and dad landlords trying to secure a little more financial security for themselves and it’s only natural for them to be concerned about what happens and how they will cope financially if their rental income dries up, yet they still have to pay their mortgage and outgoings.

Whilst State and Territory leaders have agreed on a 6-month moratorium on evictions for tenants in financial distress, this does not mean there is a 6-month moratorium on paying the rent. This is where negotiations are best undertaken.

In NSW the State Treasurer emphasised that whilst negotiations are important this is not a rental holiday and that any unpaid rent will still accrue as arrears during this period, and whilst some of the rules have been relaxed this was no “get out of jail” card for tenants.

How Should I Respond If I’m Asked To Reduce My Tenant’s Rent?

Reduced working hours, or job loss, many Australians are now more than ever concerned and this is clearly a time for understanding and compassion - nobody wins by making things difficult for a tenant who is in financial trouble.

It’s important to understand that tenants don’t want to be in rental arrears, buy if paying their rent leaves them without money for food or medical attention, the decision most tenants will make is obvious.

Try not to be tempted to get personally involved in discussions with your tenant, that’s what you employ a property manager for, be sure to take their professional advice.

Your property manager should ask your tenants to demonstrate true financial hardship directly related to COVID-19 - simply saying “we can’t pay the rent” is not enough.

Evidence of hardship including details of their employment or loss of it, other people living in the property who can supplement the rent, assists including cash in the bank and evidence of applications for Centrelink for assistance, to establish whether the tenant’s claims are authentic.

Will My Landlord Insurance Cover Rental Losses Because Of COVID-19?

There are many different insurance companies protecting landlords and each offers a multitude of different policies.

According to EBM Rentcover Insurance, it is business as usual for your landlord insurance policy.

“Pandemics do not alter any of the existing terms and conditions in your landlord insurance policy.”

What If I Can’t Make My Mortgage Repayments?

Most banks are allowing customers to pause their loan repayments for up to six months if they’re experiencing financial hardship.

We suggest that you contact your broker or bank to discuss your situation as soon as you feel you may be running into trouble, and you may even eligible for further assistance as part of the Government Stimulus Packages?

What's New In Real Estate

Renting In A Pandemic