“I lost my job and can’t pay my rent!” – Covid-19 creates anxiety for tenants and landlords
COVID-19 emergency measures introduced by NSW government
The NSW government has passed the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 in order to help alleviate the financial pressures facing tenants during the coronavirus crisis.
The Act consists of two schedules that amend various Acts for the purpose of providing relief to our community.
Schedule 1 relates to how criminal court cases will be dealt with, including access to recorded evidence.
Residential Tenancy Regulations could prohibit evictions as emergency measure
The amendment allows for the Residential Tenancy Regulations to:
- prohibit the recovery of possession of premises by a residential landlord for six months from the date of the regulation
- terminate a residential tenancy agreement, occupancy agreement, or site agreement for six months from the date of the regulation
- regulate or prevent the exercise or enforcement of another right of a landlord relating to the premises (for example, a right to receive rent) for six months from the date of the regulation
- exempt a tenant from the operation of a provision of an Act or agreement (for example, paying rent) for six months from the date of the regulation
This does not mean that there is currently a regulation allowing for a tenant not to pay rent or preventing a landlord from enforcing payment of rent.
Moratorium on forced evictions due to rental arrears and financial hardship
On 13 April 2020 the NSW government announced that it will be implementing an interim 60-day moratorium on applications for forced evictions due to rental arrears, for those who are enduring financial hardship due to coronavirus.
The moratorium includes new applications to the NSW Civil and Administrative Tribunal (NCAT) for forced evictions over rent arrears related to COVID-19.
The government has also introduced longer six month restrictions on rental arrears evictions for those experiencing financial hardship due to COVID-19. (For more information, please see Funding boost and emergency measures to protect tenants and the website of NSW Fair Trading: Six month moratorium on residential tenancy evictions during COVID-19.)
New requirement for landlords and tenants to negotiate in good faith
Where a household is struggling to make rental payments and has suffered a loss of income equal to or greater than 25 per cent because of the impact of coronavirus, there are new requirements for landlords and tenants to enter into negotiations in good faith over rental payments.
Landlords and managing agents have an obligation to enter into such negotiations with tenants prior to seeking a forced end to the tenancy.
Tenants will be protected from eviction until NCAT is satisfied that negotiations have concluded. Any unpaid rent will accrue as arrears during this period.
Tenants suffering hardship as a result of COVID-19 will not be blacklisted for the accrual of rental arrears during this time.
Measures intended to assist landlords
Residential landlords would be eligible for a land tax waiver or rebate of up to 25 per cent if they passed the saving on to tenants who are experiencing financial hardship.
Both landlords and tenants are expected to continue to honour existing agreements to the extent possible, but both sides are expected to try to negotiate new temporary terms, so that tenants are not left homeless and landlords can maintain some level of rental income.
Does the tenant have to pay the arrears?
The amount of rental 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. Fair Trading can help to resolve any disputes which arise during such negotiations.
If a landlord and a tenant come to an agreement that interest will accrue on unpaid rent, then a simple guide is the RBA cash rate plus one or two per cent.
What if the landlord refuses to negotiate and you can’t reach an agreement?
If the landlord and tenant can’t reach an agreement about a temporary reduction in rent, they can make use of the NSW Fair Trading dispute resolution process. Fair Trading will request evidence from all sources from the tenant about their previous income and current income, including any government income support and 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.
Being open with your landlord or tenant and your bank
If you are facing difficulty during COVID-19 and cannot pay the rent, or you are a landlord and your tenant cannot pay the rent and you have conflicting obligations to your bank, then it is important to discuss it both with your tenant or landlord and your bank.
Everyone is in the same boat, and the government has made it clear that if a tenant cannot pay, and the landlord has a competing mortgage, then the banks will lend a hand.
If you are struggling to negotiate on your own, contact your lawyer, who can help navigate these uncertain waters.
What about if you rent a commercial building?
The Schedule 2 amendment allows for the regulations under the Retail Leases Act to be amended to:
- prohibit recovery of possession by a landlord
- prohibit termination of a lease
- regulate or prevent the exercise or enforcements by a landlord of another right of a landlord
- exempt a tenant from the operation of a provision of an Act or agreement
Again, this is for a period of six months from the regulation coming into effect.
At this stage there is no regulation to that effect, and therefore, you should be liaising with your landlord or tenant as well as your bank, and also with your lawyer to ensure that you are complying with the regulations, and to know what your rights are.
For more information, please see How does coronavirus affect your retail, residential or commercial lease? and Backing out of a house sale due to COVID-19? How will the property sale process change in the face of coronavirus?