How are landlords and tenants dealing with the new legislation pertaining to financial hardship as a result of COVID-19? Here are some frequently asked questions.
On 8 April, the South Australian State Government passed legislation that protects landlords and tenants during the COVID-19 crisis.
Property Managers are quickly adapting to the new rental regulations in Australia proposed on a Federal level and implemented at a State level.
In Summary, these new measures look to;
- institute a short-term moratorium on eviction for non-payment of rent due to severe rental distress as a result of COVID-19
- prevent landlords from increasing rent
- allow landlords to use technology such as face-time, live video or time-stamped photos for routine inspections where possible, unless there are exceptional circumstances and sufficient safety measures in place for an inspection in person
- extend the tenant’s ability to arrange to have repairs carried out by agreement with the landlord
- provide a general protection for tenants who breach their agreement as a result of complying with a direction under law relating to COVID-19.
COVID-19 time period starts on March 30th to September 30th 2020.
To keep everything in perspective, as Property Managers we feel that the relationship with the tenant is important. Having empathy with tenants that are going through genuine financial hardship will mean a lot to them.
The stress and worry of losing your job or your business is enormous. The purpose of the new guidelines is to provide relief to those that need it.
Here are some common questions, or FAQ’s, we are getting asked regarding tenancies and COVID-19
Can you offer a rent increase during this time period?
No, rent increases are prohibited until September.
What if the rent increase was agreed prior to March 30th but not yet in place?
The rent increase can no longer be enforced and the rent must remain the same.
Will the rent then be increased after the COVID restrictions are lifted?
As far as we can understand, the rent can be increased once the restrictions are lifted.
How can we carry out routine inspections?
These now must be done by video unless in exceptional circumstances. Exceptional circumstances are not defined but would cover people that cannot or have not ability to use audio visual equipment.
You cannot agree with a tenant to do a routine inspection.
How are maintenance requests now dealt with?
This is still the same as normal, the landlord has the obligation to do maintenance and the tenant has the obligation to report it.
The tenant and the landlord can agree that the tenant can arrange the maintenance, this is an option only.
How do we handle requests for reductions to rent by the tenant?
Every owner or Property Manager must negotiate with tenants that are going through financial hardship and can’t pay rent as a result of COVID-19. One of the first things that will be asked in a Tribunal hearing is ‘did you negotiate with the tenant?”
In order to ascertain the level of hardship, KingsCoin are asking tenants to complete a form detailing their circumstances, the rent reduction they are seeking, the time period and asking for proof of their financial hardship.
The proof requested can be a pay slip, bank statement, Employment Separation Certificate and or details from their accountant.
The agreement can allow the rent to be waived or deferred. If it is deferred, then the rent is repaid over time and a payment plan is entered into. The payment plan should start once the tenants situation changes or the COVID restrictions are removed. It is also sensible to spread the payments over a period of time to a maximum of the lease end date.
If an agreement cannot be reached – the matter may then go before the South Australian Civil and Administrative Tribunal.
However, where tenants have been impacted by COVID-19 but still have the capacity to pay their rent, they should continue doing so.
It is important that any agreement is documented in a Deed of Variation pertaining to the original lease agreement and is signed by both the tenant and the landlord or Property Manager.
If the tenant is in arrears, are arrears notices and Form 2’s still issued?
Under the new laws, a residential tenancy cannot be terminated if failure to pay rent is a result of financial hardship stemming from the COVID-19 pandemic.
Until a written agreement is put in place then the normal arrears procedure will still be enforced and the usual actions taken.
What can a landlord do if they suspect a tenant falsely claims they cannot pay rent due to COVID-19?
If a landlord believes that a tenant has the capacity to pay, they can seek conciliation or an order through SACAT.
A Form 2 is issued to the tenant requesting that they remedy the breach of the lease agreement and they have 7 days to make good on that request. If they do not then the landlord can apply to SACAT to review the case.
SACAT will then require proof of hardship from the tenant and then assess the situation and make a judgement.
If the tenant cannot prove hardship then the Tribunal can order an eviction.
Will a tenant be blacklisted if they cannot pay rent due to financial hardship?
The new laws prohibit tenants from being blacklisted on residential tenancy databases and provide “a general protection for tenants who breach their agreement as a result of complying with a direction under law relating to COVID-19”.
Can a tenant be evicted if the lease expires during the COVID-19 period?
If the tenant is on a fixed term lease that is due to expire, we issue the Form 2A to the tenant 28 days prior to the lease end date. If the tenant refuses to hand back vacant possession of the property then we must apply to SACAT for an order.
Depending on the circumstances of the tenant, the Tribunal may or may not evict the tenant. The priority will be on avoiding making anyone homeless or putting them into a situation that is worse than their current situation.
What relief packages are available to landlords that are going through financial hardship?
If you are going to the Tribunal, a landlords case of financial hardship can also be considered as part of the process.
According to the Australian Banking Association, you can apply for a moratorium on your mortgage. While you won’t have to make any principal or interest payments for the 6 months, interest will continue to be accrued, it can then be paid off over the life of the loan once repayments begin again, or the length of the loan can be extended.
Also, as long as you were up to date on your payments before COVID-19 the deferral will not impact your credit rating record.
Revenue SA advises that businesses and individuals paying land tax quarterly in 2019-20 will be able to defer payment of their third and fourth quarter instalments for up to six months.
For 2020-21, Land Tax Transition Fund relief will be increased from 50 per cent to 100 per cent, based on existing relief criteria guidelines.
What can a landlord claim for on Landlord Insurance?
In order to make a claim for loss of rent, the usual arrears procedures must have been followed, therefore the Form 2 must be served on the tenant.
Typically, landlord insurance does not cover the first 6 weeks of rent loss, as the bond is supposed to cover this. Thereafter you can claim for loss of rent, but only after the fact. Most policies have a time limit on how much loss of rent can be claimed, which will vary from policy to policy, but the average is around 5 to 6 weeks.
However, if you have entered into an agreement to waive the rent, then the insurance policy may not be claimed against.
The SA Government has introduced travel restrictions to slow the spread of COVID-19. Non-essential travellers arriving at a SA border must complete 14 days of forced quarantine – and this will apply to any landlord who owns a rental in SA but lives in another state/territory and wishes to visit their investment property.