There’s been so much media on the plight of renters in the COVID-19 crisis that landlord rights feel lost in what has become a very public and somewhat one-way conversation.
Here, we attempt to clarify issues from the landlord’s perspective.
Since March 29, there has been a national moratorium on evictions of those who are suffering financial stress because of the virus crisis.
This does not mean there can be no evictions for reasons such as property damage, or failure to pay rent without reason. You should not fear a malicious rent strike, or a tenant merely trying to get away with dodging payment.
Expectations on how you should act as a landlord is set out in a Mandatory Code of Conduct that was released on April 7. It covers general principles that tenants and landlords should use to negotiate any rent relief or even an exit from the lease.
Its relevance will last as long as the JobSeeker program does – and here’s why that’s relevant: A tenant must qualify for the program to come under the rent relief code.
If you’re a landlord of commercial space, then the code applies only to companies with an annual turnover of $50 million or less which is the government definition of an SME (small medium enterprise)
We recommend that you ask the advice and assistance of your property manager to not only navigate the code but also find any compromise with your tenant.
Here are some tips to get you up to speed:
- Waivers: There will be used for commercial property, mostly. If you agree to a waiver, then you agree to a rent-free period. You’ll not get the money back.
- How a waiver might work: They should be no less than 50% of the total reduction offered by landlords (unless both parties agree otherwise). Here’s an example: if your tenant demonstrates a 50% revenue drop due to COVID-19, then you might waive 25% of the rent and agree to defer another 25%, thus making up for the tenant’s 50% fall in revenue.
- Deferrals: If you permit a deferral, then you will see the money later. The deferred rent will be amortised over the remainder of the lease, or over two years, whichever is greater.
- You cannot seek a bank guarantee or deposit from the renter to ensure they pay the deferred rent. This, in effect, is an unsecured loan.
- If you, as a landlord, you seek and receive any benefit from your bank – e.g. you have arranged for your repayments to be reduced – then you are expected to pass this on to the tenant. The government is smart to those who might try to game the code for profit.
- Tenants must continue to adhere to the other terms of the lease, such as keeping the property clean.
- There can be no early termination of a lease without both parties agreeing.
- If no agreement can be made, then the code states you and/or the tenant must seek resolution through the relevant state or territory department or dispute resolution mechanism.
- Above all, act in good faith.
If you’d like help understanding the code and how it affects your property, contact us. (Insert agent details here.)
