How will the 6-month moratorium on residential tenancy evictions work?

The good news for tenants experiencing financial difficulty as a result of COVID-19 is that regardless of where they live, they can negotiate a rent reduction or deferral and should speak to their landlord or property manager as soon as possible. The good news for landlords is that tenants will still need to pay rent.

Here are the full details of the states’ rent relief packages.

NSW

There is an interim 60-day stop on landlords seeking to evict tenants due to rental arrears. For those financially disadvantaged as a result of COVID-19 and who can prove a loss of income equal to or over 25 per cent, they cannot be evicted for a period of six months.

Landlords can still apply to the tribunal at any time to take possession of a property if they are suffering undue hardship.

Victoria

There is a six-month moratorium on evictions and rental increases, as well as tax relief for landlords who reduce rents for tenants experiencing financial hardship as a result of COVID-19.

Eighty million dollars has been designated for rental assistance for tenants in significant financial distress to help them pay their rent. Payments will be capped at $2,000.

Qld

Tenants can claim COVID-19 rental relief if they have lost 25 per cent of their income or if their rent exceeds 30 per cent of their income. Tenants can also break a lease with capped fees if they have lost 75 per cent of their income.

Initially it appeared tenants wouldn’t need to provide proof of finances, which was met with a significant backlash. This has since been amended.

WA

In Western Australia there are plans for a moratorium on evictions for six months for all tenants, except in limited circumstances such as serious damage to property or the landlord is experiencing undue hardship.

There will also be a six-month ban on rent increases. Any fixed term tenancy agreements due to expire during the emergency period will continue as a periodic agreement.

SA

Landlords cannot increase the rent during the COVID-19 pandemic even if it is specifically permitted in the tenancy agreement.

Tenants experiencing financial hardship cannot be evicted throughout the COVID-19 pandemic. Proof of hardship includes but is not limited to a letter from the former employer showing the tenant has lost their job, evidence that the tenant has applied for JobSeeker or bank statements showing little to no savings.

Either a landlord or tenant may make an application to terminate a tenancy agreement on the grounds of hardship.

ACT

Landlords are incentivised to reduce rents by 25 per cent in return for tax relief. Landlords with a 25 per cent reduction in income can also defer rates for 12 months. Evictions are banned until at least June 30.

Tasmania

Tenants cannot be evicted if they don’t pay rent throughout the COVID-19 pandemic, except in emergencies. Tenants or landlords can end the lease if they’re experiencing severe financial hardship.

NT

The government is working on measures such as “fairer terms” for new leases and longer negotiating periods between tenants and landlords, however they have not indicated they will follow the other states on other measures at this stage.

What do the changes mean for landlords?

Rent relief measures will affect landlords differently in each state. Some states and territories have gone beyond the six-month minimum, enforcing bans on evictions for the entire length of the pandemic and not just in cases of financial hardship.

However, this doesn’t mean that tenants don’t have to pay rent. In all states tenants are encouraged to negotiate a reduction or a deferral if their situation has changed due to COVID-19. While this might be a significant reduction in some cases a tenant is still expected to be reasonable and provide sufficient evidence of financial hardship. This will not mean the tenant doesn’t have to pay rent.

Landlords are able to approach their lender for a mortgage holiday or reduced repayments to accommodate any drop in rental income. And in some states there are further incentives for landlords such as land tax relief.

Landlords should keep in mind that landlord insurance won’t cover them if they negotiate a rent reduction with their tenant, even if the new measures require them to do so. Landlord insurance will only cover landlords if a tenant doesn’t pay the agreed rent under the terms of the policy. Some landlords are getting around this by waiving a portion of the rent and paying it back to the tenant.

The tenant is still paying the full amount and the balance is paid back to the tenant as a loan.

Will the changes to tenancy laws outlast the pandemic?

The Australian system has often been accused of favouring landlords at the expense of tenants’ long-term rental security. A raft of tenancy law changes was introduced in several states at the beginning of the year to give tenants more rights. The COVID-19 related measures further tip the balance in favour of tenants.

While the changes are emergency measures and aren’t designed to outlast the pandemic, it will be interesting to see whether they influence any rental reform going forward.

By Dominic Cavagnino, head of research and acquisition, Binnari Property

N.B: At the time of writing, this advice was current. This may change as government advice changes.