Confusing: tenants are going to ask for rent reduction?

Discussion in 'Loans & Mortgage Brokers' started by charlie01, 20th Mar, 2020.

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  1. charlie01

    charlie01 Well-Known Member

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    Banks are now going to offer repayment holidays for six months. Possibly tenants will have their eyes on it, asking for rent relief.
    My understanding is that the repayment holidays are about postponement of the repayment and it's NOT loan reduction. The landlords will still repay the loans in the future.
    However the rent relief means to cut the rent for tenants at the expense of landloads, because tenants will not repay the rest of the rent in the future.
    What do you guys think?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    They would be crazy for not to ask for one
     
  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Investors own their own risk including loss. Will you share 6 months of your 10 year capital gain with a tenant? No. The tenants need rent protection. Not owners. No investor concessions seems right
     
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  4. Gill Bates

    Gill Bates Well-Known Member

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    About rent reductions. Part of my consideration , would be requesting verification of income and/or Employment change status. ie documentation showing they are redundant. or Stood down with out pay for X months. ALs o need to consider what other benifits they are eligable for . Just to get proper picture of financial situation. And if their financial situation changes it would be reviewable.
     
  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Agree. Manage the tenant issue and assist to the extent you can. If you can evidence loss of work income it may be temporary and should be supported. State Govt havent yet said so but evictions may have severe limits enforced for a while and tribunals will likely be asked to do as much as they can to stop poor landloard actions. Owners will likely be able to seek lender concessions which assist.
     
  6. paulF

    paulF Well-Known Member

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    PM last night briefly mentioned in his interview on the ABC that they are looking into banning evictions in the current conditions too.
     
  7. Gill Bates

    Gill Bates Well-Known Member

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    RE: ...However the rent relief means to cut the rent for tenants at the expense of landloads, because tenants will not repay the rest of the rent in the future. ...."

    That should be negotiated... Some tenants would be in financial position to repay their rent in the future. Some may not. So decision about to give free rent or ask them to pay back rent should be made when they have a job again ...
     
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  8. marmot

    marmot Well-Known Member

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    I dont think you really will have a choice.
    Just use the safety net for property investors which is negative gearing .
    Long time holders of inv property should have no problems as they should have large buffers in place .
    Newish investors may have a problem, but any investment carries risk.
    If you dont understand the meaning of risk simply dont invest in property.
     
  9. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    State law. Maybe a limit of tribunal and legal acts re tenancy. I would argue LL insurance will be more important as they can't redefine a policy re default
     
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  10. Blueskies

    Blueskies Well-Known Member

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    Why? If a tennant is facing hardship and asks for a partial rent holiday that is fine, but it should be completely reasonable to accrue the shortfall and pursue repayment in full at the other end of all this. To say investing in property carries risk is one thing but to say we need to abandon the entire concept of a legal contract is another entirely.

    The government is not giving money to business, it is giving interest free loans, the banks are capitalising interest during mortgage holidays, that interest will need to be paid back eventually. Why should landlords just forgoe rent cometely and cop the holding costs on a property that they have a contractual agreement to be paid for?

    The outcome should be fair and win-win not one sided.
     
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  11. marmot

    marmot Well-Known Member

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    That word "fair" does not really exist at the moment.
    There are many businesses that simply wont survive, a few of these may be really big companies that just loaded up with cheap money.
    The same goes for property investors , some may have just loaded up with really cheap money , threw out any sort of conservative behaviour and never saved for a rainy day.
    Other would have taken a slower approach and paid of property with large buffers.
    Some will survive , some simply wont.
    There is probably going to be over 100,000 people lose their jobs this week , with more next week , my understanding is they wont actually see this money till the end of April, the overwhelming majority will be 20-30 year olds that work in tourism, travel and hospitality.
    Then they are being told to not go out to save the lives of predominantly older people , while the older people are running around threatening then with eviction if they dont pay their rent on time and in full, what a crazy messed up world we live in.!!
     
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  12. AlphabetSoup

    AlphabetSoup Member

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    Speaking as a tenant, if, at the end of my lease, there are a bunch of other empty apartments in our building, of course I'm going to request a rent reduction (not due to decreased income - I'm an essential worker). If my rent isn't reduced, I'll simply move over to a cheaper property.

    A lot of international students/working holiday makers in my local area have recently left the country (for some of them, it was a sudden and unexpected decision to fly home). I imagine that if airbnbs aren't able to get bookings (of course people will be cutting out holidays if they don't have enough work coming in), airbnb owners might inevitably attempt to lease their properties to residential tenants too. There are going to be reductions in demand, and increases in supply for my local inner suburban area (close by a university).

    Many of my peers have lost their jobs, a few have already started considering moving back in with parents/other family/etc to cut down on costs. I believe there will be market pressures that inevitably lead to reduced rents for many.
     
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  13. thatbum

    thatbum Well-Known Member

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    I honestly can't see the government directly intervening in tenancy law on this issue.

    The legislative framework currently has some limited scope to suspend termination dates based on relative hardship, so at most I can see maybe Covid related stuff being weighed up in the mix of factors - but that will probably be the extent of it.
     
  14. Blueskies

    Blueskies Well-Known Member

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    That is an unfair stereotype/generalisarion. The assumption that landlords are greedy boomers sitting on a cash pile that can easily afford to take the hit.

    I could call on an equally unfair stereotype and ask how many of those same 20-30 somethings made the choice to take Insta-worthy international holidays and splash their earnings on drinks and dining out instead of putting something away for a rainy day? Lucky their landlord made some sacrifices and can afford to keep a roof over their head.
     
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  15. marmot

    marmot Well-Known Member

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    I'm in my mid 50s, I travelled right most my twenties, backpacked around Europe a few times , travelled extensively around Australia , then bought a house , that one was paid off in 10 years, then bought another one and then another and finally paid them all off.
    We have big holidays every year, I really wish people my age and older would just stop banging on about how hard life was.
    If they want to spend years just maxing out their tax deductibility debt , thats fine, just dont complain about it when the **** really hits the fan.
     
    Last edited: 24th Mar, 2020
  16. paulF

    paulF Well-Known Member

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    Agreed and that's exactly what the banks are doing with bank holidays and deferring mortgage payments.

    @marmot , tenants are not the only people going through hardships at the moment.Landlords will suffer as well just like everyone else.
    Whatever the solution for the problem, it needs to be fair for both sides. And just because someone owns a rental , doesn't mean they are well off or doing any better than most. Most people who own more than one rental property are very scarce and seems like you are one of them (good on you for being in such a position).
     
  17. mr_alex

    mr_alex Well-Known Member

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    I agree that rent should be deferred full or partially for tenants, not simply cut if the banks are only deferring. But what if 'the other end of it all' runs past your lease and your tenant decides to leave whilst oweing you the rest of the full rent? Would some paperwork need to be written up detailing that if they choose to leave at the end of the lease, they are still required to pay the remainder of the deferred rent.
     
  18. Jasmine

    Jasmine Well-Known Member

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    This is not realized monies. And I further suspect those 10 year capital gains have just evaporated.
     
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  19. Bazza

    Bazza Member

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    I have interest only loans so wouldn't it be fair to ask the tenant to pay this interest only if they request a decrease in rent. That way it is a win-win. The tenant gets their discount and I get the mortgage paid.
     
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  20. Codie

    Codie Well-Known Member

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    Agreed.

    I’m in my 20s and am in the very early stages of investing or trying to create some wealth, have sacrificed and worked very hard to get 3 properties under me & if tenants decide to take advantage of this it will absolutely sink me & my partner just as we are trying to start a family.

    We have small buffers, landlords insurance, well maintained properties, but it’s hard enough trying to buy a house these days let alone have these large buffers @marmot is talking about, what world do you live in?