How has COVID-19 affected you as a landlord?

Two weeks ago my tenants up north did a runner after rent arrears, so I'm relieved I don't have to stress about them taking advantage of this situation, even though the property is empty.
I currently rent a studio whilst letting my PPOR out as AirBnb - but thinking about moving back in. (Difference of $180pw - but paying for both if AirBnb is empty). We have to help people who risk homelessness, but how do you know which tenants to trust (if they are new tenants)?

 

@Mel Morgan can you elaborate on this one? How will landlord insurance be impacted. So government is asking LL to help by reducing rent, but if doing so exposes them to vulnerability in policy coverage, then it isn't really practical for LL to do so. I've tried to call my insurance to find out more (Terrischeers) but having trouble getting through.

If your tenant has asked for a rent reduction then how to handle this? I see only two options:
1. Give them rent reduction if you can afford to with the risk of insurance not covering in case something is going to go wrong (and quite likely so in the midst of this virus)

2. Decline the rent reduction - but thats not going to get anywhere if they cannot pay? Worst case scenario is they end up staying, paying no rent but you can't evict them because my PM tells me they got a memo today from Dept of fair trading saying you cannot evict tennant if they face financial hardship during this pandemic. In this case, your LL insurance kicks in but only covers you for a few weeks of rent?

I see no win win situation, are we expecting the govt to be giving more guidance on this matter? I was of the impression that had a cabinet meeting yesterday to talk about rentals but i haven't heard anything announced yet.

 

@giraffez @Mel Morgan I asked the rent cover lady about this and she said it’s fine to drop rents, her company is EBM.

 

LL insurance covers arrears thaat are lost (after legal avenues etc are reasonably pursued). Not an agreed delay, a reduction or other agreed solutions that may even alter the lease terms. Insurance is a final loss solution.

There seems to be a stimulus response with states and Commonwealth that adresses unpaid rent etc or even a centrelink rent support payment of a set amount, a floor or a % and it could be a term guarantee eg 6 months. Be patient. Apparently it is very hard to resolve to meet all parties as a solution. LL insurance is last resort and I suspect they wont be approving claims in a hurry. The LL insurers will likely adapt to what is announced

 

I'm wondering whether a "loan" to tenants would be a way forward - for example, tenant loses job, tenant stops paying rent, however the debt is not forgiven by the landlord, merely deferred, so when the tenant's situation improves, they pay increased rent to repay some of the debt.

 

I think that is the only way, and it would need to be case by case (landlord may have no buffer)

 

@Hetty did she indicate how best to go about a rent reduction? Does a new lease need to be drawn up?

This sounds like a goreat idea but I don't know how this can be technically executed. Do you draw up a contract? Does this require a lawyer? And how to monitor when the tenant's situation improves, based on their view ?

I'm reading the Bank's LL relief measures with the "payment holidays". On the surface of things, it's great. But when you think about what it means in the long term, LL's will be made to make higher repayments to make up for the "break" period as well as the interest during that period. Literally they have hit the pause button but reap everything back after a few months plus more with interest? Have I misunderstood this?

If I have read the policy correctly, this in no way is comparable to the relief a rent reduction LL are asked to offer. In a rent reduction, the tenant does not have to pay back the difference but in a payment holiday LL will need to pay back everything to the bank plus more interest. It's clever for the Banks to do this - 1. Shows the Bank are doing their bit (but are they really?) 2. Banks never lose out and still benefit in the end.

I can't see any real relief actually being offered to LLs at this point in time by anyone to be honest.

 

We've been advised by insurers to follow the process as usual- Notice to Remedy, Notice to Leave, Tribunal, etc.

The reality is that the tribunal hearings are going to be significantly delayed AND I've already heard that in existing cases, Adjudicators are refusing to evict people who are experiencing hardship. This is going to really suck if you have an awful tenant who deserves to be thrown out, but it creates a legitimate opportunity for us to work with people that are doing their best to keep a roof over their head.

So far very few of my tenants (touch wood!) have called to warn me that they're in trouble, one of the few advantages of a low socioeconomic area is that the centrelink benefits are enough to cover 90% of my rents!
For those who are in trouble, we've explained that we need to follow the process as usual when it comes to issuing the correct notices. HOWEVER- We're aware that the eviction process is going to be seriously drawn out (6+ months), which gives us an opportunity to work with them on a payment plan, deferred payments, etc etc. I've explained that if they cooperate as best as they can during the crisis, once we get to the other side and they're in a position to make good on the amounts owing, we will wipe all record of the eviction hearings from their file.

I'm sure more will change in the coming days/weeks/months, but at this stage I feel like this strategy is legal, ethical and covers the needs of both parties.

 

@giraffez no she didn’t say anything about that. I wouldn’t think you’d need a new contract unless it was long term or for the duration of the lease, just a short agreement in writing, an email or letter.

 

What be your plan if they just stop paying completely as soon as you start the eviction process.
You cannot double evict someone.

 

I never thought of it this way before, but i'm also fairly new to this. Does this mean centrelink recipients are one of the best tenants to have from a financial stability point of view (not just in a crisis like this but in general)?

 

Well, they can't get fired from 'Cenno

 

Yes haha I always had the misconception in my head they were the ones financially unstable hence why they need welfare. If i had a facepalm emoji, that would go here!

 

@giraffez now my PM is saying I need a new lease.

 

I'm not sure what you're asking sorry Marmot? If they stopped paying, we'd continue with the eviction process?

 

This is being pushed through isn't it?

Australian landlords won't be allowed to evict tenants as part of a rental rescue package aimed at protecting those struggling throughout the coronavirus crisis.

State governments are reportedly working on the interventions to protect the eight million people in rental homes.

The federal government is also reportedly considering income tax cuts for landlords who reduce the rental amount that tenants must pay.

The Australian Financial Review cited sources on Thursday as saying state and federal treasurers were discussing the idea as a way of providing relief for renters struggling financially amid the coronavirus outbreak.

 

My gut feeling is that they are going to formally stop evictions, hopefully they'll provide us with an alternative process to go with it. In the meantime, we have to follow 'normal' procedures.

 

Thanks. But wouldn't drawing up a new lease mean that when things get better (ie when they find a job etc), the rent doesn't go back up to its original point? The fact is, you are only offering a rent reduction as goodwill to help them with the expectation when things return back, it goes back up. You have little chance unless that you will get the 50% or whatever amount back as long as the lease is in place. They could probably even use that discounted lease to bargain for a new place - I've had someone do that in the past.

I've been speaking to a few people who have also been asked for a rent reduction. Their approach mostly is to reduce with the expectation the reduction is paid back in the future when things recover.

To all the PMs, what are you recommending to your landlords when their tenants are asking for a rent reduction in the absence of any proper government direction?

 

So far I've only had two tenants ask for a rent reduction, and neither of them deserved it- opportunists who were under no financial strain. I asked them straight up why they felt entitled to a discount and they dropped the question. I've also had one Landlord offer a rent reduction without prompting, which we've passed onto the tenants immediately.

Fortunately the average rent in my portfolio is $300wk, so the recently increased welfare payments should be enough to get 99% of people through. For those who are in exceptional circumstances where they don't are genuinely struggling because they don't have enough income to survive, we'll consider it on a case-by-case basis. I'd much prefer a payment plan for deferred payment of rent, but realistically some tenants will incur a debt that they will never be able to pay back, so reducing the rent could be a viable part of an overall strategy to keep things moving for now.