Introduction

 

The coronavirus pandemic has caused many Australians to lose their jobs which can also put a strain on their ability to pay rent.

In March, the federal government issued a six-month moratorium on tenancies for both residential and commercial tenants who can’t pay their rent because they were severely impacted by the coronavirus. The federal government also encouraged tenants and landlords to agree on rent relief measures. But in many cases, that is easier said than done.

Bernie Bolger, a Nationally Accredited Mediator from the Mediation Collective talks us through the common elements of successful negotiations.

  1. So what is really going on out there in the rental landscape?
  2. The numbers are looking pretty grim for landlords.Suburbs within a 10km radius of the Sydney CBD are experiencing the biggest decrease in rent – 25% in some locales.   Short term rentals are flooding the market as the Air BNB model collapses. Some estimates say as many as 7000 new properties hit the market in April.  Sydneysiders with jobs are moving to bigger houses, closer to the beach as working from home becomes the new normal. Migrants are leaving the country and young people are moving back in with their parents.
  3. Are you suggesting that tenants have a lot of options in these negotiations?
  4. Yes, tenants have options but many are also going through a lot of pain. We mustn’t forget that this all came about very suddenly because so many people lost their jobs or were stood down and therefore lost their ability to pay their current level of rent.To start a conversation with your landlord about rent reduction you must be able to prove you are a Covid-19 impacted household.
  5. What does that mean exactly – a Covid-19 impacted household?
  6. A Covid-19 ‘impacted tenant’ is defined as a tenant living in a household whose total weekly income has reduced by 25% because of the Pandemic.

According to the Tenants Union of New South Wales, if you’ve lost your income, you can negotiate with your landlord about paying lower or no rent for a short time.

In New South Wales, there is a 60-day halt on landlords looking to evict tenants, in addition to the 6-month moratorium. To be eligible, you have to meet some requirements, according to NSW Fair Trading:

  • If one or more of the rent-paying members have either lost their jobs or had a reduced income due to coronavirus related business shutdowns
  • If one or more rent-paying members had to stop work or had their work hours cut down because they contracted the coronavirus, or they are caring for someone with the coronavirus
  • If the above factors result in a household’s income dropping by 25% or more, including any government assistance, such as the job keeper payments.

If you don’t meet these requirements, the Tenants Union recommends trying to negotiate a rent reduction with your landlord. This may be in their interests because it may be much more difficult and expensive to replace you than give some reprieve. Some landlords will be more willing to do this, especially if their mortgage costs are not excessive.

  1. You mentioned an Evictions Moratorium – what does that actually achieve?
  2. The Evictions Moratorium protects ‘impacted tenants’ from eviction, but this doesn’t mean that tenants can just stop paying rent, or just pay less rent.They must contact the landlord or agent and let them know that the need to negotiate a rent reduction.  They need to make formal contact and make sure the initial contact as well as the negotiations are in writing so that they have a record what has happened.  Any agreements reached must be in writing also.  Because most people do not have experience in negotiating, it can be quite an intimidating process.
  3. Not all Landlords are wealthy bad guys. What do you say to them?
  4. It’s important not to demonise all landlords. There are many hardworking Mums and Dads out there who may have bought just one investment proper and are mortgaged to the hilt. They might in turn have lost their jobs due to the pandemic and are relying on the rent from their tenants to help pay the mortgage and put food on the table. They are probably worried sick at the moment wondering if they might not only lose their investment property but also their family home which has been put up as collateral. All landlords need to look at the relief packages for which they might be eligible – land tax relief, deferred mortgage repayments with their lender, claiming losses on their income tax. And then they must be open and honest with their tenants about their circumstances and what they can and can’t do.

 

 

 

            Five Key Tips to a Successful Negotiation

  1. If you find yourself in a situation where you need some assistance with your rent, it is imperative that you communicate that to the people who make the decisions, i.e. the landlord or the agent if there is one managing the property.Burying your head in the sand and hoping it will all go away will definitely not work.

 

  1. Show empathy to the other party’s needs and be authentic in your endeavours to reach a resolution. Enter the negotiations honestly and fairly and be prepared to work with the other side to genuinely work towards a mutually beneficial agreement in a timely fashion. You must be prepared to act reasonably and listen to the other side’s point of view and be prepared to change your position or make concessions to reach an agreement

 

  1. Full and frank disclosure by both parties. As the tenant, you will need to be able to substantiate and validate any requests for a variation from the terms of your lease if the landlord / agent asks, e.g.
  • proof of job termination / stand-down, or loss of work hours
  • other proof of reduced income
  • proof of any Government income support you are receiving or have applied for
  • proof of prior income

As the landlord, you should provide information about your

  • financial situation – being open and honest, including whether you rely on the rental income to cover mortgage repayments or other expenses
  • conversations with your lender about waiving or reducing your own mortgage repayments
  • the rent payment you would be able to accept
  • clarify how much of the rent payment loss (arrears) will be waived and how much will need to be repaid
  1. Be clear about what you are asking for. For commercial tenants, a code of conduct has been agreed on by national cabinet establishing a clear set of leasing principles in place during the eviction’s moratorium.  One of these principles is that landlords must offer a commercial tenant impacted by Covid-19  a reduction in rent payable corresponding to the reduction in trade and revenue they have experienced during the Covid-19 Pandemic and a subsequent reasonable recovery period.  At least 50% of the reduction must be in the form of a waiver.  Any deferred rent is to be repaid over a reasonable timeframe, with minimum timeframes set in relations to this.

No similar mandatory code has been established for residential tenancies, but this principle can be used as a possible guide.  A generally accepted and useful benchmark of housing affordability is whether your housing costs are no more than 30% of your gross household income, where your income is below a certain threshold. Therefore do your numbers and be sure about whether you should ask for:

  • A full or partial rent waiver
  • A reduction in rent that reflects your reduction in income
  • A reduction in rent that reflects current market pricing
  • A longer repayment period to repay arrears
  • A waiver of arrears
  • Permission to end a fixed-term agreement early, possibly without or with a reduced penalty of by applying the break-free formula that applies in agreements entered into after 23 March 2020 to earlier agreements
  • Offer to lengthen the term of your lease to make up for any waiver on rent

 

  1. Put everything in writing. This is especially important for two reasons.  In the first place the new agreement needs to be documented and signed by both parties. And secondly, if direct negotiations between the landlord / agent and the tenant breakdown these written records will be used to show that good faith negotiations have taken place especially if the matter eventually progresses to NCAT (the NSW Civil and Administrative Tribunal) – an independent body which deals with certain kinds of disputes between landlords and tenants. It is not a formal court, but its decisions are legally binding.