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NSW COVID-19 Update: Relief package announced for renters

Written by Luke Musto, Associate

The NSW state government has announced a new $440 million rent relief package to support both commercial and residential tenants and landlords under financial stress due to the impacts of coronavirus.

The package is directly targeted at ensuring that tenants are kept in rentals over the next six months, with funding split equally between residential and commercial rentals. The measures will protect tenants from being evicted due to circumstances beyond their control, while also protecting landlords from cases where rent is not being paid when it should be paid.

The NSW treasurer has described these measures as “complementary” to the existing federal government’s stimulus measures, which you can catch up on here.

Importantly, as with all announcements of assistance packages, it should be kept in mind that at this stage this is still only an announcement from the NSW government. This means that there may be changes to the final package as the legislation giving it its effect makes its way through parliament.

How will the package protect residential tenants?

For the next six months, tenants cannot be evicted due to being in rental arrears if they have lost 25 per cent or more of their income. The scheme makes it mandatory for a landlord or managing agent to enter into negotiations with a tenant who is struggling to pay rent.

As part of measures, there is a 60-day stop on termination notices and applications to the Tribunal for terminations due to arrears on rent for circumstances where a tenant cannot meet their rental obligations due to the impact of coronavirus. This stop is designed to ensure that landlords are, in the first instance, negotiating and working with their tenants. In practical terms, it will also give time for the government’s other stimulus packages to be able to take effect and reach people. Once the 60 day moratorium has passed, landlords will be able to recover their properties if they are in financial hardship, while tenants will not be blacklisted due to an accrual of rent arrears.

However, tenants will still have to repay rent eventually, with anything unpaid accruing as arrears. This means that this package is not an excuse for people to stop paying rent, and it is important that where renters are still able to pay rent that they do so. This highlights the importance of negotiation, so that renters are able to negotiate a lower rent where possible to avoid accruing a potentially massive debt once the crisis has passed.

In practical terms, how can tenants access the relief?

They will need to demonstrate a loss in income of 25 per cent or more. We have already heard from tenants whose real estate agents are requesting a variety of documentation to prove the 25 per cent loss in income, including things such as: bank statements and balances (including transaction history), payslips, Centrelink statements / applications, and evidence from employer that workplace is not operating. However, once this package becomes law via legislation, we expect that the government will release concrete guidelines as to what evidence should be provided to satisfy this requirement.

How will the package protect and affect residential landlords?

The Government is also seeking to provide relief to landlords, primarily by waiving or providing rebates on land tax. The Government will waive land tax or provide a rebate of up to 25% for residential landlords, provided that they pass the savings on to tenants experiencing financial strain. This provides an additional incentive to landlords to be accommodating to tenants who are under financial stress. In addition, landlords claiming this waiver will be eligible to defer any outstanding land tax amounts for a three-month period.

As discussed, landlords are unable to issue termination notices on tenants for a 60-day period, and are unable to evict tenants for a six-month period, and must engage in negotiations with their tenants. Funds have been allocated from this relief package for negotiators.  

What does the package mean for commercial tenancies?

Similar to residential landlords, commercial landlords will be able to get a concession of up to 25 per cent of their 2020 tax liability, provided that they pass these savings on to their tenants. The same eligibility for businesses to access these measures as for JobKeeper will apply – that is, businesses with a turnover of less than $50 million who have suffered a revenue drop of 30 per cent or more due to the pandemic.

We previously discussed some practical options for businesses having trouble paying rent due to closures. You can find that article here.

Conclusion

This latest package reflects the reality that both landlords and tenants will be better off if they are able to work together during the pandemic to come to a mutually agreeable solution. Both parties should do their best to honour existing tenancy agreements to the full extent possible.

Renters should definitely not view this as a “get out of jail” type opportunity, given that any unpaid rent will still accrue as arrears. This is one of the more concerning aspects about this package, as it raises the possibility that a tenant who has lost their job will have unpaid rent accruing and be left with a massive debt. For this reason, it is important that renters are able to negotiate the most favourable discounts possible as needed to avoid this scenario.

Harris Gomez Group is an Australian law firm with 25 years experience based in Sydney, with sister offices in Santiago and Bogotá. We specialise in business and corporations law, technology law, and cross-border issues. We assist small to medium-sized Australian businesses with a variety of issues, including employment law, property law issues (such as rental contracts) and contract disputes.

If you are facing issues relating to rent on either a residential or commercial property due to the impacts of the coronavirus, we encourage you to contact Harris Gomez at hmg@hgomezgroup.com

Our Sydney office is located at Level 7, 92 Pitt Street, Sydney NSW 2000.