There’s a 6 month moratorium on evictions – what should I do?

Both commercial and residential landlords will be banned from evicting tenants who can’t meet their commitments because of financial stress caused by the coronavirus economic downturn for the next six months. House Model On Top Of Stack Of Money As Growth Of Mortgage Credit, Concept Of Property Management. Invesment And Risk Management.

This is part of what Prime Minister Scott Morrison calls the “hibernation approach” as the government tries to build bridges for us to get to the other side of this global pandemic.

While this brings up lots of questions, unfortunately, there is no rule book as we are in uncharted territory and details of the proposed assistance schemes for both tenants or landlords have yet to be released.

Tenants who are not significantly affected by coronavirus are expected to honour their leases and rental agreements, but at Metropole we have already seen many tenants request rental relief because of job “uncertainty” rather than because they’ve lost their jobs.

Clearly many tenants are worried that they won’t be able to pay their rent, but on the other side of the coin, many landlords, who tend to be ordinary mum and dad property investors, are concerned they won’t be able to keep up their mortgage payments.

Some of these investors have been hit with a double whammy – they’ve lost their jobs and now their rental income is threatened.

While these property investors are generally compassionate and don’t want to evict families in hardship, they are asking us questions like:

“What if my tenant doesn’t pay me for six months, and I can’t evict them? Then at the end of the six months’ moratorium they leave and don’t catch up the rent, yet I still have to pay for my monthly mortgage?” 

Their concerns are understandable and with unemployment levels expected to hit double digit figures very soon, the situation will only escalate.

But my understanding of this Moratorium is that this is a postponement of eviction and requirement to pay rent, not that rent will not be required to be repaid.

What should a tenant do?

Until the government’s relief packages are made clear, the first step is to have open communication with your property manager or landlord.

Talk to them and explain your situation, even if your income has reduced but not disappeared and put an action plan into place.

Until details of the State Governments’ relief packages for tenants are announced, speak with your bank as all our banks have agreed to help get Australians through the current economic crisis.

What should landlords do?

Most property investors will be hit by the Corona Crunch at some time as unemployment levels rise, but this is the time for understanding and compassion – nobody wins by making things difficult for a tenant who is in financial trouble. Landlord

This is a time for leniency. It’s important to understand the tenants don’t want to be in rental arrears, but if paying their rent leaves them without money for food or medical attention, the decision most tenants will make is obvious.

Fortunately, many investors will be able to fall back on their landlord’s insurance to cover some of their losses, but how the landlord deals with the situation may affect if they can claim insurance.

According to EBM Rentcover Insurance if landlords want to put measures in place to support a tenant through this difficult time, that is up to them.

However, this is how a couple of scenarios may impact insurance:

  • Reducing rent: if a landlord agrees to reduce rent, they cannot claim for the difference in payments.
  • Putting rent on hold: again, if a landlord wants to suspend rent for a couple of weeks while the tenant gets back on their feet, this would not be covered as it is a mutual agreement and not an insured event.
  • Not issuing late notices: if this sort of leniency is given to the tenant, it will only be an issue if it comes to a claim relating to termination.

Until details of the tenant and landlord relief packages are made available, our advice is for landlords to put a payment plan in place with any tenants who are genuinely suffering financial difficulties. Property Money

For example, you could offer them an arrangement where they pay less rent (maybe half) for the next few months, but agree to catch up their rental payments through increased rental in 3 or 4 months once they secure employment.

Property investors should also speak to their bank about getting a mortgage holiday – either pausing or reducing their monthly repayments.

But there’s lot’s of confusion.

Understandably with the swift progress of coronavirus, the government is announcing legislation without it being fully enacted and often without full details being finalised.

Unfortunately this is creating some confusion for tenants,  property managers and property investors.

Prime Minister Scott Morrison explained that the ban on evictions will apply to tenants who are not able to meet their obligations due to financial distress as a result of the coronavirus crisis.

But what about matters in progress?

What happens to tenants who have already fallen behind in their rentals, or tenants who have damaged their rental properties?

Does this mean these owners are going to have to look the other way?

Now it’s important to be sympathetic to people in real financial problems, but the recently announced financial rescue package should mean most people who lose their jobs will be given reasonable entitlements through Centrelink, while others who were likely to lose their job will now keep it, due to payments made to their employers to keep businesses alive.

But for property investors it’s not just a matter of pressing pause on mortgage repayments to set and forget for six months.

Some will suffer financial hardship even though the banks will assist  them by putting their mortgage payments on hold, but rmeber this is just a postponement of the payments. The interest will still need to be paid.

The view of the REIA.

President of the REIA, Adrian Kelly while being supportive of the Government and its efforts, is disappointed with the simplistic approach of the Prime Minister’s message which ignores the tenancy
arrangement and thus raises more questions than it answers.

Here’s what he had to say:

“Real estate agents are the middle persons who facilitate the agreement between landlords and tenants and manage it as well as the property.
“There are some 70,000 property managers, principals, real estate agents and representatives across Australia. Tenants don’t negotiate with landlords.
“Banks have already indicated that they are offering customers the option to defer home loan repayments for up to six months.
“We need to address the support of agents so that what the Prime Minister wants, in terms of landlords and tenants – finding a solution to get through the crisis, can be achieved.
“Estate agents will work very hard to facilitate the role between landlord and tenant, and to do this they need income.”
“I note that National Cabinet is still to consider details. Hopefully these will come so that the Prime Minister’s objectives can be met,”

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

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  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more Metropole
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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'There’s a 6 month moratorium on evictions – what should I do?' have 32 comments

    Avatar

    April 8, 2020 paz

    My Tenant was always unemployed. receiving benefits from centrelink , also receiving rental assistance from centrelink , now also getting the stimulus boost. was not effected by this at all now refuses to pay rent because they know they cant get evicted. is there anything i can do about this?

    Reply

      Michael Yardney

      April 8, 2020 Michael Yardney

      This seems a little unfair – your property manager should have a system for handling this type of request

      Reply

        Avatar

        April 8, 2020 paz

        they claim they cant do anything about it for the next 6 months or until the government changes this.

        Reply

          Michael Yardney

          April 8, 2020 Michael Yardney

          Do you use a property manager?

          Reply

            Avatar

            April 9, 2020 paz

            yes, its looked after by a real estate agent.

            Michael Yardney

            April 9, 2020 Michael Yardney

            Property manager should have a procedure to protect you in these matters

    Avatar

    April 6, 2020 ALYSIA HOOK

    I believe Australia has been “Trumped”.

    Reply

      Michael Yardney

      April 6, 2020 Michael Yardney

      🙂

      Reply

        Avatar

        April 7, 2020 Glenys Reid

        Michael -your article on ‘There’s a 6 month moratorium on evictions – what should I do?” says it was published on April 9th? Was it April 6th? Sending it to a friend who is being evicted so wanted the date to be correct?

        Reply

          Michael Yardney

          April 7, 2020 Michael Yardney

          It was originally published earlier Glenys, but we often re-publish important blogs like this so that they show up again in my morning newsletter.

          Reply

    Avatar

    April 5, 2020 Exposed

    I am trying to arrange landlord insurance for my investment property, no mortgage, but most of the dozens of companies that were offering Landlord Insurance have withdrawn these products from the market. This is probably due to the federal government’s recent announcement on the 6-month rental moratorium but lack of follow up detail provided. Coming on top of the recent bushfires however, they are understandably protecting their products and investors interests. Where does that leave property investors now who cannot obtain insurance coverage for their investment properties, and are completely exposed to an insurance event with little to no options.

    Reply

      Michael Yardney

      April 5, 2020 Michael Yardney

      I guess the insurance companies are not keen to take on new policies at present from people know they are likely to make a claim.

      On the other hand they are protecting those clients who have had long-standing policies

      Reply

    Avatar

    April 2, 2020 Andrew

    So its ok for renters to lose their income because of COVID-19, but not for estate agents or people deriving income come from investment properties?

    Reply

      Michael Yardney

      April 2, 2020 Michael Yardney

      No Andrew it’s a terrible situation and we all going to suffer. I’m not suggesting that one shouldn’t be compassionate to people who have truly lost the income. I don’t think anyone is

      Reply

    Avatar

    April 2, 2020 Chandi de Silva

    Hi Michael, thanks for shedding some light on this. We all have been putting up with our idiotic governments’ response, but ScoMo’s “moratorium on evictions” brings it to new levels!! What sort of nincompoop says something like that without planning ahead and being able to clarify all aspects of it? My tenant who has always had 100% of her income from Centrelink is “offering” to pay 40% less rent as it is “better than not paying anything”, Her income is more secure than ScoMo’s and just got a raise as well, but she reckons she doesn’t have to pay as ScoMo has offered her a trump card to stay rent free at my house, or so she thinks. These lunatics we’ve sent to parliament to run this country should be sitting on their brains.

    Reply

      Michael Yardney

      April 2, 2020 Michael Yardney

      Yes, it looks like some people are going to take advantage of the situation aren’t they?

      Reply

    Avatar

    April 1, 2020 Jane

    I am in the midst of purchasing an investment property on the Gold Coast that has a tenant on a 12 month lease that expires in November. What can I do to protect myself? I keep wondering if I should pull the plug on this.

    Reply

      Michael Yardney

      April 1, 2020 Michael Yardney

      I don’t know your financial situation Jane so I can’t advise what you should do personally.

      I have never considered the Gold Coast an investment-grade location, and on that basis I would not have bought an investment property there.

      But it’s a great place to vacation, yet I can see the Gold Coast suffering from lack of overseas tourists for quite some time, meaning the local economy will not do well, and therefore property values are likely to fall

      Reply

    Avatar

    March 31, 2020 Rambo

    Where do I stand if the rental property was.listed for sale and the 12 week notice form given to the tenant in January. Can they still be evicted for the purchaser that signed the agreement prior to the Government passing these draconian rules without considering the landlords.

    Reply

      Michael Yardney

      March 31, 2020 Michael Yardney

      Rambo the proposed rules are to stop tenants being evicted because of failure to pay rent because of financial hardship because of coronavirus. I can’t see this changing your rights to ask your tenant to finish their lease prior to these new rules coming into place

      Reply

    Avatar

    March 31, 2020 Stacey

    Hi Michael, can i get some clarification on what you believe this eviction moratorium is restricted to.
    My belief is that it is only for tenants who are unable to pay rent, however out property manager is telling us that we cannot evict tenants for any reason due to the moratorium, ie. major damage to property, not honouring lease agreements such as moving pets or other people into the property without seeking prior permission. For further clarity, can you give any light on whether it is legal for a tenant to move 5 additional people (possibly pets also) into our rental property (a 2 bedroom home), without prior permission, without increase in rent, without notifying the real estate at all. They (real estate) are saying that we have no right to ask the 5 additional people to leave the premises. We are not evicting the tenant named on the lease, only asking the additional 5 people to leave. Where do we stand on this matter?

    Reply

      Michael Yardney

      March 31, 2020 Michael Yardney

      Stacey _ like you I can see that some tenants will abuse the system. Things are moving so quickly, that the government is announcing legislation without much detail behind it at present. This often comes a few days even weeks after initial announcements.

      Our property management division is carefully monitoring announcements, but currently there is not enough detail For me to be able to answer your questions.

      Of course it makes sense that you should be able to evict somebody who is causing damage – this is very different to suffering hardship because of the coronavirus epidermic.

      Reply

    Avatar

    March 31, 2020 Rob

    Fortunately my investment property is freehold (No Mortgage). If my tenants cant pay their rent but offer to vacate the premises, I will leave it vacant. At least the place wont incur more wear and tear. Will rent it out again when The Corona virus dies off and when everyday life returns to normal.

    Reply

    Avatar

    March 31, 2020 Dave

    I read somewhere that despite the banks providing a ‘holiday’ for mortgage repayments to those impacted, that the interest liability will keep compounding over that period. Given the low interest rates we currently have it is not likely to be an enormous burden, but certainly something to consider for those pausing any repayments. A little extra pain now may be of great benefit in future. This may be a useful topic for a separate blog post if not already done?

    Reply

      Michael Yardney

      March 31, 2020 Michael Yardney

      We’ve covered this in the masterclass we recorded last weekend : How will COVID-19 impact on your banking and loans? [MASTERCLASS]

      You’ll find what you looking for plus lots more

      Reply

    Avatar

    March 31, 2020 Donna Walsh

    I have a tenant who is on a working visa. He is a casual worker for a catering company in Brisbane. He has recently been laid off. Will he be eligible for the $1500 per fortnight, paid to his employer, recently announced from the government?

    Reply

      Michael Yardney

      March 31, 2020 Michael Yardney

      as I understand it, the $1500 subsidy is available for people who have been employed for over 12 months with the same employer

      Reply

    Avatar

    March 31, 2020 Neil Diepstraten

    Hi, Do you locate tenants and manage properties in Rural areas, i.e. Bendigo and Castlemaine? Thx Neil

    Reply

      Michael Yardney

      March 31, 2020 Michael Yardney

      Sorry Neil – no we don’t – only in Melbourne, Sydney and Brisbane

      Reply

    Avatar

    March 30, 2020 Alex

    Hi Michael, do you observe landlords with vacant properties being spooked from the rental market recently? Will you advise them to wait out a bit until the dust settles? PS Stay safe and well.

    Reply

      Michael Yardney

      March 30, 2020 Michael Yardney

      Alex – everyone is a little nervous at the moment – we’re spending a lot of time supporting our clients – and reassuring them of the big picture

      Reply


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