Posted on April 7th, 2020

What should I do as a landlord during the Covid-19 pandemic?

The global pandemic Covid-19 has impacted so many different aspects of our lives. As a property investor it’s important to stay up to date on these impacts - which are changing daily.

As a landlord, you may already be faced with certain changes or questions from your tenants – and based on our experience, here are some FAQs, especially in regards to rental situations, which may occur during this period as well as a landlord subsidy during Covid.

Q1: My property manager has informed me that our tenant is encountering financial difficulties and hoped that I could reduce the rent. How should I respond?

Across the nation, the pandemic has forced many Australian businesses to temporarily close, rendering many staff without work. This has resulted in temporary difficulties to pay rent for some Australians. The positive news is that on Monday the 30th of March, the Federal Government released their third wave of economic stimulus, the $130 billion “Jobkeeper Payment” package. This package provides eligible businesses who are affected by Covid-19 with a wage subsidy for its eligible employees who will have reduced hours, or will be stood down. The business will receive a wage subsidy of $1,500 (before tax) per fortnight per eligible employee. This means that many employees who have been affected by Covid-19 will retain their job (even if they are temporarily stood down), and will receive an income whilst they are stood down. This payment has been backdated to the 1st of March, and will run for a 6 month period. Therefore, many tenants who were potentially facing not being able to afford their rent, now may be in a position to do so.

As a landlord, before making any decisions, you (or your property manager) need to ask the tenant to provide proof of their financial difficulties. This may include asking for the letter of dismissal from their company or any supporting documents that illustrate their financial situation. For tenants who are facing financial difficulties, we suggest that you discuss with your property manager and negotiate a temporary rental discount with the tenant, e.g., 20% rent reduction for 3 months with an option to extend after the period ends. You may also explore having this reduced rent being repaid over a subsequent lease period once the Covid-19 pandemic has passed.

We understand that reducing rent may be a challenge, but retaining your current tenant at a reduced rent could turn out to be a better scenario than having the tenant vacate, and then you are left looking for a new tenant which may result in a period of vacancy, and you may not secure the rent you were originally achieving. By keeping your existing tenant, you also omit fees associated with marketing for a new tenant.

Q2: My tenant can no longer pay rent but does not want to move out. What are my options?

In late March Prime Minister Scott Morrison announced a moratorium for 6 months on evictions from rental properties for people who are facing financial distress. This means that landlords cannot evict tenants who are not able to pay rent – however the Federal Government is expected to announce further details around this shortly. In the meantime the Government has urged landlords to negotiate with tenants to find a solution that works in the short term. If as a result of this you have difficulty meeting your loan repayments, please see the question below is some options on how to best handle this.

We will update this article accordingly once new details are released from Government around the rent moratorium.

Q3: My tenant has just moved out. Can I rent out my property now?

Absolutely – however, market conditions have changed and this is something landlords need to be prepared for. The pandemic has had an affect on the rental market, with many short-term “AirBNB” rentals now moving to the long-term rental market, as well as some long-term rental properties becoming vacant as tenants decide to move back home, or house share in order to save money. Therefore, it is expected over the short term there will be an elevated number of rental properties available on the market. This may result in rents softening (which will vary from suburb to suburb), and there may also be a period of vacancy experienced. It is best to speak with your property manager for guidance on what rent to market the property at, and they will also be able to provide some insight into what vacancy period may be encountered. It may also be worthwhile being flexible with options for your tenant – for example you may wish to look at shorter rental terms (6 months), or allowing tenants with pets to apply. It is important to note that after 6 or 12 months you will be able to renegotiate the lease terms and rental amount pending the market conditions at that time.

Q4: Decreased rental income may make it difficult to repay my loan. What should I do – is there any kind of landlord Covid subsidy?

Many of the Australian banks (including the “Big Four”) have arranged a range of options to help mortgage owners through difficult times if they have lost their primary income through their work, or reduced or lost rental income as well. This includes delaying mortgage repayments for up to 6 months, with the interest component over that time being added to the loan balance (although full terms and conditions should be sought by each individual bank as conditions do vary).

It is worthwhile exploring what options your bank is able to provide in order to assist you through this time, and if the bank is not able to assist, speaking with a good mortgage broker may provide you with other options as well.

Q5: Has anything been done to my investment apartment by strata or property management to reduce the impact of the pandemic outbreak?

This ultimately depends on the building or strata manager for your apartment. Many management teams across the country are being very proactive with health and safety, and plenty are temporarily closing shared facilities such as pools, cinemas and other recreational rooms.

Please continue to monitor our blog, website and social media as we will continue to provide Covid updates for landlords as they become available. The Federal Government is anticipated to release updates in relation to residential rents shortly.

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