Coronavirus and Tenancy Matters as at 26-03-20

To my wonderful landlords and tenants,

Buckle in for a bit of a long read but I have had so much on my mind and just want to share some reassurances and resources as well as try to offer some thoughts as we all navigate this new road we have found ourselves on.

As I have said, I am here from beginning to end with you all. I can’t say I’ll always have the answers, I won’t, but I will do all I can to minimise the impact of this on all of you. I myself have a family, a business and investment properties, so I am looking at everything just as much for you as I am for me. But remember, I’m not a lawyer, accountant, financial advisor or the government, so I am only sharing information, you need to do your own research about what does and doesn’t apply to you and make your own decisions.

My bottom line is that we all have to do our bit and give our best to this, but to get to that bottom line, this really is going to be a long read, with lots of internet links if you want more information so please grab a cuppa and just enjoy the information ;-P

Sadly, we are still without direction from the government about what happens if tenants are unable to pay their rent due to the coronavirus pandemic. (ie: they lose their job, if they are self-employed and their business suffers, if they can’t work due to being infected or in isolation or have reduced hours etc etc. etc.). The next proposed cabinet meeting is to be on Friday night where we hope to get these answers.

There has been a lot of questions and concern and we are all in trying times, including myself, but there is a saying --- there are 2 sides to every story and I guess I just implore both tenants and landlords to try and see things from both sides of the fence and consider that no one is on easy street at the moment. There is a difference between a tight time and hardship and the measures available are in place to prevent hardship, not to get you out of a tight time because everyone is making sacrifices, dipping into savings & credit, most likely going backwards, and it isn’t about assessing who is worse off or who should cover the fall, it’s just about being humble, everyone sharing the load and all of us taking a hit and doing our own bit to do our best to get through this.

Tenants need and deserve an assurance of somewhere to live, as we all would like, and Landlords need and deserve assurance of their rental payments being received, as we all would like if we owned an investment property.

Both parties have options should either of those things be legitimately put in jeopardy as a result of this pandemic which I will just detail a little further now. Ok … it’s not going to be little, I’m really going to detail it so I’m serious, if you haven’t got that cuppa, then go get it :-)

Owners can access mortgage deferral (read further about the fine print on this below) should things come to that to retain their own home and/or their investment property, and tenants (and owners for that matter) can access welfare payments if things come to that (some info on this below also). It is very unlikely at this time that a bank would foreclose on an owner and have them out of their own home if they didn’t meet their mortgage payments (no promises on this at the moment, it’s just the talk on the town), and it’s looking more and more likely that tenants will also be offered the same type of reassurance in the coming temporary rental reforms where evictions are likely to not be allowed during this time (again no promises on this at the moment, just the talk on the town). But it all just has to come with a fair balance of responsibility because it can’t be left to the owners to fund a second household, or for the tenants not to be able to eat and feed their kids just to pay their rent!

We are all going to feel stress. We are all going to have to make sacrifices without being greedy or selfish but doing everything we can to ease the stress on one another is the best we can do.

I thought it may assist if I sent you this link to an article about what the banks are offering owners, and eligibility criteria does apply.

There appears to be some misinformation that owners are getting a holiday from their mortgage and may even make money through this time. The upshot is that any payments that are deferred are added to the loan balance. The interest is capitalised on that new balance (calculated daily for the term of the loan), and dependent on the bank, their future repayments will actually go up as a result of the deferral or the term will be extended and interest will be calculated daily for a longer time. They still have to find the money to cover the council rates, water supply, insurance, maintenance and body corporate levies if it’s a unit complex.

Let’s say the owner has a mortgage of $400,000 with 24 years and 3 months left on their loan, they defer let’s just say $6000 worth of payments, their new balance will be $406,000. The interest will be calculated on that new balance for the entirety of the loan. Depending on the bank, they will be paying interest on that $6000 for the same remaining term (24 years and 3 months) in which case the repayments would be increased to cover the new balance, or they’ll be paying that $406,000 off over 24 years and 9 months in which case the interest will be calculating for an extra 6 months.

So, this mortgage deferral thing is not a gift. It will actually cost the landlord more in the long-term, and they still have to pay other costs to hold the property as mentioned above. But … it is an option to soften the blow in the short-term remembering that they have not only their investment property to worry about, but their own homes too.

So that’s a remedy specific for the owners, what about the tenants?

Whilst not approved yet, there are proposals to ban evictions for 4 or 6 months so if a tenant can’t pay all their rent, they won’t be homeless. However, again, this is not a gift or permission from the government to just not pay their rent. It potentially comes with the loading that any unpaid rent will accumulate as a debt that they still have to pay when the crisis is over so again, it sounds good up front, just like the mortgage payment deferrals, but it is not a get out of jail card. It is there to assure the tenant they will have a roof over their head, but not to put unnecessary hardship on the owner when they are also dealing with their own financial burdens. Remember that the owner may not be able to evict a tenant, but should they not be able to stay above the financial situation of this, they may well lose their rental property or possibly their own once banks resume their guts to take possession of property for payment default. There is rumour of some rental assistance for tenants effected by the coronavirus, but that seems further down on the agenda, though you never know, but it is being discussed in some forums. So once again, at the moment, this is all just conjecture. The laws have not changed, hopefully Friday will see some decisions made.

The balance is to get through if you are impacted by the coronavirus however you can … a number of owners will need to rely on the mortgage deferrals and a number of tenants will need the grace to not be evicted because they can’t pay all their rent but no one is profiteering. A landlord shouldn’t be heartless, and a tenant shouldn’t take advantage, but the main thing is that we can’t rest on these measures alone because they aren’t long-term way outs, they all come with a burden at the end.

Here is a link to the RTA’s blog on the matter, you can keep checking here for updates from them.

The only thing that seems to be ramification free is that anyone who does lose their income or whose income is reduced as a result of coronavirus, can possibly have access to Centrelink payments totalling approximately $550 a week plus whatever stimulus payments end up coming (The first one is $750). Tenants have this to help with their rent and landlords have this to help with their mortgages and holding costs but … there is eligibility criteria and it is quite clear that there will be a backlog until those payments arrive, most likely at least a month but they will be back paid to the date of the claim. And … partners income currently does come into the eligibility criteria (and it isn’t high!), but there is a push to review this for the short-term … again no promises, just the talk on the town.

Here’s a couple of links to information about the welfare payments.

Here’s some information on cash flow assistance if you have your own business

We also all have access to superannuation if needed, and eligibility criteria does apply, but again, that comes with downsides … like a lower balance to be used for future recovery and some people don’t have $10-$20,000 in super to even draw down. So, it’s give and take for everyone.

Here’s an article on accessing your super

Here’s some things to be aware of if you plan to access your super

If you are one who can get through this mostly unscathed, then please show compassion on others and share their burden a little. Keep what you need but share what you don’t. If you are one who needs help through this time, then gracefully accept it but don’t abuse or take advantage, only use the kindness that’s needed and leave some for others. But let’s not compare or begrudge, and mostly let’s not assume things of each other. Landlords, don’t assume your tenant is bludging and Tenants, don’t assume that your landlord is cruising. We ALL just have to do our bit to get through this. We ALL have our role to play in helping each other not go down or end up homeless as a result of this … and remember, a landlord can end up homeless too.

To my tenants, I can only ask you that you do all you can to still pay the rent because the owners are carrying your property through this crisis (probably losing some short-term property value in the process) and it is not viable for most to cover their own house and sponsor another until your debt is paid. But if you sincerely are having issues due to the coronavirus, please talk to me so we can see what we can work out and give us as much notice as you can if you foresee payment issues so the owner can be as prepared as possible for that shortfall in income. And still please pay what you can, don’t just not pay!

And likewise, I ask all landlords to be prepared by exploring your options and do what you can to assist if it’s sincerely needed. Cause if we can all find a way to work through this, then it will come good in the end, no matter how long that takes.

I know I’ve ranted, but I just feel for you all. I am very much in-tune with the financial fear as an owner of property and as someone whose income will also be effected by this crisis, but I also am seeing first-hand the stress and worry in our beautiful tenants so I just needed to say all that to try and find the balance, even if you didn’t read or agree with it all :-P

And more just personally, may we all stay well through this and I hope we all come out the other side as better individuals, closer families, a tighter community, a more united country and if even possible, may it be a leveller across the world as every nation faces the same challenges and share stories, resources and knowledge. Don’t mean to sound like a world peace ambassador cause it’s not where I’m coming from, but there is a commonality that everyone is sharing right now that I hope we can turn into a positive for all!

I will be in touch if there is an outcome after Friday’s cabinet meeting, and I welcome any abuse, criticism or thanks for my long email. I did start it at 6.30am this morning and the day has been so manic, I’ve only just finished it now while my family is eating dinner (which my husband had to cook cause I was spending time with you … LOL), but I hope even if all of it was too much, that there was at least one piece of information there that has helped.

My warmest and sincerest regards as always, from Amber