By now, most of us are a couple of weeks into some version of a lockdown. As we learn more about how COVID-19 impacts us and whether or not our attempts to “flatten the curve” are working (they are), there’s a whole bunch of us probably getting a bit worried about paying the rent.
And with good reason.
It feels like there’s a new government announcement every half hour in regards to what we can and cannot do (it’s okay for two family members to do a jigsaw puzzle at the hairdressers but as long as it’s under 30 minutes? We dunno either.)
But governments have been eerily quiet on a topic that is about to wreak havoc on the nation’s tenants and landlords: what do we do if we can’t pay rent?
People are rightly very concerned.
Maybe you’ve already been stood down from your job. Or maybe it’s your housemate who’s already had to dip into their savings. Either way, it’s important to remember that you are not alone in this circumstance, and that certain protections are in place to ensure we all keep roofs over our heads during this global health crisis.
However, if you are struggling to make ends meet, or have been financially impacted in any way due to the coronavirus, it is imperative that you contact your real estate agent or landlord as soon as possible to discuss your options.
Can I get evicted?
The federal government has announced that a moratorium on evictions for six months will be enacted to protect renters, but this is where the current information stops.
As property is an issue managed at a state level, it has been indicated that each of the states is currently mapping out how this will look in real terms.
For now, though, we can assume that for the next six months, it will be very hard to get evicted, especially for reasons related to hardship inflicted by the coronavirus pandemic.
Can I stop paying rent?
You should not simply stop paying rent unless this has been agreed to by your real estate agent or landlord. If you absolutely cannot as your funds have dried up, you need to discuss this as soon as possible with said agent or landlord.
Not having enough money to pay something as basic as rent can feel awful. Safe accommodation is a human right and the inability to provide for yourself and your family is a crushing blow.
The most important thing you can do right now is negotiate a better deal with your landlord.
But it’s a familiar situation for many right now, and ending up without the means to pay rent is not your fault. It’s also an extremely important time for us all to spend time indoors to help lower the rate of infection, so the government’s main priority will be ensuring that people have homes to stay in while this pandemic plays out.
In short, if you’ve lost your income, there’s a very good public health argument for the government to intervene and ensure you do not lose your house, too, though we are still waiting to hear more on this.
Do I have to pay it back?
As it currently stands, it looks like the most highly suggested option that is likely to be made available to renters who can’t pay rent is a deferral, meaning that yes, eventually it would have to be paid back.
A deferral can be handy in the instance that you might be short one week, or need extra funds one month that can be repaid the next, but is a very dangerous long-term solution as it ultimately puts a renter who is already in financial trouble into large amounts of debt.
For example, if this lockdown lasts for three months and a real estate agent offers a deferral of 50 per cent of the rent on a AUD$750 per week property, then by the end of the lockdown you would find yourself owing AUD$4875 to the landlord in arrears.
That’s a nasty sting to the hip pocket, and that’s assuming you can even go right back to work.
This is why the most important thing you can do right now, at least until we wait for more information from the state governments, is to negotiate a better deal with your landlord.
How do I ask for a reduction in rent?
It’s a lot easier than you might think. Despite the age-old notion that landlords are all evil blood-sucking overlords, this is merely a trope, and there’s a compelling financial argument to be made for the reduction of rent during this pandemic.
At the end of this article is a handy template that you can use to send your real estate agent (or landlord if you deal with them directly) to ask for some practical leniency that will benefit you both during the coronavirus pandemic.
Remember, the Prime Minister himself advised landlords and tenants to negotiate a fair deal over one week ago (that’s eons in terms of communication during a pandemic).
And lastly, it’s important to note that many states and territories provide protections for renters to avoid what’s called a “retaliatory eviction”, which is where a landlord might try to force an eviction out of spite. This essentially gives renters the ability to assert their rights without fear of losing their homes.
Why would a landlord reduce my rent?
By the very act of owning an investment property, a landlord takes on a risk. Investments can have positive or negative returns, and diminishing the risk of a negative return is good business.
It’s why they (generally) make sure there’s paint on the walls, a working stove, and the carpets aren’t moldy: the more somebody is likely to rent a house, the more they can generally charge for it.
It also costs quite a lot of money to lease a property: there’s listing fees and agency costs, not to mention that every week it sits empty is another week it doesn’t collect rent.
This is the most compelling argument for a savvy landlord to keep tenants in their homes right now for a reduced rate: it is much better to have somebody paying something than it is to have nobody at all.
While it is not common practice to negotiate a rental adjustment based on market behaviour (at least in terms of a reduction), these are extraordinary circumstances, and call for extraordinary measures.
Most landlords are already aware of the financial implications of having a house listed, and it’s pretty safe to say that it’s going to be even harder to fill a listing during mass lockdowns when millions of people are out of a job, especially at the same rate a current tenant might be paying.
With all this in mind, it is absolutely in every landlord’s best interests to keep the cash flowing and their house filled with tenants, even at a reduced rate, until society can go back to functioning normally again.
My agent suggested using my superannuation
There have been some reports of real estate agents suggesting tenants dip into their superannuation to pay rent during the COVID-19 pandemic, since the government made doing so possible.
This is not only a bad idea for several reasons, it could be illegal for them to suggest you do so, as it likely constitutes offering “unlicensed financial advice against people's best interests”, in direct breach of the Corporations Act (cth).
The Australian Securities and Investments Commission (ASIC) last week issued a nation-wide warning to real estate agents that in doing so, they risk a maximum of five years imprisonment, and/or a fine of up to AUD$126,000.
Agencies could face fines of up to AUD$1.26 million.
Will I get “blacklisted”?
The great spectre that is often used to make scared tenants keep quiet is that of the “blacklist”.
The reality of this boogeyman-esque list is a bit different to what most people think.
There is no secret blacklist that only agents know about, and you can’t be added to one for simply exercising your rights as a tenant.
While there are databases like the National Tenancy Database that provide lists of “problem” tenants that real estate agents can cross-check when looking at potential tenancy applications, getting placed on one of these lists is much harder than you might think.
In short, there are only two scenarios in which you can find your way onto a tenancy database:
- If your rent is in arrears by an amount in excess of the bond; or
- You're in breach of your tenancy agreement.
You also can’t be added until AFTER your tenancy has ended, an agent who plans on listing you MUST tell you so that you have time to dispute the listing, and any agent performing a background check on you in future must inform you if your name comes up on a “blacklist”.
All listings only have a lifespan of three years before they are removed, too, making the spectre of the “blacklist” more an annoyance than a life-ruining prospect.
But all that aside, remember: there is no secret blacklist that only agents know about, and you can’t be added to one for simply exercising your rights as a tenant.
A (very good) email template
Still confused about where you stand? Not sure how to reach out to a real estate agent to ask for leniency?
Don’t despair, we’ve got your back.
Here’s a pretty simple (but in our opinion very good) template of the sort of email you should be sending your real estate agent or landlord SOONER rather than later.
Remember, the more you give them to work with in terms of time, the more of a favour you are doing them, and the more likely they might be to come to the party.
Don’t wait until you can’t pay rent if you know the deadline is looming. Tell them straight away and you’ll both be able to come up with a solution together.
All you need to do is copy and paste the below, and change the bold bits to make it your own. It’s a bit similar to the one released by the Tenants Union of NSW, who have a load of great resources on their website (including useful stuff if you’re not in NSW). Go check them out here.
I am/We are making a special appeal to you regarding our home at address. As you no doubt are aware, the COVID-19 pandemic is having a serious impact on many in our community.
The official advice from Governmental health departments is also to practice social distancing techniques. This makes it hard for people to be out in public spending money to keep businesses, and hence the economy, going. As such, my income has been reduced/I have lost my job/Nobody is buying my product or services.
I/We know very well that this will have an impact on you, too. I/We hope that the government will come to assist the whole community, by looking at rents, mortgage payments, council rates and utilities, so as to ensure financial security for homeowners as well as tenants in these trying times.
With the impacts currently being felt across the community, if I/we have to vacate it may be very difficult for you to find a new tenant at the moment, especially at the same rent I am/we are currently paying. I/We also love our home, and take good care of it; I/we don’t want to have to move somewhere else, and doing so right now wouldn’t be good for either concerned party.
From that perspective, I/we would like to propose a reduced rental amount of $XXX per week, with a pause on the rent depending on your circumstances for the next week/fortnight/month. If we can come to an arrangement then once this crisis is over and our income picks up again or other relief is introduced then our rent payments can continue sooner.
I/We would also like to mention that while a deferred payment plan might be the norm in times of financial hardship for a tenant, given my/our current financial situation, and the uncertainty on the horizon in terms of job prospects and the economy as a whole, it would be irresponsible for me/us to commit to such an arrangement indefinitely.
I/we would also like to avoid reentering the workforce with a large amount of debt.
I/We would be happy to revisit this proposed arrangement fortnightly/monthly. If the government does make some decision on these issues, whether it’s rent and mortgage relief or something else, then I/we expect I/we will follow that directive.
Could you call me/us on 04XX XXX XXX to discuss or reply by email
All the best,