States getting ready to launch individual relief packages
Sadly, following last night’s National Cabinet meeting we are still waiting on a promised National response to the need for relief for tenants and landlords to help see them through the Covid-19 pandemic. National Cabinet will meet again on Friday 27 March.
The big 4 banks have announced a Covid-19 relief package for small businesses, and the Federal Government has revealed stimulus packages which provide relief to eligible small and medium businesses.
For now, it appears that any response for tenants and landlords will be largely State and Territory-based, and it is not anticipated to include a Federal contribution to rent payments for residential or small business tenants. Some State and Territory Governments, particularly NSW, have indicated that they are working on arrangements to protect tenants and landlords who can evidence that the Covid-19 pandemic is a cause of financial or rent distress.
What we know now, and expect in a relief package
So what is happening in the meantime? Below are Q&As covering some frequently asked questions as to what relief is already in place, what is being worked on, and what can be expected:
Q: How does the relief package from the banks work, and does it provide sufficient relief to landlords?
A: To obtain relief, businesses must register with their bank for access to the package, which gives small businesses a six month break from making loan repayments on existing mortgages. Assuming that the Covid-19 crisis passes before the end of the six-month period, this may provide sufficient relief to small business landlords who rely on rental income to make their mortgage repayments, by covering any rent relief they may provide to their tenants. Importantly however, note that interest will continue to accrue during the six-month period, adding to the amount eventually due, which may leave such landlords ultimately out of pocket. Also, there are some landlords who may not qualify as a small business for the purposes of access to the package, such as landlords who have purchased a rental property for investment purposes outside the criteria of a ‘business.’ It is uncertain currently whether the banks will extend the relief package to cover such individuals.
Q: Is the Federal Government doing anything to assist?
A: Last week, the Federal Government announced a stimulus package, which includes unsecured business loans of up to $250,000.00 with repayments deferred for up to six months, and up to $100,000.00 to eligible small and medium businesses and not-for-profits. Again, this will be of assistance to eligible businesses but may not extend to provide assistance for individual non-business landlords.
Q: What have the States/Territories done so far, if anything?
A: New South Wales is ready to provide a relief package, alone if it has to. On 24 March 2020 it passed the COVID-19 Legislation Amendment (Emergency Measures) Bill 2020 (NSW). This enables the NSW Government to respond to the COVID-19 pandemic issues by regulations made under certain legislation, including the Residential Tenancies Act 2010 and the Retail Leases Act 1994, and may, amongst other things, include:
- Banning of evictions of residential and retail tenants; and/or
- exemptions to those tenants from complying with lease obligations (including the obligations to pay rent and other money) during a six-month moratorium.
The regulation-making powers are also stated to apply to “any other Act relating to the leasing of premises or land for commercial purposes”, which potentially includes all commercial leases within the protections.
The Tasmanian Parliament is debating the COVID-19 Disease Emergency (Miscellaneous Provisions) Bill 2020, which has a four-month moratorium and provides for matters including prohibitions on evictions, prohibitions on landlords increasing rent for both residential and commercial tenants, and providing landlords and tenants with rights to break fixed-term leases, with the approval of the Residential Tenancy Commissioner, if they can evidence severe hardship.
In South Australia, Adelaide City Council has announced that it will provide tenants of Council owned buildings, Central Market traders and community groups with a three-month rent holiday, prompting calls from small business for similar rent-relief measures from the government. The Property Council SA, for example, has been working closely with the State Government on stimulus measures for landlords and tenants, with Executive Director Daniel Gannon commenting:
“Our experience is that landlords will seek and are seeking to work with the tenants to help them through times like these…but government is also a major stakeholder and needs to be involved to provide relief…The state government has had a strong appetite to look at a solution in this space and I’ve got no doubt they’ll be making announcements in the coming days."
The remaining States/Territories have indicated that these issues are currently being discussed and debated, and that responses/proposed measures will be forthcoming shortly.
Q: In NSW, when can the powers under the Emergency Measures Act be used, for how long will they remain in place, and what do they mean for landlords/tenants?
A: The emergency powers can be used when the New South Wales Parliament is not sitting and will not be sitting within the two weeks following the relevant regulation(s). Any regulation made under the power will expire six months from the day it is made, or earlier if the Parliament so decides. The Act confers broad regulation making powers ‘in particular circumstances.’ That expression does not appear to be defined but it is probably safe to say that it would include a residential tenant’s inability to pay rent because they have lost their job as a result of the pandemic, or a retail tenant’s inability to pay rent because they have been forced to close their premises or limit their trade. The Act does not address the issue of how this might affect landlords, although there has been mention of the potential implementation of other measures to pause the payment of rent, including a government-underwritten loan scheme to ensure that renters do not end up with a huge debt and/or that landlords do not default on their mortgages as a result of being forced to provide rent relief to tenants.
Q: I am a landlord but not a “business” and I rely on rental from my investment property to pay the mortgage. Can I expect any relief if my tenant is unable to pay rent because of hardship caused by the Covid-19 pandemic?
A: Currently the best response is to watch this space.
- The general consensus amongst the States/Territories appears to be that they do not want to see tenants evicted, but that they also understand that there will be challenges for landlords who rely on rental income to make mortgage repayments.
- At a Federal level, Treasurer Josh Frydenberg has asked banks to contribute by being flexible with customers whose ability to pay mortgages has been affected by the crisis.
- Governments have indicated that landlords will receive assistance in return for accepting rent freezes and or the prohibition on evictions, but how that assistance will be provided is still under discussion.
We will keep you updated as any developments occur. If you have any questions about your business and property issues, please get in touch with Jane Wolfe on 0409 159 271 or email@example.com.