July 23, 2020

With COVID-19 causing financial strain to individuals and families, residential landlords may be experiencing problems receiving rent from their tenants. The strain felt by landlords may be compounded where there are mortgages over the property and other financial obligations.

 

FEDERAL GOVERNMENT SUPPORT

The National Cabinet previously announced on 29 March 2020 that there would be a moratorium on evicting residential tenants for six months.

 

QUEENSLAND POSITION

Residential Tenancies Regulation

On 24 April 2020 the Queensland Government passed the Residential Tenancies and Rooming Accommodation (COVID-19 Emergency Response) Regulation 2020 (Qld) (Regulation). The Regulation implements temporary amendments to the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) to provide support to residential tenancy arrangements.

The Regulation will expire on 31 December 2020, as outlined in COVID-19 Emergency Response Act 2020 (Qld).

The Regulation applies to all residential tenancy arrangements entered into before or after 29 March 2020, which is the commencement date of the Regulation. The Regulation reaffirms the National Cabinet’s position that tenants will be able rely on a six month moratorium on evictions from 29 March 2020. However, the Queensland Government has provided that this can only by relied on by a tenant if they are suffering “excessive hardship” because of the COVID-19 emergency.

The Regulation provides that “excessive hardship” includes:

  • a person, or another person under that person’s care, suffers COVID-19;
  • a person is subject to a quarantine direction;
  • a person’s place of employment is closed, or the trade or business conducted by the person’s employer is restricted as a result of a public health direction;
  • a person is self-isolating because they are a vulnerable person, or they live with or care for a vulnerable person; 
  • under a law a person is unable to travel to work or return home; and

Either:

  • the person suffers a loss of income of 25% or more; or
  • the person’s rental payment is 30% or more of their income.

If there is more than one tenant under the residential tenancy arrangement, “excessive hardship” will mean a situation where there has been a combined reduction of 25% or more of the total household income, or where the rent payable is 30% or more of the total income of all the tenants.

However, if a tenant does not experience “excessive hardship”, then the landlord will not be prohibited from ending the residential tenancy agreement if there has been a non-rent related breach of the agreement.

Other matters detailed in the Regulation include:

  • Where a tenant has not paid rent for seven day and a landlord “knows or ought reasonably to know” that a tenant is suffering excessive hardship due to COVID-19, the landlord must give the tenant a show cause notice, as opposed to a notice to remedy the breach.
  • Where tenants have notified the landlord that their rent is unpaid due to excessive hardship, the parties should enter into a tenancy variation agreement.
  • There must be an extension of fixed term residential tenancies to 30 September 2020 (or an earlier date if requested by the tenant) if a tenancy is to end on or before 29 September 2020, provided that the tenant is suffering excessive hardship. 
  • Disputes should be resolved via conciliation through the Residential Tenancies Authority, and if that is not successful, via dispute resolution through the Queensland Civil and Administrative Tribunal. 
  • Break lease costs for fixed term leases will be capped at one weeks rent where the tenant has lost more than 75% of their income and they have less than $5,000 in savings. 
  • Short tenancies (for moveable dwellings) can be extended until 29 September 2020 if both parties agree.

Additionally, if parties are entering into a tenancy variation agreement, then the parties should negotiate as to whether rent arrears will need to be repaid in the future.

These temporary amendments will expire 31 December 2020 and tenants will not be able to rely on these temporary provisions after that date. Consequently, tenants will need to adhere to the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) whereby a failure to pay rent should be reasonable grounds for the landlord to provide the tenant with a notice to remedy the breach.

 

Residential Tenancies Practice Guide

To aid the administration of the Regulation, the Queensland Government have released the Residential Tenancies Practice Guide: Guide for navigating requirements and protections for residential tenancies impacted by the COVID-19 pandemic (Guide). 

The purpose of the Guide is to assist landlords and tenants. The Guide details how parties may negotiate variations to residential tenancy arrangements and that the required form for those variations are provided on the Residential Tenancies Authority website. The Guide also provides mandatory steps for a conciliation process if parties are unable to reach an agreement. This process is to be facilitated by the Residential Tenancies Authority.
Of note is that the Guide also provides at attachment 1 additional “approved grounds” for which a residential tenancy can be broken during the COVID-19 pandemic. Additionally, landlords can still rely on existing grounds (other than rent arrears where there is excessive hardship) for ending tenancy arrangements, with attachment 2 of the Guide providing some detail in relation thereto.

 

Land tax

On 9 April 2020, the Queensland Government announced COVID-19 land tax relief measures, including:

  • “a land tax rebate reducing land tax liabilities by 25% for eligible properties for the 2019-20 assessment year
  • a waiver of the 2% land tax foreign surcharge for foreign entities for the 2019-20 assessment year
  • a 3-month deferral of land tax liabilities for the 2020-21 assessment year.”

The Government has stated that the waiver and deferral, are to be applied automatically to land tax assessments. Landholders wishing to access the land tax rebate are able to apply via OSR online. Applications must be made before 30 June 2020. 

Landowners will be eligible for the land tax rebate on a property (not necessarily all of their landholdings) where:

  • tenants are unable to pay normal rent due to COVID-19, and landowners will provide rent relief to their tenants that is at least commensurate with the rebate; or
  • landowners are unable to secure tenants, and financial relief is requested due to COVID-19.

Additionally, landowners must comply with the Queensland Government’s leasing principles, as released on the Queensland Treasury website:

  1. “You will negotiate in good faith with your tenant to seek a mutually agreeable resolution if their ability to pay is impacted by COVID-19;
  2. You will not evict your tenant if they are in financial distress and unable to meet their commitments due to the impact of COVID-19;
  3. You will not end a tenancy for any reason other than on an approved ground; this does not include the tenant’s inability to pay rent or the end of a fixed term lease;
  4. You will not charge break lease fees for tenants who need to end a fixed term tenancy early due to the financial, health or personal safety impacts of COVID-19; and
  5. You will allow a tenant to refuse entry for non-essential reasons, including routine repairs and inspections, particularly if a member of the household has a higher risk profile if exposed to COVID-19.”

 

LOCAL COUNCILS’ SUPPORT

At a local level, the Brisbane City Council has announced proposed relief by way of offering payment plans or deferral of rates for those suffering hardship. We recommend that you check with the relevant local council to see if any specific COVID-19 relief measures are being offered.

 

CONSIDERING THE IMPACT ON YOUR POTENTIAL LANDLORD INSURANCE

As a landlord, there is usually an ability to rely on your insurer to cover any unpaid rent if your tenant is unable to make their rental payments per the tenancy agreement.

However, a number of insurers have opined that a landlord’s insurance contract will not cover any loss of rent as a result of COVID-19. In particular, these insurers have stated that no relief should be available under an insurance policy where landlords:

  • reduce the amount of rent;
  • put rent payments on hold; or
  • do not issue late notices to tenants.

Additionally, the Insurance Council of Australia has advised that insurers are not pursuing residential tenants where those tenants cannot fulfil their rental obligations as a result of genuine financial hardship due directly to COVID-19. The Insurance Council of Australia has also advised that some insurers have already changed the tenant default clauses in their new landlord insurance policies.
Consequently, we recommend that you get in contact with your insurer to see what their position is in respect of the COVID-19 regulations for residential tenancies in your state or territory.

 

HOW CAN WE HELP YOU?

McInnes Wilson Lawyers can help you navigate these uncertain times. In particular we can:

  • provide you with advice on the arrangement and the state and territory legislation; and
  • document any changes arising from negotiations.