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COVID-19 For Landlords

COVID-19 is having a big impact on tenants and landlords of residential properties. Many of my clients have at least one investment property, and this is a hard time to be a landlord. While you probably do not want to be unfair to anyone that has been impacted, you need to protect your financial wellbeing.

This information is general in nature and intended as a guide only. You can contact me to discuss your situation in detail.

There has been nothing specific announced regarding relief around residential tenancy, so many of you may be unsure of what the right thing to do is.  Many businesses have been closed for weeks now and the financial impact is going to start hurting a lot of people.  Many people have more than one investment property, and some of you have many.

Today’s Financial Review noted that major insurers are noting that they will not provide cover where a landlord and tenant come to an agreement regarding rent. [1]  So, I thought I would reach out with an update of what is available to assist right now.

If your tenant is still able to pay, then you have nothing to do.

Many businesses will be supported through the Job Keeper payments that were passed into legislation on Thursday April 8.

If your tenant advises they are about to get stood down they may be eligible for Job Seeker or Job Keeper allowances. If this is the case and you want to enter into an arrangement with them, contact your insurer to see if that is acceptable under your current policy.

If it is not, then you need to decide about the best way forward.

Evictions have been put on hold for six months which is great news for residential tenants but as a landlord this could leave you with a shortfall in paying your loan when you are reliant on the rental income.

The current benefits like Job Seeker or via their employers or for sole traders Job Keeper is available.  You can find out more about your eligibility for those payments here:

https://www.servicesaustralia.gov.au/individuals/subjects/affected-coronavirus-covid-19

https://www.ato.gov.au/general/gen/jobkeeper-payment/

However, lender have been encouraged to allow repayment holidays on Residential Investment Loans where the tenant is unable to pay. Each lender will have their own set of conditions.

We have spoken to a few clients who are needing to put residential investment property repayments on hold.  Lenders are making this relatively easy.

We are in this together, but there are a few things you might need to consider prior to requesting any break from loan repayments:

  • Most lenders will freeze access to redraw or require you to utilise funds you have in redraw or offset before you can get a repayment holiday
  • With most lenders if you pause your repayments, interest will still be calculated daily and added to your loan account.  Most lenders will not extend the loan term so be mindful that when you go back to normal your repayments might be higher than they are right now
  • In the past applications for hardship appeared on your credit file, so make sure you read the terms of your request carefully

Now, it will be up to you to contact your lender, but if they do say things you don’t understand or want to put you on a fixed rate, contact your broker for assistance in negotiation – they might just offer you a better deal.

The relief package for commercial tenancies is available here:

https://www.business.gov.au/Risk-management/Emergency-management/Coronavirus-information-and-support-for-business/Relief-for-commercial-tenancies

[1] “Landlords are ‘freaking out’ over insurance p11 Australian Financial Review 9-13 April 2020

 

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Phoebe Blamey

Author Phoebe Blamey

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