Rental First
Published 08 May 2020
Moratorium is ok but what about the rent?
The obvious question follows – what about the rent? What can Covid-19 impacted tenants and landlords expect in terms of what will be considered a ‘fair and reasonable’ rent reduction offer or a deferral payment plan – by Fair Trading, and by the Tribunal.
It’s a lot easier in the commercial tenancy space?
- Commercial tenants and landlords in a similar situation can rely on the national cabinet mandatory code of conduct, which sets out a principle of proportionality, basically the idea that rent will need to be reduced in line with the tenant’s lost revenue – so a reduction of up to 100% of the ordinary rent payable.
- The mandated code gives further guidance that an overall rent reduction offer needs to include at least 50% waiver rather than deferral. It also sets out minimum periods for repayment of any remaining deferred rent.
There isn’t anything similar in place for residential landlords and tenants.
- The suggestion is for Tenants to sit down and work out their household budget considering how much they can afford on rent right now, what they anticipate is affordable for them going forward, and what they can manage in terms of any unpaid rent they’ve accrued up to that point.
- The landlords are required to enter into negotiation in good faith with the tenants.
- If that fails, they are mandated to take the services of mediation by Fair Trading NSW
- The idea is that a fair and reasonable offer is agreed upon, one in which the tenant isn’t being asked to accept any offer that puts them into housing stress. Which is pay more than 30% of their weekly household income in housing costs.
- On top of paying for their housing, people need to be able to eat, pay for medicine and health services, and cover all the other basic necessities for the families and households during this crisis.
- And any offer that is simply a deferral of rent can’t be considered ‘fair and reasonable’. The outcome of deferred rents for people in financial crisis is simply exacerbation of that distress down the track.
So the jury is still out on what will be considered a fair and reasonable arrangement between the Landlord and tenant.