The NSW State Government has recently passed new regulations affecting residential tenancies. The Residential Tenancies Amendment (COVID-19) Regulation 2020 imposes restrictions on landlords’ rights to evict tenants who are unable to pay rent or charges due to being impacted by COVID-19. The Regulations, which are to remain in place until 15 October 2020, also introduce mandatory rental negotiation conditions and increase minimum termination notice periods.
The Regulations at a glance
Subject to the conditions explored below, the Regulations establish a six-month moratorium on landlords:
- issuing an impacted tenant with a termination notice for non-payment of rent, water usage charges or utility charges;
- applying to the NSW Civil and Administrative Tribunal (NCAT) for a termination order in relation to a termination notice issued for failure to pay rent or charges; and
- applying to NCAT for orders relating to any other breach of the residential tenancy agreement arising from the failure to pay rent or charges.
These prohibitions will apply without any qualification for a period of 60 days, ending on 14 June 2020. This 60-day period is intended to protect tenants from receiving termination notices before they have had an opportunity to apply for and receive government financial support.
After this period, a landlord may then evict an impacted tenant for the failure to pay rent or charges if the landlord first satisfies the following conditions pursuant to the Regulations:
- the landlord has waited until 14 June 2020 before issuing the termination notice or applying to NCAT;
- the landlord and tenant have already participated in a dispute resolution process facilitated by NSW Fair Trading in good faith to try to negotiate a rental payment plan; and
- in the circumstances, it is fair and reasonable for the landlord to serve the termination notice or apply to NCAT for orders to the same effect.
Who do the Regulations apply to?
The Regulations apply to “households impacted by the COVID-19 pandemic”.
A household includes any tenants and other people living together in the same residential premises.
A household will be held to be impacted by the COVID-19 pandemic if the overall household’s weekly income has decreased by at least 25% after tax. In calculating a reduction in household income, the current weekly household income should be compared to the household’s weekly income during the period before any one or more rent-paying members of the household were impacted by the COVID-19 pandemic.
A rent-paying member will have been impacted by the pandemic if they have:
- lost their job as a result of the impact of the pandemic;
- had their work hours or income reduced as a result of the impact of the pandemic; or
- had to stop or materially decrease their working hours due to:
- becoming sick with COVID-19 themselves;
- having another member of the household become sick with COVID-19; or
- having carer responsibilities toward a family member sick with COVID-19.
Government payments must also be considered when assessing whether the weekly household income has been reduced by 25%.
If a household has been found to be “impacted by the COVID-19 pandemic”, then all tenants within that household will be classified as an “impacted tenant”. It is important to stress that this characterisation is determined at the household level and is not based on any one individual tenant’s circumstances.
New notice provisions
The Regulations have also increased the minimum notice period that landlords must provide to impacted tenants if they intend to terminate their lease.
During the six-month moratorium period, landlords must now give at least 90 days’ notice of the termination of any of the following arrangements:
- a fixed term tenancy;
- a periodic tenancy;
- a tenancy where the tenant has breached the residential tenancy agreement for reasons other than the failure to pay rent or charges; or
- a tenancy with a term of 20 years or greater.
The Regulations prohibit landlords from listing impacted tenants on a residential tenancy database if they have breached their residential tenancy agreement as a result of failing to pay rent or charges.
However, there is no prohibition on continuing to list impacted tenants who have breached their residential tenancy agreement by other means though. Further, this prohibition does not extend to tenants who have failed to pay rent or charges but are not characterised as an “impacted tenant”.
Recommended steps for impacted tenants and landlords
- Negotiate honestly and fairly. It is preferable for tenants and landlords to negotiate a bespoke arrangement that suits their needs before incurring the expense and time required to pursue a formal rent negotiation process through NSW Fair Trading.
- Provide evidence of your financial position to further negotiations. Tenants seeking rental relief pursuant to the Regulations should provide documentation evidencing their loss of income such as letters from employers confirming they have been let go or stood down, current payslips and proof of income during the period prior to the tenant being impacted by COVID-19. Tenants should also disclose any government financial assistance.
Similarly, landlords should be forthright about their financial situation. If landlords rely on rental income to repay a mortgage over that property, the landlord should convey the results of conversations they have had with their mortgage provider as well as the outcome of any other relief they have applied for to assist them to provide rental reductions.
- Seek legal assistance to ensure any agreed variations to the terms of a lease are properly documented in a Deed of Variation. It is critical to ensure the scope of any temporary arrangements are properly documented to avoid disputes about the agreed terms or their intended duration later.
- Parties should continue to review their circumstances. The provisions will only apply while an impacted household continues to be impacted by COVID-19. If for example, an impacted tenant gains new employment, such that the household income is no longer 25% lower than it was prior to being impacted by the pandemic, the above prohibitions will no longer apply to that lease.
- Consider government economic relief measures that may be available to you such as the jobseeker payments or land tax relief. You can read more about the NSW Government’s land tax relief package available to eligible landlords in our article here.
- Ultimately, if an agreement cannot be reached, either party can apply to NCAT to determine disputes about breaches or the termination of a lease. However, we highly recommend seeking legal advice before pursuing this path. In determining any orders relating to the termination of a lease, the Tribunal will consider a range of factors including:
- whether either party refused to make a reasonable offer regarding rent during the formal negotiation process;
- whether the tenant has continued to make any sort of payment towards the rent;
- the general financial position of the parties;
- whether reasonable alternative accommodation is readily available to the tenant; and
- any special vulnerabilities and the public health objectives to restrict the movement of citizens by having them remain in their homes during the pandemic.
- Finally, understand that temporary reductions in rent or rental deferrals do not automatically equate to a waiver of rent. Unless the parties otherwise agree, any unpaid amounts will still be owed by the tenant to the landlord. Further, the Regulations do not apply to households who have not been impacted by COVID-19 and as such, tenants of these households can still be evicted for breaches of their residential tenancy agreement.
McCabe Curwood has extensive experience advising tenants and landlords alike on their rights and obligations. Our Property Team is well placed to help facilitate rental negotiations to achieve solutions tailored to the needs of the parties.
If you have any questions about the new Regulations and their impact on you, we recommend you contact McCabe Curwood today.