Over the past few weeks, the NSW Government has been navigating uncharted waters and deliberating unprecedented issues in the realm of leasing, as a result of COVID-19. The NSW Government's most recent address sheds greater light and clarity for residential landlords and tenants, by introducing the Residential Tenancies Amendment (COVID-19) Regulation 2020 ('Regulation').
The Regulation considers a tenant (being one or more rent-paying members of the household) to be impacted by COVID-19, if they have: lost work, had a reduction in work hours, contracted the virus, or need to care for someone with the virus and cannot work, and the household must also have lost 25% of its income as a result of COVID-19.
If a tenant has been impacted in any way by COVID-19, landlords must understand their obligations pursuant to the Regulation, which addresses the following issues:
Moratorium on evictions
There is a six month moratorium on evictions from the commencement of the Regulation, whereby landlords are not permitted to terminate for non-payment of rent, or apply to the NSW Civil and Administrative Tribunal ('NCAT') for a termination order due to non-payment of rent if the tenant has been financially impacted as a result of COVID-19 and is unable to satisfy its monetary obligations under the lease.
However, it is important to note that this does not entitle the tenant to six months rent free. Therefore, we encourage both landlords and tenants to maintain open communication about the tenant's position, and if there is a change with their financial position, then reasonable options for rent relief is recommended.
Grounds when termination is permissible
The Government also had significant discussion regarding when a landlord is permitted to terminate a lease agreement under the Regulation. The general rule of thumb is that a landlord must provide a minimum 6 months' notice to the tenant. However, there are limited circumstances which the landlord is permitted to provide notice to evict and terminate.
Notice of eviction
A landlord still has the capacity to obtain an eviction order from NCAT to evict a tenant from the building, irrespective if they have been impacted by COVID-19, for reasons other than non-payment of rent. However, the Regulation has set minimum requirements to evict a tenant which the landlord must satisfy, being:
- A minimum 60-day notice period, after the Regulation is implemented;
- Parties are required to negotiate in good faith concerning any monies that are payable under the lease; and,
- The landlord must have fair and reasonable grounds to terminate the lease.
If the tenant is a boarder, a landlord can also evict a tenant irrespective if they have been impacted by COVID-19. This must be for reasons other than non-payment of rent, by giving 60 days' notice if an agreement could not be reached due to the tenant not acting in good faith, or 6 months' notice if negotiations were amicable. However, if the boarder is causing damage to the property or other residents property; using the premises for illicit means; threatening, intimidating or harassing other boarders; or is not paying rent or fees and the boarder is not impacted by COVID-19, then the 90-day notice period for eviction is waived.
Notice of termination
If the landlord seeks to end the lease due to the lease expiring, a landlord can issue a notice of termination. In these circumstances, a landlord is required to provide a minimum 90 days' notice if it seeks to terminate a fixed term tenancy at the end of the term or a periodical (reoccurring) tenancy.
As a landlord it is necessary to diarise dates if you require the tenant to vacate the premises upon the expiration of the lease. This is particularly important if you seek to the sell the property with vacant possession, as the 90-day notice period could exceed settlement for a standard 42 day Contract.
The Regulation has offered tenants protection from being reported on tenancy databases by the landlord, if the tenant is unable to satisfy its monetary obligations under the lease due to being impacted by COVID-19. However, landlords are still permitted to report their tenants for breaches other than non-payment of rent, or if the tenant has not been paying rent and is not affected by COVID-19.
Importance of being amicable
As mentioned earlier, we implore landlords and tenants to be amicable when discussing options for rent relief. If an application is made to NCAT, the Regulation permits the Tribunal to have regard to:
- any advice provided by NSW Fair Trading regarding the negotiations that parties have undertaken, and whether parties were acting reasonably by making and considering proposals for options of rent relief;
- if the tenant has continued to make any payment towards their rent;
- the financial impacts and hardships experienced by either landlord or tenant as a result of COVID-19;
- whether there are alternative and affordable accommodations available to the tenant; and,
- whether the tenant is especially vulnerable.
The government's main concern is to ensure that our population is not rendered homeless, and to reduce any movements of tenants needing to relocate. Therefore, parties should take into consideration these points above, along with the government's objectives, during any negotiations of rent relief and try to reach an agreement. It is important for parties to understand that if an application is filed with NCAT, it becomes a timely process and the power of decision making is removed from both parties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.