The news that the Federal Government has introduced a six-month moratorium on residential and commercial evictions is positive news for tenants who are struggling financially – but what about your life as a landlord who owns investment properties?
Although many people perceive landlords as the elite rich, the fact is that most landlords are ordinary Australians, who have worked hard to invest strategically and safeguard their financial future.
In our strange, new post-virus world, it is nice to know that tenants are being protected throughout this unsettling time, however, landlords also deserve some protection and if you are worried about your own rights as a property owner, it’s important to understand your options before offering rental reductions to your tenants.
Whether to bow to public pressure and offer a rental reduction is a moral – and financial – tug-of-war. Yes, you want to help your tenant through a hard time but, chances are you also rely on that rental income to maintain your own lifestyle and security.
Your obligation as a landlord
1. To your tenant
Australian common law states that landlords have a duty to guarantee the safety of rented property and its contents. This means that it is vital that no injury or damage is caused to the tenants, neighbours or public as a direct result of the landlord neglecting his/her responsibilities.
Landlord responsibilities include:
- Providing safe accommodation for your tenant
- Maintaining property structure, exterior and utility provisions
- Attending to and treating any potential health threatening issues related to the property
- Plus, what is specifically stipulated in your tenancy agreement
State and territory legislation differs, so it’s smart to check your own local government department to ensure you are adhering to the appropriate requirements.
2. To your lender
Taking on a residential or commercial investment is a huge financial decision.
When you originally applied for loan, your lender weighed up the risks associated with your application and made a decision to approve your property finance. Factors considered would have included:
- Your capacity to service your loan plus any on-costs (strata fees, building maintenance, etc.)
- allowance for interest rate hikes (Typically, there is a buffer of 2.5%)
- vacancy periods (up to 30%)
- occupancy by a reliable tenant, AND
- your own stable employment/income
Your lender did not predict this pandemic but, depending on your lender, talking to your trusted mortgage broker, could see you negotiate a commitment to help you as an investor, by offering some mortgage relief. It’s another reason why working with a mortgage broking specialist can help reduce stress in hard times, thanks to their knowledge of what you may be able to access in times of unusual hardship, such as the coronavirus impact.
A tenant’s obligations to landlord
- pay the rent in full AND on time as outlined in the original rental agreement,
- maintain the property to the same standard as when they took possession (normal wear and tear excepted.)
If your tenant can’t meet their obligations to you, you may be able to access financial support from the government but it will depend on your overall circumstances.
Keeping up with the latest offers from the government can be time-consuming and confusing, but there is definitely help available. Your personal circumstances are unique to you and to help you make decisions that support you through this evolving crisis, talking to your accountant is another sensible way to properly understand your financial position – and how to minimise any negative consequences. The reality is that it is hard on everyone in different ways – but it will, eventually pass.
By knowing your numbers, you can, hopefully, feel more confident in knowing how to manage your finances during the immediate fall-out – and how to bounce-back to your life as a landlord in the future.
For more information about potential mortgage relief, or how to manage your tenants throughout the COVID-19 crisis, talk to our professional mortgage brokers at Lending Specialists today.