Tenants and Landlords in a COVID-19 world

Tenants and Landlords in a COVID-19 world

Since the coronavirus hit us there has been a lot of attention on the financial and emotional stress being experienced by residential landlords and tenants. A number of tenants are struggling to pay their rent and many landlords are desperately reliant on their rental income. So the question is how is this to be sorted out and why is the solution so hard? Wood Property lease and manage hundreds of properties and are currently in the thick of helping tenants and owners work through the impact of the coronavirus.

Since late March the Federal, State and Territory Governments have been desperately searching for a solution to the unique situation of residential tenants who are suffering financial and emotional stress directly resulting from Covid-19 and can not pay their rent. Of course, many property investment owners are also experiencing significant financial and emotional hardship emanating from Covid-19 and rely on the income from their investment property for their own household income and have to continue to pay direct property bills.

The legislation and regulation around property ownership and occupation is deeply embedded and has been refined over many years to delicately balance the rights and responsibilities of both parties. So too have the dispute resolution mechanisms and tribunals that resolve issues in times of hardship or disagreement by weighing up the fundamental need for shelter, financial obligations and the legal rights of each party.

No legislation contemplates the impact of global pandemic and what is a fair way to protect the basic property rights and financial needs of an owner with the need for shelter and a home of the tenant. In normal times if, for example a tenant falls 2 weeks behind in their rent and continues not to pay rent, the property manager works with that tenant through an application and communication process where that tenant either catches up the rent over time or moves out and another tenant moves in. I am not arguing for or against these rules but that is just the law which to date has not changed.

In a Covid-19 world however the last thing anyone wants is people who are already suffering financial and emotional hardship (say in the case of owners) suffer more distress and loss of income with no resolution options if their tenant cannot pay the rent , or alternatively (in the case of tenants) ask them to move out of their home with the risk they have nowhere else to live because they can’t afford to pay the rent. Both options are totally unacceptable.

Any change to the delicately balanced existing legislation could unfairly prejudice either the landlord or the tenant.

It is important to give this debate balance as say most tenants remain financially stable, in full employment and can continue to pay their rent. Similarly, many owners could financially withstand a few months of a slightly lower rent if they had to. The problem occurs when neither the owner can withstand a drop in rent, nor the tenant afford to pay the rent.

So, what is the answer? The governments have not been able to find a solution mainly because whatever they do must apply to all tenants and all landlords in their state or territory which would unfairly advantage or disadvantage people on either side of the equation and potentially enable some people to game the system.

In my opinion there is no single or silver bullet solution. The answer lies in a series of measures, communication, understanding and empathy from everyone involved. It is also critically important to remember this is not just a financial problem. The emotional stress is immense. The impact of home isolation for many weeks or months will undoubtedly take its toll on our mental health. Many people who are still working are insanely busy and have a different kind of stress.

There has been unprecedented government support directly to individuals or via businesses to put money back in the hands of people whose jobs have been impacted. So that will help many tenants. Banks have been quick to offer support to businesses and property owners which will help.

But the most important ingredients to resolving this conundrum is communication, understanding and empathy. It is a case by case agreed outcome where property managers talk to tenants and landlords to understand their specific situation (good or bad) and help everyone access whatever support services are available to them and navigate the most acceptable path through the next few months.

The agreed path today may vary from the path tomorrow as the tenant’s and owner’s situation will almost certainly change, and so too will the best path to resolution. It also needs to consider if the owner has landlord insurance in place and what legal process needs to be followed to ensure this can be accessed to help limit the pain for all.

We can’t throw out the entire rule book. But that book has absolutely no contemplation for what should happen in the event of a global pandemic and the governments don’t have time to rewrite the rules in a totally equitable way. It is therefore incumbent on all of us to step up and lead the way to support each other and figure this out in a fair and understanding way. We all need to carry a relative proportion of the load to get us to the other side of this.

Throughout history in times of struggle and hardship we have pulled together to support each other in a way that is truly human and right and often totally outside normal rules. I am confident we will do that again in this case and before to long life will return to normal.

Stay safe.

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