Landlord's Options When Tenant Asking Rent Relief

Hi All Financial gurus

I have an investment property at Gold Coast. Currently is rented to two overseas students for $540 pw (joint lease agreement), and the lease is managed by Meriton (their property management branch).

Just now, I received a letter from the property management agent, telling the tenants want to reduce the rent to $250 pw, citing the reason that they have lost their jobs due to the COVID-19 outbreak. The agent also mentioned the Government just issued a policy that no tenant can be evicted as a result of financial distress caused by COVID-19 for a maximum period of 6 months.

To be fair, they are good tenants and have never missed their rent, and we want to keep them if everything are kept the same. Whilst we have sympathy to people having hardship and want to help if we can, but we want to know if there are better ways to PROPERLY deal with such request. What are my options?

For example, how do we assess their financial situation (eg, they may get another job next week); and if we agreed to give some concession, what is the justified amount and condition, and how to put the terms into some bonding contract so we can protect ourselves.

Finally, if things turned bad and we cannot reach an agreement, am I risking having no rent payment for 6 months, and have no power to do anything?

Do you have any such experience, and/or what is your suggestion?

Thanks in advance for your kind advice.

[*** Update ***] I just realised the lease agreement is due to renew by next month. Does it mean if either party decided not to renew the lease, the "6 months no eviction rule" won't apply as there is no lease agreement?

Regards,
Michael

Comments

  • +4
    • Thank you @payton.

      There are lot of discussions about whether the "6 months Moratorium" is fair or unfair. But I wish to know, with the given circumstances, what is my option to respond to the tenant's request.

      • +1

        sorry yes, the top one is a bit of philosophical discussion but the 2nd and 3rd threads hopefully have some actual info applicable to you.

  • +1

    Be careful if you agree to a rent reduction as your Landlords Ins will only cover the lower amount should they leave or stop paying altogether

    • +2

      That's true. Also I feel they asked for too much. While I want to help them and keep them, their financial problem isn't really my problem. I can easily rent out my property for $500+ pw in the current market.

      • +8

        It is not in your interests to agree to anything formally at this stage. Do not agree to anything at least until the laws are clear in your state and you have discussed this with your landlord insurer.

        If you agree to rent reduction and they do not pay it, then you still cannot evict them, yet you have reduced any insurance claim or claim you might have against them in future by that amount.

        Edit: Just advise them that due to various uncertainties you are unable to enter into any formal agreements at this stage and will review this in the coming weeks.

        • Great advice! Thanks.

      • +2

        "Easily"? You sure about that? I'd imagine most people would be staying put and doing as your tenants are doing and negotiating. Or downsizing. Can't imagine many prepared to move house however, or your property manager wanting to run open houses etc.

        Be careful of how sure you are that you'd find another tenant anytime soon

        • You maybe right. But what's the point to agree on $250 pw for keeping the tenant?

          I guess that's why I am asking the question here …

          • @eco2: Thought of a counter-offer? Doesn't need to be 2 set prices in mind

            • @spackbace: I am more than happy to go below a bit under the current market rate. I am willing to help them out provided I am not losing out in the long run.

              I liked to see many people's suggested here - i.e. not to be bonded to a hard-fixed agreement. The COVID-19 thing will eventually be over, so too some of the government's temporary policies.

      • I’d question how easy it would be to rent your place out again, if it came down to that.

        I’ve noticed a lot of “for rent” signs in my area up for most of March and still up, when previously things would be leased within a couple of weeks at more.

  • +11

    The other thing to consider is that giving them a reduction means they don't owe you anything more than the reduced amount. You cant claim the difference back through insurance either

    If you leave the rent where it is and they pay what they can (not through agreement with you), they still owe you when the eviction ban is over. Whether you chase that up, claim through insurance or evict them at that time would be up to you.

    These may change over the next few weeks, so keep an eye out. But if you think it is easy enough to rent out (considering the times, it would probably be longer to get someone in particularly at the normal price) then take the risk.

    Personally I'd leave the rent where it is, and decide later if and when they go into arrears.

    • Really appreciated your advice @dizzle

      I think they are saying they can only afford $250 pw, not that my property only worth $250 pw.

      So you're saying if that's the case, take $250 pw for now (without any change in rent agreement), and chase for owed amount later when circumstance changes?

      (I am thinking to push back a bit asking $300 pw for now ..)

      • +2

        Any agreement from you (including accepting $300 for several weeks) could be considered an acceptance of that change in contract even if it's not in writing. So I think negotiating will be considered the same and you may have trouble chasing it up after that.

        What I'm saying is you will have to have a paper trail that says "$xxx paid up until XX/XX/20 - meaning you are $XXX in arrears". Otherwise they can say you talked to them, and by accepting $300 a week that was the new arrangement.

        • Thanks @dizzle

          As in the "update" of this post, we have the option not to renew the lease which will be due in the coming month. I wonder if the government's "6 months no eviction" ruling is still applicable is the lease expires and not being renewed.

          • @eco2: I haven't seen officially, but I would expect an end of lease not to be treated the same as eviction. So as long as you give the right notice within the time frames that you would end the lease at the normal time you should be fine.

            However I could also see the case of if they don't leave when required they would go on a month to month lease, which you could then end when this period is over (there is even a form on the QLD tenants assoc website for this). Best to check with RTA QLD - I couldn't find much online, but call them and see.

            I have just given notice to my real estate that I will be ending the lease in June. I'm not have any issue with them paying rent, so I have said that if they are having trouble finding somewhere they could stay a month or so longer. And because I am flexible on moving back in I've stated if they find somewhere sooner, they don't have to worry about notice periods. My REA doesn't think I'll have a problem with that.

  • +2

    Would Meriton be able to address some of your questions? Some agents are asking for details/evidence from tenants to show that their income has been reduced. You could ask your agent whether they have received rent reduction requests/agreements from other tenants/landlords, how much on average and for what duration of time. Whilst the circumstances of each tenant may be different, it could give you at least a starting point. Your agent should also be responsible for ensuring the terms of the agreement are captured in writing.

    I think QLD has already released what it plans to do in terms of assistance which might not help you if your overseas tenants don’t meet the requirements. If it’s possible that the QLD government intends on releasing further assistance, then perhaps you could just enter into a short term temp agreement to bide both sides over until then or just hold out until you know what it is.

    Instead of reducing the rental rate and thus getting less back from on your landlord insurance should the tenants still default, what about front loading the rent reduction if you can afford to? So as a simplified example, instead of offering a rental reduction of say, $110/week for 5 weeks, offer the first week free with the remainder at the standard $550/week.

    • Interesting suggestion. I will ask my agent for more information. Cheers!

  • OP have you seen this?

    https://www.qld.gov.au/housing/renting/rent-assistance/bond-...

    Looks like the QLD government will cover you for a month.

    Perhaps an agreement with your tenants that this month is covered by them, next month by the QLD government, and then revisit based on what the situation is then?

    • A bit unfortunate, the tenant aren't Australian citizen.

  • +1

    I reckon you leave the rent as is and they can pay the $250 that they can afford.
    Remember they are not entitled to job seeker or job keeper and are doing the right thing by initiating communication.

    I’ve got a unit with 2 tenants on the lease both who have been stood down from work and will be entitled to job seeker or keeper.
    The rent is $345/week and they are demanding a rent reduction or they are threatening to pay nothing.

    I’m casually employed now with an uncertain future in the short term, my spouse has been stood down and getting job keeper and we’ve got our own rent to pay of $775.

    I get it that we all need to work together but I’m not understanding how 2 adults, who at the very least can get job seeker of $1100 each want to stitch me up

  • I thought international students had to prove they are able to support themselves before a visa was granted.

    • +1

      Lol

    • +1

      They probably did. Before March.

      Not sure what rock you've been living under but a huge percentage of the population is stood down or out of work.

      Fair chance the tenants are part of that figure.

      • To have a visa granted they need to prove they have enough money to support themselves.

        • Did you even read my post?

          • +1

            @zeggie: But if they are on study visas I think they can only work 20 hours a week, so it's designed that they should be able to support themselves without that 20 hours and that just gives them an extra bonus for personal spending etc.

            Still I understand this isn't limited to Australia, so their parents or sponsors may not be able to afford the rent either.

    • Well, only for the first year of study full time.

  • +1

    OP, the correct answer is wait until federal and state policies are actually official before doing a single thing. Nothing is set in stone yet.

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