Residential Tenancy Relief Measures in NSW amid COVID-19 Pandemic

The COVID-19 pandemic makes it difficult for a large number of Australians to pay rents for their residence as they either lost or suffer a significant reduction in their income. They risk being evicted from their homes and rent recovery actions by landlords. On 29 March 2020, the Australian states and territories agreed on a moratorium period on eviction of tenants during the pandemic which moratorium is to be implemented in the respective states and territories.

In New South Wales, not only were relevant regulations amended to impose a 6-month moratorium period from 15 April 2020, the government also grant land tax reductions to help ease the financial stress of landlords and tenants. In this article, we will make an overview of such relief measures.

TERMINATION OF TENANCY FOR RENTS OR UTILITY CHARGES IN ARREARS

• Relevant law

The residential tenancy is regulated in New South Wales by the Residential Tenancies Act 2010 (‘the Act’) and its subordinate legislation Residential Tenancies Regulation 2019 (‘the Regulation’). Under the Act, if rents or utility charges for water, electricity, gas or oil remain in arrears for 14 days or more, the landlord can terminate the tenancy by giving the tenant at least 14 days’ of notice.

After the termination date in the notice, if the tenant fails to vacate the premises, the landlord can apply to the New South Wales Civil and Administrative Tribunal (NCAT) for a termination order and a possession order. The possession order is enforceable as the NCAT may issue a warrant of possession and have a sheriff’s officer to evict the tenant from the premises.

• Who benefits from the moratorium

On 15 April 2020, the Regulation was amended to impose a 6-month moratorium period on eviction of an “impacted tenant”.

An impacted tenant is a member of a household which is “impacted by the COVID-19 pandemic”. Under the Regulation, any of the following events which happened to any rent-paying member of a household as a result of the pandemic can be regarded as an impacting event:

1. loss of employment or income;
2. reduction in work hours or income;
3. stopping of work or material reduction of work hours because: the member or another member fell ill with COVID-19; or the member has to take care of another member who fell ill with COVID-19.

A household is ‘impacted by the COVID-19 pandemic’, and thus benefits from the moratorium, if its weekly household income fell by at least 25% compared to that before an impacting event above occurred.

It should be noted that the moratorium does not apply to social housing tenancies as they have their own rental arrangements.

• Notes on weekly household income

First, “household” means ‘any tenants or other persons living together in the same residential premises’. They can be a family, or mere co-tenants, or even head tenants and sub-tenants (e.g. one tenant having a head tenancy with the landlord, while the other tenant having subtenancy with the first tenant).

Second, “income” is that of all the rent-paying members of the household combined. Thus, even if only one member is impacted, if the impact on that member is so great that the weekly income of the entire household dropped by at least 25%, then the moratorium still applies.

Third, “income” refers to income after tax, but it includes government payments such as social security benefits. For example, if a tenant loses his job for the pandemic but receives the JobSeeker payment, the payment will be included in the weekly household income. If that income is not at least 25% lower than the weekly household income before the tenant loses his job, then the moratorium does not apply.

• Termination of tenancy during the moratorium

During the moratorium, if an impacted tenant is unable to pay the rent or utility charges, the landlord must first, in good faith, participate in a formal rent negotiation process with the tenant. If the landlord and the tenant cannot reach an agreement in private, they must seek assistance from NSW Fair Trading to facilitate a formal rent negotiation.

More information in this regard can be found the website of NSW Fair Trading:

https://www.fairtrading.nsw.gov.au/

Following the formal negotiation process, the landlord can issue the termination notice or apply to NCAT for termination and possession orders on or after 14 June 2020, if it is fair and reasonable in the circumstances to do so.

Note: the standard of fair and reasonable is based on a range of factors which the NCAT will take into account, including:

1. financial positions and nature of financial stress of the landlord and the tenant;
2. payments made by the tenant towards the rent;
3. circumstances affecting the tenant such as vulnerability, alternative accommodation options etc;
4. public health risks related to eviction and moving of residence; and
5. advice from NSW Fair Trading relating to the negotiation process, e.g. whether a reasonable offer about rent was made or refused.

• Listing in residential tenancy database

According to the Act, if the amount that the tenant owes the landlord exceeds the rental bond, or the NCAT makes a termination order, the tenant’s personal information can be listed in a residential tenancy database for landlords and agents to decide whether to give the tenant a tenancy.

However, under the amended Regulation, impacted tenants who breached their tenancy only because of rents or utilities charges in arrears cannot be listed in such databases.

TERMINATION OF TENANCY ON OTHER GROUNDS

Under the Act, the tenancy can be terminated by the landlord on a number of grounds to which different notice periods apply.

During the moratorium period, the landlord must give the tenant at least 90 days’ notice for terminating the tenancy on the following grounds:

1. end of a fixed term tenancy;
2. termination of a periodic tenancy, or a long term tenancy for 20 years or more; or
3. breach of tenancy terms other than rent or utility charges in arrears.

Termination of tenancy by the landlord on other grounds remain unaffected, such as sale of premises, serious damage to the premises or injury to the landlord or agent caused by the tenant, use of premises for illegal purposes, hardship to landlord etc.

LAND TAX REDUCTION

In New South Wales, a property owner must pay land tax annually unless an exception applies such as the property being the owner’s principal place of residence or the total taxable value of the property being below the land tax threshold (which changes every year and is $734,000 for the 2020 land tax year).

A landlord of residential property may have the land tax payable in the 2020 land tax year (1 January to 31 December 2020) in relation to the leased property reduced by up to 25% if:

1. the property is leased to an impacted tenant; and
2. the landlord reduces the rent of the impacted tenant, the amount of rent reduction will be the amount of land tax reduction

Please contact our firm for advice specific to your circumstances.

Disclaimer: This publication is general information only and does not purport to provide legal advice. We do not accept responsibility for any losses for reliance upon this publication.