Remedying the financial hardships for both tenants and landlords that have been brought on by the pandemic, will be a slow burner as much as a balancing act.
While many tenants are faced with the reality of having to sustain lease payments at a time when their incomes have been constricted, and in some instances taken away altogether, some landlords also face the prospect of losing the stream of income they have relied upon to keep their investment property loan repayments covered.
Upon the federal government’s announcement that the specifics surrounding how tenants and landlords of residential properties will be supported during these uncertain times will be placed into the hands of each state and territory government, president of REIA, Adrian Kelly, expressed concern over the inconsistency of the approach.
“We now face the potential situation where Australians will be treated differently depending on where they reside,” Kelly said in a media address – also sharing that residential tenancies are subject to “a social as well as economic impact”.
Extending on the available support
Saskia Wrobluskie, CEO of Advantas Property, says that for a landlord, reaching an agreement with a tenant over the short-term provides a stable foundation for long-term results.
“Most states have already released some form of rent relief for any reduced rent that has been negotiated and most states will not allow agents/landlords to charge break-lease fees,” Wrobluskie says.
“In some states, tenants are able to terminate a fixed term without penalty, so from this perspective, negotiating temporary rent relief with tenants who are significantly impacted is best.”
For instance, New South Wales was amongst the first to unveil a rental relief package designed to assist both tenants and landlords: within a master $440m package, land tax waivers and rental rebates will be extracted.
Landlords will be able to apply for a 25% rebate in land tax on the basis that the same rental reduction is granted to their tenants. However, if a tenant’s changed income as a result of the pandemic requires a further reduction to their rental payments, then it’s advised that both parties open a discussion to reach an agreeable rate during this time.
This approach has been met with widespread disappointment, as the burden falls largely on the landlord to manage the financial loss.
Across the other side of the country in WA, $30m of rental assistance will be distributed amongst tenants who have had their incomes disrupted by the virus, with those eligible able to be alleviated of up to $2,000 in rental payments. This will be provided on-top of a rental reduction as agreed on by landlord and tenant. A similar rental relief package is available in Queensland to those who have lost 75% or more of their income due to COVID-19.
How the situation will pan out over the short to medium-term remains largely uncertain, as compromised incomes could potentially see an increase in tenants not being in a position to pay their leases over the coming months.
However, Wrobluskie shares some ways that a landlord can effectively engage in conversation with their tenant, as well as the avenues they can tap into to ensure that their investment continues to perform under the current market conditions.
She encourages landlords to always approach their investment property as a business and says teaming with the right agent can “reduce their risk and make the business profitable”.
Virtual strategies – such as 3D tours, video meetings and electronic contracts – are being provided to landlords as a way into the future of real estate.
Meanwhile, it’s ideal if you can strike an agreement with an existing tenant to allow them to remain in the property during the crisis.
When having to work through a tricky situation with a tenant, she advises landlords to engage by “listening, validating the information, assessing the risk and negotiating a mutually beneficial outcome”.
“Even though we have been incredibly lucky to only have a small portion of tenants and clients financially impacted by COVID-19, we still encourage all our clients to put together a crisis response plan,” Wrobluskie says.
“This includes crunching numbers, talking with banks and insurers, and having a solid plan in place so that they are not caught off guard if in the event things take a turn for the worse.”
Conducting inspections in the midst of restrictions
In the case of landlords who are self-managing their rental properties, Wrobluskie recommends the use of a video call in place of a physical inspection. Photographs are also effective.
“We have adapted our technology to include the ability to have tenants access a link where they can upload their inspection photos,” she shares, also noting how tenants have been pleased with the new process and have shown “pride in the presentation of the property and the photos they produce”.
While some landlords might question their tenant’s capacity to conceal damage in this way, Wrobluskie points to how harbouring a low level of confidence in a tenant could point to a larger root concern that should be addressed.
When selecting a property management agency, she says, “It is definitely best to go with someone who is experienced, a strong communicator and well equipped with technology in order to ensure business continuity during times like this.”
“A good agent is one who understands that they form part of their client’s investment strategy and what it really means to maximise the assets potential, even in challenging times,” Wrobluskie adds.
