Thursday, July 9, 2020

Tenant’s obligation to pay rent during COVID-19

Tenant’s obligation to pay rent COVID-19

Due to the impacts of COVID-19, Government have imposed obligations to protect the health of the community. Unfortunately, this has adversely impacted the Australian economy. There is currently a lot of discussion regarding the potential difficulty that tenants will face if they lose their jobs and are unable to pay the rent on their properties.

“Our fear is that Government will legislate to remove tenant’s obligation to pay their rent,” says Tim McKibbin, REINSW CEO. “This is concept fundamentally flawed.”

“By removing the obligation of a tenant to pay rent, merely transfers the difficult financial circumstances of the tenant to the landlord,” says McKibbin.

  • Landlords have expenses: rates, water, strata fees, maintenance and mortgage repayments to name a few. If landlords are required to absorb these expenses, then effectively the Government is asking the landlord to provide social housing.
  • It has been suggested that the major banks may give mortgage holders a holiday from making loan repayments if they are suffering financial stress. Whilst that sounds like an attractive option, the landlord is still paying interest on the loan, and that is compounding each month. Paying interest on the interest charged. There is nothing free being offered by the banks.
  • Once the opportunity to avoid paying rent is made available, some tenants who do not require assistance may see the opportunity to avoid their contractual obligations. It is difficult to see how a process to expeditiously assess and assist the needy whilst avoiding the opportunist.
  • It is a fallacy that all landlords are wealthy. 80% of landlords own only one property. That property is typically mortgaged and the landlord is either making loan repayments, or alternatively the property is owned by a retiree who depends on the income for their expenses. By removing the requirement to pay rent, it puts the landlord in financial stress. What is needed is Government to assist and enable the Tenant to pay the rent. 
  • The life-blood of all economies is the flow of money, if the money stops flowing then the economy dies. A better solution is for the Federal Government to provide tenants with assistance to pay the rent and allow the money to move thus keeping the economy active.
  • The policy of granting tenants the right not to pay rent – erroneously assumes that the landlord has not lost their job!

Source: REINSW

Strataville Editorial
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