How the end of COVID eviction moratoriums will affect landlords

While the media focus has largely been on tenants, tens of thousands of Australian landlords have also been badly hurt by the economic impacts of COVID-19. Now, the end of the moratorium on evictions in many parts of the country is being seen as a light on the horizon for rental property owners.

Few parts of Australian society were left unaffected by the devastating arrival of the COVID-19 pandemic in 2020. Close to one million Australians lost their jobs, with many millions more experiencing hardship as the economy slowed down and ground into recession.

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With so many people out of work, the Federal Government took decisive action to avoid an economic and social disaster by introducing the $100 billion JobKeeper scheme, aimed at helping businesses under stress to continue to pay their staff.

At the same time, most states and territories put new temporary laws into place to ensure that residential tenants who could not pay their rent due to the pandemic were not evicted. In addition to this ‘eviction moratorium’, jurisdictions such as Victoria and Western Australia also temporarily outlawed rental increases.

While the freeze on evictions was good news for renters, it was devastating for Australia’s thousands of residential property landlords, many of whom rely on rental income for their livelihoods. Recent figures from the University of NSW’s ‘COVID-19: Rental housing and homelessness impacts – an initial analysis’ study suggest about 10 percent of Australia’s 2.6 million rental households have sought rental relief since the start of the pandemic – about 250,000 households.

The research suggested the landlords for some 175,000 of these properties had been forced to absorb the cost of the rental reductions themselves, taking a major hit to their bottom lines. In an estimated further 75,000 cases, the landlords and tenants had agreed to a rent deferral, with the outstanding money to be paid once conditions improve.

Now, with COVID-19 vaccines being rolled out and the Australian economy on the upturn, a range of states have begun the process of repealing the moratorium on evictions, in a move that spells good news for landlords. Queensland repealed its moratorium in September 2020 while Tasmania followed suit in January, and NSW, Victoria, and WA joined the club at the end of March 2021. South Australia and the ACT will end their moratoriums by the end of May.

The fact that the end of the moratoriums coincides with the end of JobKeeper in March presents landlords with a variety of challenges and opportunities. On the one hand, some experts are predicting a massive increase in tenants unable to pay rent and lease defaults. On the other, landlords now have the power to evict tenants who have not paid rent for many months and show no signs of resuming payments (provided certain conditions have been met).

If you are a residential landlord, here are five courses of action to consider over the coming months to shore up your own financial position.

Negotiate to recover deferred rental income

If you have deferred a tenant’s rental payments, now may be the time to ask them to begin paying back what they owe you. With moratoriums winding up, defaulting tenants face the very real risk of eviction if they fail to meet the terms of their agreement. There is a process to follow. In NSW, for example, a transition period is following the end of the moratorium in which landlords and tenants are required to negotiate a payment plan for any outstanding rental payments.  It may be in your best interest to find a common ground. Getting the money you are owed over an extended period may be better than not getting anything at all.

Investigate land tax rebates

If you provided a rental reduction to your tenants in 2020 or in the first three months of 2021, many states will grant you a 25-percent deduction in your land tax obligations for the period. While Queensland’s rebate scheme wrapped up in 2020, NSW, Victoria, South Australia, and the ACT are continuing to offer the deduction in recognition of the hardships suffered by landlords. Visit the relevant government websites in your state to find out more.

Check your insurance

Once the eviction moratoriums were announced by the state governments in 2020, most insurance companies immediately stopped covering tenant-related risks on new policies. However, existing policyholders remained covered for the loss of income. Check your coverage if you haven’t already. If you are taking out a new policy following the end of the moratorium, check the details with your insurer. While some are once again offering protection against tenant-related risks, others aren’t.

As a last resort, consider eviction 

No one wants to be the bad guy. However, in cases where there is no prospect of a tenant resuming normal rental payments or repaying deferred payments, they will cost you more and more money over time. In some jurisdictions, you will be required to first negotiate a payment plan. If you do this in good faith and they still fail to comply, then you stand a good chance of succeeding with eviction. Before proceeding bear in mind factors like rental vacancy rates in your area. In some areas, it may be difficult to immediately find new tenants due to reduced immigration levels and fewer foreign students.

Consider asset protection

Many landlords have been badly shaken by the loss of income caused by the pandemic and some have lost everything. It may be worth exploring strategies to safeguard your investment in property should another crisis occur down the track.

The DGI institute’s Master Wealth Control service provides individuals with a means to lock their assets away against certain creditors should an economic crisis arise. It’s designed to mitigate against the downside and make you a very small target for creditors.

To find out more, book an appointment with one of our asset specialists.