Tenants have struggled to secure rent reductions due to hardship from COVID-19.

Whilst an eviction moratorium prevents tenants from being evicted during the first six months of COVID-19, landlords and property managers have perhaps not played fair with tenants through this time.

A range of options has been presented to tenants facing hardship due to COVID-19:

1. A rent reduction – for a period of time or for the duration of the lease

2. A rent deferral (where full rent is not paid now but is owed later) - for a period of time or for the duration of the lease

3. Bringing the residential tenancy agreement to an end with or without penalty

4. No negotiation at all!

The rental eviction ban (moratorium) is due to end at the end of September in NSW.  Even tenants who were able to negotiate a rent reduction or deferral may now find themselves in the unenviable position of needing to re-pay rent that was previously deferred on top of rent payments reverting to normal.  For example, a tenant paying $800 per week in rent with a $200 per week deferral was able to pay $600 per week during COVID-19, however from the end of September will need to pay back $1,000 per week (their rent + the deferred rent) or else face eviction with moneys owed taken from their bond.  This is despite that the tenant’s financial circumstances may be unchanged or even worse than what they were six months ago when the rental eviction moratorium started.

From the landlords’ position, the home loan relief that was provided by the banks is also coming to an end, meaning that the full mortgage payments will need to be re-commenced.  Landlords are in a bind: do they keep their tenant at lower rent and with the same out-goings, or do they terminate their tenant’s lease notwithstanding soaring vacancies and falling rents in some areas of Sydney? The only saving grace is that interest rates are low at the moment.

Research into tenants’ experiences of negotiating rent reductions has described tenants’ stress, frustration, despair and uncertainty, particularly in the early weeks of COVID-19 when there was so much uncertainty around jobs, health and broader uncertainty over people's finances.

Negotiated reductions were hard won and generally for just three months or less.  Many tenants were forced to settle for a rent deferral rather than a reduction, leading to concern for tenants’ future ability to pay both the full rent as well as the deferred rent.  However, tenants have felt caught because the process of securing a new rental during COVID-19 has been incredibly challenging in terms of limits on inspections and of course how to rent a home when one is on JobKeeper / JobSeeker as their sole source of income?  It doesn’t stretch far in most areas of Sydney, particularly the Inner West, North Shore and Eastern Suburbs.

Having secured a rent deferral – or better still, a rent reduction for a period of time - a tenant’s next concern is whether their lease will be renewed.  Suffice it to say, tenants have felt incredibly insecure during this time.

Unfortunately, legislation drafted by every State intended to minimise tenants’ movement during COVID-19 has not been drafted to ensure success for both landlords and tenants.  Perhaps better legislation would have compensated landlords who reduce their tenant’s rent commensurate with the tenant’s fall in income.  Land tax rebates are available, but only to about 15% landlords who actually pay land tax.  The rest are being forced to forego rental income to support tenants, or else to terminate the lease and find a new tenant – likely with a long period of rental vacancy and a lower eventual rent. 

The end of September will be a tense time in NSW and I expect there will be many more leases ending and a flood of homes coming onto the property market.  with this increased supply and no increase in demand, I foresee rents coming down sharply.

Melissa Maimann is a licensed real estate agent, buyer's agent and rental search / relocation agent in Sydney. She saves renters valuable time and frustration offering an affordable service that finds and secures the best rental properties quickly, easily and effortlessly. If you need a Licensed Real Estate Agent to find your next rental home for you, don't hesitate to make contact.