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While no reasonable landlord wants to evict a tenant, one industry professional has flagged that more needs to be done to protect the potential four-fifths of investors who won’t benefit from NSW land tax relief.
Ramon Mitchell, the founder and managing director of Gault & Co Property Advisory, has weighed in on the NSW government plan to provide $440 million in rental relief for landlords and tenants across residential and commercial properties, alongside the provision of further clarification around rental agreements and the six-month eviction moratorium.
“No reasonable landlord wants to evict a tenant,” he began.
“They realise the current situation has brought rental stress to tenants through no fault of their own, and property owners aren’t keen to see any tenant without a home. Secondly, securing a tenant in the near-term market will be tough, and a vacant property will not help in covering loan repayments or other costs such as maintenance,” the managing director outlined.
He noted that the new guidelines allow tenants who have suffered at least 25 per cent reduction in income – after factoring in all financial support – to approach their landlord and open discussions on rent payment reductions for a set period.
“The tenant will still be liable for unpaid rent during the reduction period, but the liability will be deferred,” Mr Mitchell said.
In essence, it means the tenant is not excused from their rent obligations under their lease agreement, with Mr Mitchell highlighting that this news will be of relief to landlords: “Unless both parties agree to waive the lost rent, the tenant will need to pay back the outstanding rent once coronavirus restrictions are lifted.”
On the tenant side of the equation, Mr Mitchell is encouraging anyone who is seeking a rental reduction or change to lease terms to provide evidence of their loss of income.
He said it will assist enormously in allowing the landlords to understand the full picture when considering a reasonable resolution to the situation.
It’s not just a consideration for landlords, however, with Mr Mitchell extending that encouragement to landlords in discussions with financially stressed tenants.
He highlighted that they can approach their lender and seek a pause on mortgage payments for a six-month period, although accrued interest will be capitalised to the loan.
“What we really need to see is the banks coming back to the table and put forward a revised support plan that does not include interest accrual,” he acknowledged.
And while the state government is offering to provide land tax relief to landlords to the tune of a whopping $440 million, Mr Mitchell has expressed the belief that such a step “isn’t a far-reaching incentive for reducing tenant rent”.
He highlighted how only around 16 per cent of landlords – usually those with large, multiproperty portfolios – actually meet the threshold for the payment of land tax.
As a result, this incentive excludes the vast majority of investors – mum and dad landlords who hold just one or two properties – and a group that makes up just over 90 per cent of the national investors population.
Land tax, also known as property tax, is the fee paid on the purchase of a property owned by an individual or other legal entity.
A landlord, also known as a lessor, refers to an individual that owns a leased property.
Rent refers to the payment made by a tenant periodically to a landlord for the use and occupancy of a property.
A tenant, also known as a renter or occupant, is a person or entity that leases space for residential or commercial use.