The coronavirus pandemic has created significant challenges in the real estate environment. Many sellers are withdrawing from the market and would-be buyers are putting their plans on hold, writes Kristy-Lee Burns.
But how does this affect those that have to sell – such as those dealing with family law matters where a property order requires them to sell their property?
A vulnerable market
Dominic D’Ettorre of D’Ettore Real Estate suggests the current environment is completely unprecedented.
“In my 23 years of real estate, I’ve never experienced anything like this. It’s quite a diabolical crisis we’re having in the real estate industry at the moment.”
D’Ettorre suggests that for those that must sell, they should speak to their agent about designing a strategy best suited to their circumstances. This may involve requesting expressions of interest or going to auction, it depends on the particular property and the market.
For those currently negotiating the terms of how property will be divided with their former partner, it is important to remember that property values may be affected in the current environment. If there is an option to not sell yet, it is worth exploring.
Commercial property in flux
D’Ettorre suggests that the commercial property market has been seriously affected by tenants that can’t afford their rent and landlords who can’t afford not to earn rent.
“It is quite a drastic situation. We are seeing tenants who can’t pay the rent during this period. Owners are saying, what are my options? Do I sell?”
“My advice to them is to just hold out, wait for the dust to settle. I believe in this current climate, when selling a commercial property, buyers will be wary and they’ll be far and few between. My advice is it’s a wait-and-see game at the moment.”
D’Ettorre is seeing several tenants looking to negotiate rental reductions, but not all landlords can afford them.
“We are trying to negotiate rental reductions for tenants that are in affected businesses. Some [landlords] are being very cooperative.”
“With tenants who are greatly affected, they are virtually at a point where their business will go broke and go under.”
A framework for negotiations
The Federal Government has now introduced a mandatory commercial tenancies code, which will be legislated and regulated in each state and territory to guide negotiations throughout this crisis.
Tenants will be able to negotiate for a reduction in rent or a deferral of payment, so long as they have a turnover under $50 million and are eligible for the JobKeeper program, which means they have experienced a 30 per cent drop in revenue or more as a result of coronavirus. This creates a framework to ensure that tenants will be able to afford to stay on and for landlords to continue to be paid.
D’Ettorre argues that for commercial landlords, the challenge is retaining a paying tenant, even if rent is reduced.
“What I’m conveying to landlords is that it’s better to have something at the moment rather than an empty shop.”
Landlords should do what they can to avoid their property becoming vacant, as in the current environment it will take much longer to find a new tenant.
Considering the current market, if it’s possible, hang onto your property for now. But if a property order as part of family law proceedings requires you to sell, make sure you speak with your real estate agent to get advice on the best way to proceed and your lawyer on how the current conditions may affect the outcome.
By Kristy-Lee Burns, solicitor, Owen Hodge Lawyers