Residential tenancy moratorium on evictions during COVID-19

The NSW Government has introduced restrictions on landlords seeking to evict tenants due to rental arrears as a result of COVID-19

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The new measures

The new measures include:

  • an interim 60 day stop on landlords issuing termination notices or applying to the NSW Civil and Administrative Tribunal (the Tribunal) for an eviction order due to rental arrears, where tenants meet the eligibility criteria for being financially disadvantaged by COVID-19. This measure was introduced to allow time for Government financial support to reach those who needed it and limit social movement during the pandemic. The interim 60 day stop ended on 13 June 2020.
  • a six month restriction on landlords evicting tenants who are financially disadvantaged by COVID-19, unless they have first attempted to negotiate a rent reduction with the tenant.
  • extended notice periods for certain other lease termination reasons.
  • allowing tenants financially disadvantaged by COVID-19 to terminate a tenancy agreement where a landlord will not negotiate or where it is necessary to avoid financial hardship
  • retaining the ability of landlords to terminate a tenancy agreement in cases of undue hardship.

Under the new measures, landlords must negotiate a rent reduction with an impacted tenant in good faith before seeking to terminate a tenancy, and can only give a termination notice or apply for an eviction order if it is fair and reasonable to do so in the circumstances.

Fair Trading is able to assist landlords and tenants to try to reach an agreement.

Landlords can still apply to the Tribunal at any time to take possession of a property if they are suffering undue hardship.

All tenants not impacted by COVID-19 are expected to continue paying all rent and charges in full.

Extended notice periods

Along with these restrictions on evictions for rental arrears, the Government has also extended the notice periods for certain other lease termination reasons to 90 days. This 90 day notice period applies when ending:

  • a fixed-term agreement
  • a periodic agreement
  • a tenancy because of breach of agreement other than for non-payment of rent or charges.

For tenants

If a tenant is impacted by COVID-19 and requires a reduction in rent, they should contact their landlord immediately. A tenant should not wait until they are in arrears to begin negotiations with their landlord.

Eligibility for restrictions on evictions

To be eligible for the six month restrictions on evictions, a household needs to demonstrate they are impacted by COVID-19.

A household is COVID-19 impacted if:

  1. one or more rent-paying members of a household have lost employment or income (or had a reduction in work hours or income) due to the impact of the COVID-19 pandemic, or
  2. one or more rent-paying members of a household have had to stop working or reduce work hours due to illness with COVID-19, another member of the household’s illness with COVID-19, or COVID-19 carer responsibilities for household or family members, and
  3. the above factors result in a household income (inclusive of any government assistance) reduced by 25% or more.

A tenant can provide simple documents to show that they are impacted by COVID-19, for example:

  • proof of job termination/stand-down, or loss of work hours
  • proof of Government income support
  • proof of prior income.

A household’s circumstances may change over time. For example, a rent-paying member of a household who lost their job may find a new job. This may result in the household no longer meeting the eligibility criteria for being COVID-19 impacted, and the new measures will no longer apply.

Tenants should keep their landlord informed of any changes in their circumstances.

Where a tenant no longer meets the eligibility criteria, the tenant and landlord may wish to renegotiate their rent agreement. For example, they may agree that the tenant will resume paying the usual rent amount.

To understand how the ban on evictions due to COVID-19 may affect your tenancy agreement, see the Flowchart: Can a tenancy be terminated during COVID-19.

Termination of a tenancy agreement by a tenant

A tenant who meets the above eligibility criteria for being impacted by COVID-19 can also apply to the Tribunal to end a tenancy if:

  • the landlord refuses or fails to participate in a process provided by Fair Trading to negotiate rent reductions, or
  • the landlord and tenant are unable to agree on a rent reduction and repayment arrangement that would avoid financial hardship for the tenant.

If the Tribunal ends the tenancy, the Tribunal may decide that the tenant should pay compensation of up to two weeks rent to the landlord.

Further information about this process can be found in the Residential Tenancies Act.

For landlords

If a tenant can no longer pay their full rent due to the impact of COVID-19, the landlord and tenant should discuss whether they can agree to a reduced rent or repayment arrangement.  Landlords may be able to negotiate reduced repayments or a repayment freeze with their mortgage provider.

During the 60 day stop on evictions, a landlord was not able to issue a termination notice or apply to NCAT for a termination order on the basis rent arrears if a tenant met the criteria for being impacted by COVID-19. The 60 day stop expired on June 13 2020.

From 14 June 2020, a landlord can issue a termination order or apply to the Tribunal for an eviction order only if:

  • the landlord has first participated in good faith in a rent negotiation process run by Fair Trading and
  • it's fair and reasonable in the circumstances for a tenancy to be terminated.

In considering an application for an eviction order, the Tribunal may consider:

  • advice from NSW Fair Trading relating to the landlord and tenant's participation in the formal rent negotiation process overseen by NSW Fair Trading, including whether the landlord or tenant refused, or refused to make, a reasonable offer about rent
  • whether the tenant has continued to make payments towards the rent
  • any financial hardship and the financial position of the landlord and tenant
  • any special vulnerability of the impacted tenant
  • the public health objectives of ensuring citizens stay at home and that avoidable movement of people is prevented during the COVID-19 pandemic and
  • any other matter the Tribunal considers relevant.

If you are a landlord and you want to understand how the new measures affect all types of residential tenancy terminations, see the Flowchart for landlords - termination of tenancy options.

Assistance for landlords

Landlords facing financial difficulties are encouraged to:

  • ask their financial institutions for a temporary mortgage freeze or reduced repayments if their tenants are struggling to pay the rent
  • check if their insurance covers rental reductions or default
  • check eligibility for the recently announced land tax reductions

Land tax relief

If you’re a commercial or residential landlord who has reduced your tenants’ rent due to COVID-19, you may be eligible for the NSW Government’s land tax relief.

Landlords are encouraged to apply for land tax relief before 31 October 2020. To find out about eligibility and how to apply, visit Service NSW or Revenue NSW.

For information about commercial leases and COVID-19, see commercial leases FAQs

Termination of tenancy if landlord is in hardship

Landlords may still apply to NSW Civil and Administrative Tribunal at any time to take possession of a property if they are suffering undue hardship.

Situations where the new measures don't apply

Landlords can still use the usual termination processes to end a tenancy in certain circumstances, including:

  • for non-payment of rent or charges by a tenant who is not impacted by COVID-19
  • where the landlord is suffering undue hardship
  • where the tenant has caused serious damage to the property or injury to the landlord or their agent or neighbour
  • where the tenant is using the premises for illegal purposes
  • where the tenant has threatened, abused, intimidated or harassed the landlord, the landlord’s agent or another person
  • where the landlord is selling the premises
  • where the tenant has not complied with a rectification order issued by NSW Fair Trading.

Guidance for negotiating rent payments

Landlords and tenants should be aware of what they are agreeing to in rent negotiations.

It's important to distinguish between a deferral of part or all of a tenant’s rent payments and a waiver of part of or all of rent payments.

A waiver means the tenant won't be required to pay back an agreed amount of rent.

A deferral means the tenant must pay back an agreed amount of rent in the future.

The amount of rent which is waived or deferred may be some or all of the regular weekly rental cost.

Any agreement reached should specify what amount of rent will be waived or deferred.

If rent is deferred, the agreement should specify when the rent is to be paid back, and how payments will be made to cover the amount (repayment plan).

Good faith negotiations

In general, a good faith negotiation means parties dealing honestly and fairly with one another to genuinely work towards a prompt and mutually beneficial agreement.

Good faith will depend on the circumstances of each case. All parties must act reasonably and be prepared to change their position or make concessions to achieve an agreement.

If a negotiated agreement can’t be reached, both landlord and tenant will need to show they’ve attempted to negotiate in good faith.

For agents

It’s understood agents are required to act in the landlord’s best interests.

However, the COVID-19 situation presents circumstances that mean agents may have to change the way they relate to both parties.

Agents may be required to play more of an intermediary role between tenants and landlords to comply with the new tenancy laws and the government’s relief package.

It’s important to understand the whole economy has changed under COVID-19 and the tenancy market has been significantly affected.

What was in the landlord’s best interests before COVID-19 may not apply now.

Consideration should be given to whether maintaining an existing tenancy with changed terms may be more viable than seeking termination and re-letting the property.

Fair Trading encourages agents to ensure:

  • the process for tenants is accessible and easy to understand
  • both parties are aware Fair Trading can help with dispute resolution if an agreement can’t be reached
  • correspondence is promptly communicated
  • any evidence required from tenants is reasonable and sufficient to show the person is COVID-19 impacted and has suffered a loss of household income
  • agreements for COVID-19 impacted tenants aren’t limited to deferring rent payments and can include variations of a tenant’s obligations such a reduced rent for an agreed period, reducing rent for the remainder of the lease term, or agreeing to break a lease agreement early due to financial hardship, with a reduction or waiver of the break fee
  • the landlord is aware of available relief options including:
    • negotiating deferred mortgage repayments with their lender
    • land tax rebates for rent reductions
    • claiming tax losses
  • accurate documentation of interactions and discussions with landlords and tenants during negotiations. This will be especially important if the matter progresses to NCAT.

For tenants

We have created a template letter for tenants to help them when approaching landlords to request rent reduction. We have also created an example below.

Step 1: Seek assistance

Approach your landlord or agent to negotiate a rent arrangement.

Fair Trading has prepared this example letter to help.

Tenants will need to provide evidence to show they meet each of the eligibility requirements:

1. Rent paying members of the household have lost employment, work hours or income due to COVID-19 that has reduced the household’s take home income by 25%.

Evidence may include, but isn’t limited to:

  • payslips or bank statements showing reduced income
  • documentation from an employer showing loss of employment or reduced hours
  • evidence of a business closure or business records showing loss of takings
  • Centrelink confirmation of eligibility for financial assistance

2. Rent paying members of the household have had to stop work (or have reduced work hours) due to illness with COVID-19, another household member’s illness with COVID-19 or for carer responsibilities for family or household members due to COVID-19.

Evidence may include but isn’t limited to:

  • the same evidence outlined above to demonstrate a loss of income
  • medical certificate

Eligible tenants may consider any significant, easily accessible cash savings that can be used to pay rent before approaching landlords and agents for a rent reduction.

This shouldn’t include superannuation.

These templates can help tenants requesting a rent reduction:

Step 2: Negotiate

Agents must contact the landlord as soon as possible to discuss the tenant’s financial hardship and opportunities for a payment arrangement.

The landlord’s financial hardship and opportunity for mortgage relief or land tax, and income tax relief (if applicable) must also be considered.

Understanding both the tenant’s and landlord’s financial circumstances will help ensure a workable outcome.

Parties should be prepared to consider a range of options where affordable.

For example:

  • a full or partial rent waiver
  • a rent reduction that reflects the tenant’s reduced income
  • agreeing to a longer repayment period for arrears
  • waiving arrears
  • allowing the tenant to end a fixed-term agreement early, possibly without or with a reduced penalty, or by applying the break fee that applies to agreements entered into after 23 March 2020.

Step 3: Outcome

Parties should put any agreement in writing.

Agreements can include the deferral of rent to a later date or waiver of rent.

The terms of each agreement will depend on the circumstances of tenant and landlord.

Details to include:

  • date
  • details of the tenancy agreement to which the arrangement applies
  • the new agreed amount of rent
  • date the agreed rent starts and payment frequency (weekly, fortnightly or monthly)
  • how long the agreed rent will be in place
  • date the agreement will be reviewed
  • what happens when the agreed period expires. For example, reverts to the original amount payable under the tenancy agreement or the rent payment is reviewed by the parties.
  • if an early termination arrangement has been agreed, the date the lease will end and any break fee.

For landlords when responding to a tenant

All landlords must be prepared to negotiate rent payments with tenants experiencing financial hardship due to COVID-19.

To help, we've created a template you can use when responding to rent reduction requests.

For landlords when talking to their financial institution

Landlords may wish to approach their financial institution to seek a mortgage freeze or reduced repayments as part of the negotiations with tenants.

Landlords who aren't satisfied with the response from their financial institution have the option of accessing their institution’s internal dispute resolution service.

Check the financial institutions website for contact details.

If a landlord is not satisfied with the outcome of that process, they may have the option of lodging a complaint with the Australian Financial Complaints Authority.

You can use this template and example letter to help.

Frequently asked questions

What happens now the interim 60 day stop has ended?

From 14 June 2020, a landlord can issue a termination order or apply to the Tribunal for an eviction order only if:

  • the landlord has first participated in good faith in a rent negotiation process run by Fair Trading and
  • it is fair and reasonable in the circumstances for tenancy to be terminated.

Can a landlord and tenant still end a tenancy if they agree?

Yes. A tenant and landlord can agree to end a tenancy and decide when and how this is to happen.

Will landlord insurance cover rental losses? 

Landlords should check with their insurer to see if they are covered for rental loss during COVID-19.

Different insurers will have different requirements, but many insurers are adopting more flexible procedures during COVID-19, allowing landlords to claim for rental loss.

Can tenants be encouraged to access their superannuation to pay rental arrears?

No. This may constitute unlicensed financial advice. Substantial penalties may apply.

Can a landlord still sell a tenanted property?

Yes. Landlords can still use the usual termination process where they wish to sell their premises.

Is income calculated before or after tax?

When determining whether a tenant meets the COVID-19 impact test, the income received is the money coming into the tenant’s bank account after tax.

 I am a tenant in social housing. Does the stop on evictions apply to me?

Social housing providers have their own processes for dealing with rental arrears and are not covered by the new provisions.

How does the test apply to group houses where not all rent paying tenants have been affected by COVID-19?

The COVID-19 impact test applies to the total income of all members of the household who pay rent, inclusive of any government assistance, such as the new job keeper payments.

Are sub-tenants covered by the stop on evictions?

Yes, where the tenant is either:

  • a sub-tenant under a written residential tenancy agreement with the tenant named in the main tenancy agreement or
  • a tenant named on the property’s main written tenancy agreement.

Example scenarios

Reduced income together with income support resulting in less than 25% loss of income

A tenant earning $800 a week pays $300 per week in rent but has lost their income as a sole trader due to COVID-19.

The tenant now receives government income support of around $1,500* per fortnight, or $750 per week, paid through their employer*

Lost income per week is only $50 per week, which is less than 25% of their original income.

Result: No. The restrictions on termination notices and applications for eviction due to rental arrears don't apply.

Increase in income due to government support payments

A tenant earning $650 per week pays $300 per week in rent but has lost their job due to business closures.

The tenant now receives government income support of around $1,400* per fortnight, or $700 per week, paid through their employer.

The tenant’s income has now increased by $100 per fortnight.*

Result: No. The restrictions on termination notices and applications for eviction due to rental arrears don't apply.

Tenant and co-tenant in a family household. The tenant loses income and gets income support

A family pays $750 per week in rent and the adults are co-tenants.

Tenant A earns $1,000 per week, while their partner, tenant B earns $500 per week.

Tenant A loses their job due to business closures, but is receiving a government payment of around $1,100 per fortnight or $550 per week*­

There is no impact on tenant B’s income.

The lost household income is $450, which equals 30% of the original household income

Result: Yes. The restrictions on termination notices and applications for eviction orders due to rental arrears apply.

Tenant is sole breadwinner, tenant loses income and gets income support

    A tenant earning $1000 per week pays $600 per week in rent and is the sole breadwinner for the family.

    The tenant loses their job due to business closures.

    The tenant receives government income support payments of around $1,500 per fortnight, which equals $750 per week*

    The loss in household income is $250 per week, which is 25% of the original household income

    Result: Yes. The restrictions on termination notices and applications for eviction orders due to rental arrears apply.

Share household where all tenants are on the main lease

Two friends share a house and are named on the lease.

The rent is $1000 per week.

Tenant A earns $1200 per week and tenant B earns $800 per week, making a combined household income of $2000 per week.

Tenant A loses their job and now receives government income support payments of $1115* per fortnight, which is around $557 per week.

The combined household income is now $1357 per week.

The income loss is $643 per week, which is 32% of the original household income.

Result: Yes. The restrictions on termination notices and applications for eviction orders due to rental arrears apply.

Share household with head tenant and sub-tenant on a written lease with head tenant

Two friends share a house and the rent payable on the main lease is $1000 per week.

Tenant A is the head tenant and has a written sub-tenancy agreement with Tenant B.

Tenant A earns $1200 per week and tenant B earns $800 per week, making a combined household income of $2000 per week.

Tenant A loses their job and now receives government income support payments of $1115* per fortnight, which is around $557 per week.

The combined household income is now $1357 per week.

The income loss is $643 per week, which is 32% of the original household income

Result: The restrictions on eviction orders issued due to rental arrears apply to Tenant A, but not to Tenant B, as their incomes haven’t changed.

Assistance

Trained dispute resolution officers in Fair Trading are available to help landlords, managing agents and tenants to negotiate temporary changes in rental arrangements, if agreement cannot be reached between parties.

When you seek assistance with negotiations, we may need to obtain some initial information before it can schedule a time to discuss the matter with both parties.

How to seek help

If you have attempted to negotiate a rental plan without success you can apply for assistance by completing the Tenancy Complaint Form.

 
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