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Governments face new calls to help landlords
Tension is increasing between landlords and tenants as governments continue to push the mantra of working together. Photo: Shutterstock

Governments face new calls to help landlords

State governments across Australia are continuing to face mounting pressure to provide support to residential and commercial landlords commensurate with that available for tenants affected by the COVID-19 crisis.

State governments across Australia are continuing to face mounting pressure to provide support to residential and commercial landlords commensurate with that available for tenants affected by the COVID-19 crisis.

Earlier this month, Australian Property Investor Magazine reported that residential property investors in New South Wales were facing additional costs to provide rent relief for tenants affected by COVID-19.

Recent research indicated a majority of tenants had been affected by the crisis, with 59 per cent of 1,600 respondents to a survey by Rent.com.au reporting they had lost their jobs or had their working hours cut.

At National Cabinet level, the solution was to provide a framework for landlords and tenants to work together to find a mutually beneficial solution, with property owners relying on assistance from their banks to provide any financial relief.

Real Estate Institute of NSW chief executive Tim McKibbin said the legislation introduced in his state burdened both parties with unnecessary red tape, and created an adversarial environment.

Mr McKibbin questioned whether the NSW government had created a fair outcome for all, or whether the financial pain had simply been passed on to residential investors.

“There has been no consideration given to landlords’ financial circumstances due to COVID-19 in the public narrative to date,” Mr McKibbin said.

“Landlords are expected to reduce and/or defer the rent while at the same time meeting all of their obligations attached to the property.

“These include council rates, water charges, insurances, strata fees and repairs.”

Mr McKibbin said this has resulted in an increasing number of landlords placing investment properties up for sale, warning this could be the beginning of an increasing trend.

On the commercial side, Western Australian Treasurer Ben Wyatt announced a $100 million land tax rebate package last month, in an effort to offset landlords’ reduced income caused by providing rent relief. 

However, eligibility criteria requires landlords to waive the equivalent of three months’ rent over a six month period from March 1, and freeze their tenants’ outgoings.

Property Council WA analysis of land tax rebates in each capital city found that for a commercial building valued at $50 million, WA property owners were facing a disproportionate burden to their interstate counterparts. 

In Brisbane, the land tax rebate is $67,245 and the landlord must pass at least that amount to an eligible tenant. The proportion of rent lost over six months is 8 per cent.

Sydney’s land tax rebate is $138,705, which the landlord must pass on, while the proportion of rent lost is 5 per cent.

Melbourne landlords are eligible for a land tax rebate of $48,904 for a building worth $50 million, which must be passed on, with the proportion of rent lost 5 per cent.

In Perth, the land tax rebate is $63,028, but to qualify a landlord must completely waive three months of rental income, which would be $538,462 for a $50 million building, the Property Council said.

“That is 50 per cent of the rent the landlord would have been paid over the six months,” Property Council WA executive director Sandra Brewer said.

Ms Brewer said WA landlords that offered proportional relief in line with Prime Minister Scott Morrison’s policy would not qualify for the land tax rebate, while small WA landlords would not qualify at all.

She said WA landlords’ issues were exacerbated by the high level of commercial vacancies in the Perth CBD, relatively low rents as compared to other capital cities and slow valuation growth.

“We are concerned at the level of misunderstanding about the reality of the financial impact of this pandemic on landlords,” Ms Brewer said.

“WA landlords have for many years worked hard to find ways to retain tenants through some of the most challenging market conditions.

“They are being asked, again, to shoulder the burden of a disaster that is not of their making.”

Ms Brewer urged the state government to provide further relief to landlords that are doing the right thing by their tenants.

In Victoria, Pitcher Partners executive director Andrew Clugston said the situation was becoming more complicated.

The Victorian state government recently amended its legislation to take into account a landlord’s ability to provide relief, a similar move to the framework put in place in South Australia.

However, Mr Clugston said the landlord must also give consideration to the tenant’s ability to make lease payments.

“This would imply that the landlord must have an understanding of the tenant’s financial position and cash flow when making an offer for relief,” Mr Clugston said.

“We have even had tenants writing to landlords implying it is the landlord’s responsibility to ensure tenant’s solvency. 

“However, in a recently issued FAQ, provided some two weeks after the regulations, the Victorian Small Business Commissioner stated landlords should not be asking for financial information such as balance sheets, cashflow projections, bank statements etcetera. 

 “This confusion is not promoting a sense of good faith or an efficient negotiation process. I can see a lot of this ending up in mediation or litigation.”

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