A lot of people are having trouble paying rent at present. It’s thought that a recession will hit the Australian economy and no one knows how long it will last. Many people will likely lose their jobs across the country as the recession hits businesses hard across the country.
We’re already feeling these effects: it’s thought that up to one million Australians will soon be newly unemployed. As such, paying rent becomes a lot harder. Many people are asking for a rent freeze or for some kind of government assistance to help them if they cannot afford rent.
What measures are already in place to help those feeling the economic effects of the coronavirus pandemic? What are the plans for the future?
We know how stressful these times are for everybody. As experts in property law, we have you covered. Keep reading and find out what you can do if paying rent becomes an issue.
Can I Get a Rent Freeze?
Many Australians are going to need to ask their landlord for a rent freeze during the ongoing COVID-19 crisis. Scott Morrison recently urged commercial landlords to put a moratorium on evictions from commercial property but legislators are still ironing this plan out. At present, the government is asking landlords and tenants to sit down and work out a compromise.
One solution is a rent freeze. Yet this is at the discretion of the landlord and so far, there have been mixed results.
If granted, a rent freeze would mean that the tenant would not have to pay rent for a month or more during this crisis.
When tenants have asked landlords for a freeze, some have denied the request saying that they still have a mortgage to pay. While this is true, many Australian banks are offering a freeze on mortgage payments, which means the landlords will not have to make payments while they experience reduced income.
As the commercial rent freeze goes through, some politicians hope that there will be a federal moratorium on forced evictions from residential properties . The Labor Party is asking for a moratorium on all evictions during the crisis.
If you are not able to pay your rent, your landlord may be able to call on guarantors to ensure that they get their payments, even during the pandemic. The Federal Government, however, have introduced a the National Cabinet Mandatory Code of Conduct which prevents landlords from calling on guarantors or guarantees (such as bank guarantee, security of payment bond or deposit bond).
Will I Be Evicted For Not Paying Rent?
At present, in most parts of the country, your landlord is less likely to evict you. However, normal notice periods still apply. If you are still paying your rent but the landlord wants to evict you, this will come under an eviction without grounds.
Landlords are encouraged by the National Cabinet Mandatory Code of Conduct to restrain from evicting tenants affected by the COVID-19, directly or indirectly. The NSW Government has not yet put in force a legislation of similar effect.
If the landlord wants to evict you without giving a reason, they will need to give you 30 days notice to vacate the property. It is possible that you rely on the National Cabinet Mandatory Code of Conduct in defence of such an eviction. If you already have a late payment or have breached the agreement in some other way, the notice period drops to 14 days.
Yet this still may give you enough time to avoid evictions.
How the Different States Are Implementing a Moratorium
A moratorium on evictions from residential and commercial properties has yet to become state law, yet states around Australia are tweaking their property legislation during this crisis. Let’s take a look at how different states are changing their laws.
New South Wales
In NSW, legislators are putting in place a six-month moratorium for households that have lost a quarter of their income or more due to coronavirus. The landlords and tenants will need to work out a different price for rent. If the tenants cannot afford rent payments under this agreement at a later date, it will build up as arrears and payment of rent will be deterred.
There is a six-month eviction moratorium in place for Queensland tenants experiencing financial hardship. As in NSW, tenants and landlords will need to agree on a new price for rent and go to the relevant authority if this is not possible.
Legislators have announced a moratorium with tenants and landlords having to negotiate a new price for rent. If the tenant cannot comply with the agreement, the landlord can go to the South Australian Civil and Administrative Tribunal, who have the power to evict a tenant.
Legislators have not yet put a moratorium in place in Victoria. Tenants are being told to speak to their landlords. If your landlord serves an eviction notice, you can still appeal.
In WA, the moratorium is being put into local law. The state government is asking tenants to pay whatever rent they can.
Australian Capital Territory
The state government has said that the state will not evict public housing tenants who have trouble paying rent.
In Tasmania, there is a 120 day period in place for tenants who are having trouble paying rent. Landlords cannot evict tenants during this period but can evict once it ends.
Can I Sue If I’m Evicted Illegally?
If a landlord illegally evicts you during this moratorium, then you will have a case for suing them. This will be a civil case but can still result in the court forcing your landlord to pay compensation. It can also have other repercussions on their business.
If the landlord uses violence or intimidation to make you leave, it becomes a police matter. If your landlord threatens you or your property, you should call the police at once.
If necessary, tell your landlord that you will consider commencing legal proceedings if they attempt to evict you without giving you any notice. If your landlord is being unreasonable, you could also consider joining a tenants’ union who can back you up during these times.
While some businesses including BUPA and Hungry Jack’s are staging a rent strike and refusing to pay rent, this should not be your first move. If you are found to be in breach of contract and there is no moratorium yet in place, your notice period will be shortened.
Can My Contract Be Frustrated?
If you’re having issues paying rent you may be wondering if your contract will be frustrated. The doctrine of frustration allows for a contract to be declared void due to circumstances outside the control of either party. It states that if a contract’s obligations cannot be carried out or are radically changed by an event, the contract can be ended.
Whether the doctrine of frustration covers leases is open to a court’s interpretation. This means that businesses will still have to pay rent and cannot end their lease. However, if a business has to shut down and cannot operate as normal, there could be grounds for frustration.
On the other hand, if a business can still operate but only at a limited capacity, the case becomes a lot weaker. For instance, if you can work from home and your income is not suffering, you will still be obliged to pay rent.
What Happens After Frustration?
If a court finds that your lease is null and void due to a frustration of the contract, it can have quite severe consequences for you and your landlord. While you will not be obliged to pay rent you may still suffer financial impacts. It’s worth doing your research or consulting with one of our lawyers before you make your case for frustration.
What Obligations Do I Have During the COVID-19 Pandemic?
Paying rent isn’t the only obligation that you may be under during the pandemic. It’s common to see reporting obligations put into contracts ensuring that if a doctor diagnoses you with an infectious disease, you report it to the landlord. You may also need to report it to the relevant authorities in your state.
If the authority mandates any specific actions, like fumigating the property, you will probably need to pay for this procedure. If you don’t report the diagnosis or don’t follow instructions, a court can find you to be in breach of your lease. This could result in the landlord evicting you after the moratorium and you may need to pay legal damages.
Can a Landlord Close a Shopping Centre During the Pandemic?
A landlord can close access to a shopping centre or other commercial enterprise during a pandemic, which will limit your ability to work. If they do go ahead and stop you accessing your business, you should take a look at your contract. You may be entitled to a rent reduction if you can’t access your business.
Can I Claim For a Breach of the Covenant For Quiet Enjoyment?
If the landlord makes it impossible for you to access your business (or in a dramatic scenario, your home) you may be able to claim a breach of the covenant for quiet enjoyment. If common areas are shut off without government mandate, this is more likely to be found in your favour. If the government has ordered a closure, it is out of the landlord’s hands and you will not be able to claim that the contract has been breached.
The latter case does open the contract to frustration, however.
The government has also introduced the relief, which is discussed above, that can be used by tenants.
Can a Landlord Make Me Keep My Business Open?
The landlord has no right to make you keep your business open. Commercial contracts often obligate a client to make sure that their business is kept open and stocked. However, these exceptional times demand exceptional measures.
A landlord would need to file for a court order to make you reopen your store and a court would be unlikely to grant one during the pandemic. You may still be open to a claim for damages from the landlord but they cannot make you reopen your business if you are closing for reasons related to the pandemic.
A court would probably find your obligation to follow government guidelines to be of greater weight than your obligation to keep your business open.
Will I Be Able to Claim For Lost Income On Insurance?
You may be wondering whether you will be covered by income protection insurance during the pandemic and whether you could use an insurance payout to pay your rent. Whether the pandemic is covered by insurance or whether it qualifies as an act of God is yet to be determined.
You may be able to file a claim and appeal it if you are declined but at present.
Can I Get An Exemption From Closure?
If you are worried about how the pandemic will affect your ability to pay your commercial rent, you may be able to get an exemption from closure. This would mean that government rules on the closure of non-essential businesses would not affect you.
If you think you are being affected by the current legislation or will be affected in future, you should contact your state government or federal government representatives to find out the procedure for seeking an exemption.
How We Can Help You
We understand that this is a distressing time for many Australians and worries about paying rent are running rampant. If you cannot pay your rent, you may be covered by the moratorium and the government measures allowing your rent to be reduced or abated.
If the landlord is attempting to evict you during the moratorium or if they are trying to evict you without notice, you have a legal case that we can help you with.
If you would like to seek legal assistant and find out more about how the legislation affects you and what your rights are, please get in touch with us. We’d be happy to arrange a consultation with you.