With many Australian tenants affected by COVID lockdowns, should landlords consider renegotiating and what are the other options?
It’s no secret that these are difficult times for a lot of Australians. The 2021 lockdowns have resulted in people from all backgrounds struggling financially and many property investors have found themselves faced with a loss of rental income.
If you are in a difficult position because you have a tenant requesting a rent reduction, your property manager is always a good point of contact but here are some of the options you can consider.
Renegotiate with your tenant
Your first and probably best option if a tenant says they can’t afford to pay their rent is a negotiation and rent reduction. This strategy makes sense as it will at least keep some cash coming in and will save you the trouble and expense of seeking new tenants.
Here are some things to keep in mind:
• Government grants. Investigate with your tenant (and with the help of your property manager) if there are government grants which will help them overcome their financial setback.
• Set a timeline. Decide together how long the rent reduction will last. You can revisit your agreement closer to the date to decide if it needs to continue.
• Get everything in writing. This way you can refer to it if necessary in the future.
• Work with your property manager. It will be a less stressful process if you have a property manager who can act as a go- between. They will leverage their experience and knowledge of tenancy laws to help you reach a beneficial outcome.
Losing rent money is never ideal but as the saying goes, a bird in the hand is worth two in the bush. Reducing rent by a small amount can still be more cost-effective than having your property sitting empty while you seek new tenants.
Find new tenants
Reletting your property is another option, particularly if there is still strong demand in your area.
Do some research and look at real estate listing platforms to check availability in neighbouring streets and suburbs before you ask your tenants to leave. You should also speak to your property manager or a local real estate services provider to get an idea of how quickly an empty property can be leased, and for what amount.
One thing to be aware of is that during lockdowns tenant advocacy groups across Australia have worked hard to protect tenant’s rights. Regulations vary from state to state so it is best to check the current legal requirements in your state in regards to ending a lease agreement. Again, your property manager will have the latest information.
Selling
You could look at selling your investment property if your tenants can’t keep up with the repayments. The following are some things to consider before you make this decision:
• Demand in the area. Some parts of Australia are experiencing a boom in property prices and a lack of stock on the market so you may be able to capitalise on this. It depends where you live and what type of property you have.
• Your long term goals. Renegotiating rental payments may cause short-term financial stress but it could still support your long term plan so review your strategy before you decide to sell.
• Current COVID restrictions. Depending on where you live, it may be difficult to host an open home to draw interest from buyers. There are always ways to work around this but you may need to consider the timing of your sale and plan it for a date in the future.
As a landlord, you do have a responsibility to treat your tenants ethically and to follow any rules around ending your contract with them. Make sure you understand the current legislation if you attempt to renegotiate yourself, or work with a property manager who can guide you towards a successful outcome.
