Navigating COVID-19 as a landlord

Over recent weeks, we have discussed the impact of COVID-19 on the property market. Property investors are also landlords, and with an economic shakedown underway there’s a chance your tenant could be impacted. This week’s research blog article discusses the current landlord-tenant environment, particularly insofar as landlord insurance is impacted by concessions you offer your tenant.

Over a month ago now, Prime Minister Scott Morrison announced a moratorium on evictions, enabling greater certainty for tenants during the fallout of COVID-19. A moratorium essentially means to put something on hold, but the finer details are determined by state and territory legislatures since tenancies are their jurisdiction. Throughout April and May, these have been rolled out with differences between states and territories. These discrepancies make it important for you to confirm the exact details of your applicable state or territory jurisdiction.

To prevent abuse of this system by both landlords and tenants, both recommendations and legal requirements have been implemented. Examples include standards of proof of hardship, eligibility criteria and exceptions (such as if a tenant presents a danger to neighbours unrelated to COVID-19).

As a landlord, you should be aware of your government entitlements and insurance policy before negotiating with your tenant. Failing to do so could be of detriment to both parties. Landlord insurance policies differ considerably from one to another, meaning that some landlords may be protected from their tenant defaulting on payments while others aren’t. If your landlord insurance policy began since the COVID-19 crisis began, this particularly applies to you.

Aside from tenant default, your landlord insurance policy also likely allows for claims regarding tenant hardship. Whichever situation you find yourself in, it is important to be cautious about how you renegotiate with your tenant. To mitigate misunderstandings arising from these renegotiations, state and territory governments are offering mediation services. If taking this route, you still need to be conscious of how any changes impact your ability to claim against your insurance policy. One notable issue to consider is whether it is advisable to modify the wording of your lease. In most cases, it is advisable to leave the initial wording unchanged.

As our states and territories settle on the finer details of the eviction freeze and temporarily pass amended residential tenancy legislation, the pandemic has called on major insurers to step up and clearly define how current active policies will come into play for landlords who will require making a claim.

Some key insurers have announced that they will temporarily remove the requirement for landlords to provide an eviction date when claiming loss of rent, whilst other major policy providers are still suspending the sale of new landlord products until further notice.

We anticipate clearer and comprehensive details to be announced over the coming weeks as policyholders begin to exercise the measures available in their jurisdictions and lean on policy backing where their tenants have been unable to meet their rental payment obligations.

As is the case for most challenges as a property investor, we always recommend seeking advice from the team of licensed professionals around you, as well as maintaining an open dialogue with your property manager and tenant. Oftentimes, crises are made worse by poor communication and simple misunderstandings.

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