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Property investors are being urged to make a simple check that could save them from being crippled by a looming ban on evictions, while tenants need to make new changes too.
Landlords are being urged to check their insurance as many rental protection policies may not cover them for lost income under a new climate where tenants can no longer be evicted.
It comes as the financial future of Australia’s more than two million investment property owners looks increasingly uncertain due to a looming prohibition on lease terminations.
The restrictions are being developed by the National Cabinet of state premiers, territory leaders and Prime Minister Scott Morrison.
The eviction bans could stretch over a 120-day initial period with the option to extend in 90-day blocks. Tenants may have a legal obligation to pay up after the coronavirus crisis passes as part of measures to discourage squatting.
Housing experts suggested landlords and tenants work together to avoid a situation where rents were no longer paid, which would be problematic for both parties.
Investment adviser Anna Porter said landlords should check with their tenants on their job security and be prepared to offer slight reductions in rent if the tenants were struggling or lost their jobs.
“You’re better off doing that than waiting for it to get too late and the tenant can’t pay any rent at all,” Ms Porter said.
Tenants would be better off reaching out to their landlords to renegotiate their rent than waiting until they were under financial duress and couldn’t pay, according to Property Investment Professionals of Australia chairman Peter Koulizos.
“Even if evictions could continue, landlords are not in the best position to find new tenants at the moment and should be more open to working something out,” Mr Koulizos said.
He added that landlords should do everything possible not to sell in the current market as they would likely take a hit with the price.
“Banks are offering breaks on interest payments, sometimes up to six months, and this could make up for months of last rental income,” Mr Koulizos said.
He added real estate owners could consider taking out a line of credit from their mortgage if they had a decent amount of equity in their properties as this may help stave off losses.
“You don’t want to be forced to sell in a crisis,” Mr Koulizos said.
My Housing Market economist Andrew Wilson said those forced to sell would have to “accept whatever the market was willing to offer” and it was not yet clear how greatly buyer demand was dropping.
Ms Porter said existing landlord’s insurance customers were in the best position to get through the next few months as they may be able to update their policies to account for the recent changes.
Landlords wanting to take out new insurance policies in case of lost rental income may struggle to get cover, she said.
“Tenants and landlords need to remember they both have many lifelines,” Ms Porter said.
Landlords and tenants were also advised to keep in mind the current crisis will eventually blow over. “We’re all going to take a hit from this,” Mr Koulizos said. “It’s time for everyone to come together and help each other.”
WHAT TENANTS AND LANDLORDS CAN DO:
- Update landlord insurance
- Speak to bank about getting mortgage holiday
- Offer small rent reduction if tenants jobless
- Consider a line of credit
- Avoid selling if possible
- Ask landlord for assistance if struggling
- Consider renegotiating lease terms
Aidan Devine, news.com.au, 27 March 2020