The Covid 19 crisis is a worldwide tragedy that much is obvious. Property Managers like many other businesses are dealing personally with the loss of business, looking after employees, managing tenants and owners expectations.
There is much confusion out there right now between Tenants, Landlords, Property Managers, Journalists and the Government. Throw away lines like “Landlords and tenants need to sit down and work this out” are we talking Commercial Landlords or Residential? Then theres mortgage freezes, Landlords are profiting and greedy they should reduce my rent, give me free rent, financial hardship etc it goes on.
“Unfortunately some Property Managers and Landlords are being seen as a target for shaming for simply trying to collect the rent”
As a registered Land Agent and Registered Property Management business we have clear fiduciary duties to the owners who contract the management of their property with us. Since a property manager is a fiduciary they must act with the highest good-faith and fair dealing with respect to the owner’s asset. We must disclose all material information that may affect the owners decision-making with respect to that asset, and can’t in any way act adversely to the owner’s interests. In simple terms it’s our duty to collect the agreed rent, ensure the property is well maintained and act at all times in the owners best interest.
What does this mean for the Tenant, Property Manager, Landlord relationship during these tough times? It’s a delicate situation that needs to be handled clearly, compassionately while still maintaining the clear contractual obligations we have to our owners.
The question for both parties is – Can the Tenants afford to pay their rent? Should we be throwing reductions, deferments and goodwill gestures etc out there.
There are two fundamental things we need to survive this pandemic as comfortably as we can, food and shelter. These elements are critical and essential. General hardship provisions have always been in place and many Tenants in properties have always relied on the various government support that has always been available. The Government has now put numerous high support packages in place including Job Seeker, Job Keeper payments and one off payments.
“Consider the basic examples below”
When calculating rent affordability Property Managers look at the ratio of Income to rent. We use 35% as a general rule during normal times to ensure tenants can comfortably afford the rent. The examples below are how we may assess hardship now to ensure our tenants can continue to afford everyday living.
Example 1 – Assume a Family of 4 paying $750 per fortnight Rent
Worst case scenario which is terrible, both adults lose their Jobs and go onto Job seeker payment of $1100/ Fortnight which is $2200 combined. Using 35% of this amount means the rent would need to be more than $770.00 per fortnight for us to consider they may struggle paying the rent under these new circumstances.
Example 2 – Assume a family of 4 paying $950 per fortnight Rent
Worse case Scenario again terrible, both adults are retained by their employer but go onto the job keeper payment of $1500/Fortnight which is $3000 combined. Using 35% of this amount means the rent would need to be more than $1050.00 per fortnight for us to consider they may struggle paying the rent under these new circumstances.
“These examples don’t even take into consideration the one off support payments or other benefits such as rental assistance or if one or more tenants retain work”
We looked at the numbers below relating to average property rental prices in both Adelaide and Nationally posted recently on Rent.com https://www.rent.com.au/blog/rental-snapshot-march-2020
Adelaide Median rental prices are:
House $760.00 per fortnight
Unit/apartment $640.00 per fortnight.
Example 1Family of 4 with $2200 combined income per fortnight the ratio is 34% – Still under for a house.
Example 2 Family of 4 with $3000 combined income per fortnight the ratio is 25% – Still way under for a house.
Nationally Median rental prices are:
House $890.00 per fortnight
Unit/apartment $900.00 per fortnight
Example 1 Family of 4 with $2200 combined income per fortnight the ratio is 40% – Just over for a house but not diabolical.
Example 2 Family of 4 with $3000 combined income per fortnight the ratio is 29% – Still way under for a house.
Yes these are average examples, peoples individual expectations of course may be different. Affordability is the real question here. We personally have discovered living expenses are lower due to self isolating, working from home, not buying lunches, coffee, parking, fuel etc.
Are Landlords in a position to offer any goodwill to Tenants? The answer is many are not.
Tenants and Landlords alike may not be able to afford all the usual luxuries, however rent like food is essential for both parties. It would be helpful and more proactive for heads of government, media outlets etc to stop calling out Landlords to absorb the expense – Everyday Mums and Dads own residential properties, they are a large expensive asset with many associated costs and those costs will not stop for a Pandemic.
It would be helpful and proactive for Government and to suggest these support payments are there so everyone can keep buying essential groceries and keep a roof over their heads during these tough times. Tenants must where possible keep paying essential rent.
So ..Should Landlords cut the rent during COVID 19?
Everyone needs somewhere to live, a little bit of common sense from all parties is required here. Hardship can and should be assessed fairly and if relief can be given thats good. There are many new options available for the tenant to keep paying their normal rent in most cases, and we are happy to help our tenants where we can with those solutions. Keep your distance 🙂 All the best and “Stay Safe” everyone.
