COVID-19 Induced Rental Arrears - What happens now?
Updated: Apr 26
In April 2020, the NSW Government introduced a state-wide moratorium to protect tenants that accrued rental debt from being evicted during the COVID-19 pandemic. The moratorium period ended on 26 March 2021, and NSW has now begun a six-month transitional period as it recovers from the effects of COVID-19.
Under the transitional protections, tenants who were impacted by COVID-19 and accrued rental, water usage or utility arrears during the moratorium period cannot be evicted for those accrued arrears if a certain criteria is met:
A repayment plan was agreed for the arrears, and
You have complied with the repayment plan.
If a tenant has failed to make two or more consecutive payments by the agreed deadline outlined in the repayment plan, a landlord can issue a termination notice to the tenant.
Landlords can issue a termination notice or apply to the NSW Civil and Administrative Tribunal (NCAT) to end a tenancy provided they have, in good faith, been involved in the arrears repayment negotiation and the circumstances surrounding the negotiations are 'fair and reasonable'. Notably, the Tribunal will look to the material evidence supplied and take a subjective approach when determining whether fair and reasonable repayment negotiations have occurred.
What does the Tribunal consider in deciding whether the issue of a termination notice is fair and reasonable?
The steps taken by the landlord and tenant to negotiate a repayment plan
Any payments made by the tenant towards the arrears
The general financial position of, and any financial hardship experienced by the landlord or tenant
The availability and affordability of reasonable alternative accommodation for the tenant
Any special vulnerability of the impacted tenant
How can Fair Trading assist?
During the transitional period, landlords, tenants and managing agents can be assisted by Fair Trading NSW in negotiating repayment plans for arrears accrued during the moratorium period. Those seeking assistance should submit a ‘Formal Arrears Repayment Negotiation Application Form’ along with a ‘Tenancy Complaint Form’ to Fair Trading NSW. Once those forms are received, Fair Trading NSW will likely request evidence to help parties negotiate the repayment plan.
Before entering into the repayment negotiations, tenants should have an idea of how much they can pay in addition to regular rental payments and at what frequency. Depending on the landlord’s financial position, the landlords are required to work with the tenant to come to an agreement regarding repayment of the arrears, including the amount and rate at which the tenant repays.
For landlords and tenants who have an existing agreement regarding the deferral or waiver of rental payments, the ending of the moratorium and the transitional measures do not affect those agreements.
When parties cannot negotiate a rental agreement
An early termination of a residential tenancy agreement is possible for tenants who have been unsuccessful in negotiating a rental agreement with their landlord. Before NCAT will approve a termination order, an important consideration is whether the landlord responded to the tenants written request for rent negotiation or the formal rent negotiation application facilitated by NSW Fair Trading.
The moratorium period rules will continue to apply to notices of termination, or proceedings in the NSW Civil and Administrative Tribunal (NCAT) that arose on or before 26 March 2021. For arrears accrued after 26 March 2021, landlords will be able to terminate a tenant under standard provisions. COVID-19 impacted tenants are also protected from being blacklisted on tenancy databases for arrears which were accrued during the moratorium period.
On a positive note, Fair Trading reported in February 2021 an 85 per cent decrease in both complaints concerning COVID-19 related rent negotiations and in requests for assistance compared to June last year.
The new transitional measures are set to end on 26 September 2021.
This article provides general information relevant to our expert services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.