What happens if I don’t pay my rent?

COVID-19 has been an economic sledgehammer, smashing through once thought “indestructible businesses” across the world. The ripple effect has impacted almost every industry and crippled most small businesses. We are fortunate in this country to have mechanisms in place so that small businesses and their employees can benefit from our government’s Job Keeper and Job Seeker schemes; it’s somewhat softened a terrible blow. However, with forced lockdowns still in place, many employers are currently watching their business evaporate before their eyes; unsure of what the future holds.

Unfortunately, hundreds of thousands of people have been stood down from their jobs or lost working hours during this pandemic: both Landlords and Tenants. This is on top of the direct impact of contracting or caring for someone who has contracted the virus and the mental health implications of forced isolation. 

It is very easy for groups of people to attack one another during times of stress. We implore everyone to remember that the Landlords are people too with commitments to meet and mortgages to pay. They are more likely to be “that nice family living next door” than Scrooge McDuck and likely depend on the rent for the property you are living in or working from. The other harsh reality is that a significant percentage of Tenants live paycheck-to-paycheck and do not have sufficient savings to see themselves through this storm. Both sides are suffering.

We are, as the Prime Minister says, all in this together.

“So what should I do if I can’t pay my rent?”

Contact your property manager and/or your landlord immediately. Both the REIV & Consumers Affairs Victoria are advising tenants in financial stress to contact their landlords to arrange a payment plan.

REIV President Leah Calnan says that there are two kinds of rental payment plans that are currently in place: rental reduction and deferred payment. Both are very different and should not be confused.

A rental reduction, as implied, is a discount on your rent that does not need to be paid back. For example, your rent is $400pw and your considerate Landlord (if they can afford to) may agree to drop your rent to $300pw, which could be reviewed on a monthly basis for the duration of the pandemic.

Deferred payment is when the Landlord agrees to accept a lower rental amount until the Tenant is in a financial position to pay the accumulated arrears over a set period of time. For example, your Landlord may accept $300 instead of $400 per week for six months; with the accumulated arrears to be paid off over the following six-month period. The rental amount for the following 6 months would be $500 instead of $400 per week.   

The absolute worst thing that you could do is nothing. Letting rental payments slip into arrears leaves you vulnerable to eviction, incur default fees, or have other significant consequences.

“But what about Scott Morrison’s six-month moratorium on evictions?”

Tenants in Victoria have been advised to continue paying the full amount of rent until they reach a written agreement with their Landlord. At this stage, if you owe 14+ days of rent, your Landlord can still give you a 14-day Notice to Vacate. You can still default on your lease, be placed on a tenant blacklist, be summoned to VCAT, and be evicted directly after the moratorium period ends

It is worth noting that the moratorium is only for financial hardship cases caused by COVID-19 and is not a blanket moratorium on all evictions.

“What if I refuse to pay my rent?”

If Tenants are in a position where they can afford to pay their rent but are willfully refusing to pay rent, they are still liable for eviction as this is likely to be a breach of the tenancy agreement.

The recent calls for a rent strike, demanding amnesty from rent & mortgage payments during the crisis, may result in increased homelessness, business closures, and tenant blacklisting amongst the most vulnerable. Tenants who don’t pay rent during the moratorium period — and have not worked out a rental payment plan with their landlords — could get caught in a wave of VCAT cases once the crisis has passed.

So please: contact your property manager as soon as possible if you are experiencing any financial difficulties during your tenancy. At Modo Property we are committed to helping our Landlords and our Tenants to get through this. We are here for you and cannot stress enough that communication plays a critical part in making it through to the other side.

The economic fallout will be felt for many, many years to come, but it’s important to remember that Australia is a safe haven and we are the envy of most other countries right now. As a nation, we rightfully deserve our reputation for resilience through hardship which stems from the strong minds of our countrymen and our economic capacity to bounce back once this is over. Stay strong and keep safe.

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