QLD: Residential Tenancy Law Reform and COVID-19 [WEBINAR]

This transcript of the 23 April 2020 Webinar about the QLD Residential Tenancy Law Reform and COVID-19 included a panel of Frank Higginson and Chris Irons, Hynes Legal and Rob Honeycombe, Bees Nees City Realty.

The much-anticipated legislation relating to rent relief for vulnerable residential tenants in Queensland facing excessive hardship because of COVID-19 was tabled in state parliament on 22 April 2020. Tenants have rights and obligations under strata law. This panel of experts talk about the issues you will be facing but also offer some practical solutions.

Chris
Well, good morning, everybody. Welcome to this webinar. We will get started because I know that there’ll be quite a few attendees and quite a lot of interest and we want to cover as much ground as we possibly can today.

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Firstly, thank you all for taking the time to join in. A few introductions to begin with. My name is Chris irons. I’m a strata advisor with Hynes Legal here in Brisbane. I was formerly the commissioner for body corporate community management in Queensland, and as I say on there with Hynes Legal as Strata Advisor. Joining me today is Frank Higginson. Frank is a Partner at Hynes Legal. And also joining with us today, Rob Honeycomb. Rob is Managing Director of Bees Nees City Realty in Brisbane and the past chair of the Real Estate Institute of Queensland (REIQ).

We’re doing this webinar today in conjunction with LookUpStrata. Thanks, Nikki and Liza for getting this all together, as always.

So the purpose today was to talk about issues relating to residential tenancies in particular and also any overlaps with strata in Queensland. So the prompt for this is that last night Queensland Parliament passed a bill to give effect to some emergency measures related to COVID. And that bill included provisions for residential tenancies. I guess, Frank and Rob, the first thing to note is that we don’t necessarily have all of the formal detail at the moment, do we?

Related Information:

Frank
No. At least we’ve seen the regulations. So I suppose from a legal perspective they started with a very wide ranging Act which gives the minister some regulation making power personally to address other things that pop up over time. But we have seen the regulation in relation to rental which has been probably very heavily in the media for the last two or three weeks. So I’ve spent no time at all reading any of the stuff that’s been on the front page of the Courier Mail because it has been changing relatively frequently. And for me, the first time I’ve actually seen the details when I sat down and sort of 5:30 am this morning to start to read it based on a what was passed last night. So we do have some but not all, but enough so that we can give people some guidance today.

Rob
It was interesting, Chris, the Minister now has the power to make guidelines that are only consistent with his regulations. And I gather that, well he said in his press conference that he set up a committee to help him with that and that includes representatives from tenants union and Queensland shelter, the RTA itself in the REIQ representing property managers and property owners. So hopefully, as those guidelines come out, we don’t see too many surprises compared with what has actually been talked about today.

Chris
But I think it’s important that you make that point, Rob, because the potential for surprise is there. And I think the other point to make is that this is not a normal process of government. The way in which things would normally work is that there would be a lengthy period of consultation, there would be a bill introduced, it would go off and be examined by a committee come back debated and there’d be a substantial lead in time.

You don’t usually find things happening this way, where Parliament passes a bill on the day and then it’s over to the minister to set the detail of that thereafter. It doesn’t usually happen that way, but we are living in these surreal times. And this is how things are happening at the moment. We might kick off. I might Rob hand over to you, as a real estate agent, sort of out there every day at the coalface interacting with tenants and landlords. What sort of stories and situations are you encountering at the moment?

Rob
Well, the initial initial response after the Prime Minister’s announcement back on March 22, I think, when he first talked about the moratorium on evictions, the initial response came from landlords, saying ‘Hey, look, if my tenant has a problem, please be sure to talk to us because we’re happy to help you out’. So, and then very quickly, hopefully not surprisingly, from tenants saying, ‘Oh look, I understand my landlords got some tough times happening as well’, so you’d have to say the initial response has been one of mutual understanding of each parties situation.

So despite what the media would love to talk about, the conflict, for the most part people have been getting on with the negotiations recognizing that there’s two sides to this. That landlords aren’t all Scrooge McDuck, lying back on our vaults full of cash. That they do have their own issues and trying to find some mutual agreements. We don’t have a lot of tenants trying it on. We’ve had a couple of course, as you’d expect, but for the most part, people aren’t really asking for assistance if they don’t need it.

Chris
One of the key things that’s emerged from, you mentioned there the Prime Minister’s statement and subsequent statements for the Premier and the Housing Minister is this need for parties to enter into discussions. To communicate, to talk about what is and is not possible under the circumstances. It’s a point that Frank and I make all the time when we talk about body corporate issues that the sooner you get on the front foot and start talking about the issue, the better it is for everyone, and the better your chances are of coming to a settle position. That’s right, isn’t it? Frank?

Frank
Absolutely. And front foot is not the typical scorched earth legal position of sue everyone. This is one where communication is just so important. And letting people know what’s going on at both sides of the coin is even more so. And even in terms of what they’ve done with this regulation, I can see that sort of built into it as much as it might not necessarily be expressed. I think there’s some best practice stuff in terms of what they have produced that we’ll be talking about today that I think everyone sort of needs to build into their processes for the time being.

Chris
Let’s just turn our mind to what has been announced. So, as I say, a bill was passed. In this case, quite unusually for these circumstances. The Minister tabled and the Housing Minister tabled last night a draft regulation in Parliament. And that is now available (we’ve included a link above). That regulation sets out what it is that these provisions are going to look at. It’s split up into a variety of divisions talking about rent, talking about termination, and a few other things as well. Frank, might turn their mind to probably the most burning part of all of that which is the issue of about hardship, and about payment of rent here in. So the hardship definition is pretty specific, isn’t it?

Frank
It is. So the very start of this regulation creates a definition of what is excessive hardship. So for me, probably the way to visualize it is that for tenants to have available to them that protection by this regulation in relation to payment of rent, they need to be suffering excessive hardship, and unless that is actually the position, then they can’t get through the gate and therefore they’ve still got the same obligations they do as tenants today with respect to their rents and everything else.

The section in the regulation is Part 1, 6 When person suffers excessive hardship because of COVID-19 emergency (pg 7). Effectively, to get the benefit of excessive hardship, you or someone in your care has got to suffer from COVID-19, you’ve got to be subject to a quarantine direction. This is talking about tenants, their place of employment is closed, or their place of employment is restricted because of a public health direction. So again, take for example, someone working at the casino, someone working at a pub. Clearly those have been closed as a direction, someone working for Virgin. And the other one is persons self isolating because they’re vulnerable.

Vulnerable has actually been defined in the regulation. So vulnerable is:

someone over 70 full stop

someone over 65 who I think has health conditions or morbidity. That really means I think it’s best I can tell, sort of reaction or exposure to viruses or poor reaction to viruses. Basically a reduced immunity.

Or someone of Aboriginal or Torres Strait Islander Islander descent, who’s above 50 with those same health conditions or mobility issues.

So those are the people.

Residential Tenancies and Rooming Accommodation (COVID-19 Emergency Response) Regulation 2020 | 6 When person suffers excessive hardship because of COVID-19 emergency

This section applies to a person who is a tenant or a resident.

For this regulation, the person suffers excessive hardship because of the COVID-19 emergency if, during the COVID-19 emergency period—

any of the following circumstances apply to the person—

the person, or another person under the person’s care, suffers from COVID-19;

the person is subject to a quarantine direction;

the person’s place of employment is closed, or the trade or business conducted by the person’s employer is restricted, because of a public health direction, including, for example, because a public health direction has closed a major supplier or customer of the person’s employer;
Examples—

The person’s place of employment is closed in compliance with a public health direction.

The person’s place of employment is unable to continue to operate because of a loss of trade or business resulting from a public health direction.

the person is self-isolating because the person is a vulnerable person, lives with a vulnerable person or is the primary carer for a vulnerable person;

a restriction on travel, imposed under a public health direction or other law, prevents the person working or returning home;

the COVID-19 emergency prevents the person leaving or returning to Australia; and

the person—

suffers a loss of income of 25% or more; or

the rent payable by the person under a residential tenancy agreement or rooming accommodation agreement is 30% or more of the person’s income.

However, if there is more than 1 tenant or resident under the residential tenancy agreement or rooming accommodation agreement, subsection (2)(b) is taken to provide—

that there has been a 25% or more reduction in the combined total income of all of the tenants or residents; or

that the rent payable under the agreement is 30% or more of the combined total income of all of the tenants or residents.

In this section—
income, of a person, means the net weekly income of the person, including, for example, any financial assistance the person is receiving from the State or Commonwealth.

So the first step is you need to be in one of those categories. And if you’re not in one of those categories, then the protection and the regulations are not going to apply to you. Part Two of that is then that that person needs to have suffered a loss of income of 25% or more, and that is net income. So the net weekly income, so what you would otherwise have been banking, or the rent payable by that person is more than 30% of the person’s income. So I suppose for me, those things are financial, very strict elements that people are going to be able to prove all they wont. And I think if someone is going to make an application for relief in relation to COVID, then producing that sort of information that actually proves those things is going to be a reasonable request handled the right way.

Chris
I think that’s really important. This is not a blanket provision which says that now that everybody is in the midst of a pandemic, there is an automatic ability for you to not pay rent, or not pay as much rent. That’s not the case at all. And there’s been a bit of misconception, I think it’s fair to say, Frank about this idea that, ‘Oh, this means we just don’t pay rent at all’. No. If you qualify under one of these defined criteria or a couple of these, you have to qualify, first of all under the criteria. And then second of all, there’s the financial aspects so there’s two arms to it. You need to qualify under both. Assuming that you do then you are entitled, as Frank said, to benefit from what is being offered here on under law. So that’s really important to clarify that nowhere in this reg does it say that automatically, anybody who was attendant can stop paying rent. That’s not what this it says at all.

Frank
No, nothing in there at all. So those definitions talking before about 25 or 25% of income or you’re paying more than 30% of your income as rent, they’ve expanded that also to include where there’s more than one tenant or resident under the residential tenancy agreement. I think that’s an important thing. They’ve both got to be signed on to the agreement itself. So the typical, which is what some of our younger lawyers at work still do, one person’s on the lease and then they effectively sublet bedrooms to other people, won’t necessarily include those sub tenants would be my take.

Chris
Although it does go on to say if there is more than one tenant or resident under the agreement, so that goes to your point, then those financial criteria are taken to mean that if there has been a 25% or more reduction in the combined total income of all the tenants and residents. So, the way the legislation is framed, it’s firstly framed on one tenant. But if there’s more than one tenant then it’s a combined income.

Frank
So that is probably the very key thing is that you’ve got to be able to jump through those hoops to be able to take advantage of the protections provided by this regulation.

Chris
We actually have a question that goes to that point. I’ll paraphrase questions as they come in: foreign students on visa. Does the new regulation protect students on visas as tenants?

Well, so long as they tenants and they qualify under the criteria Frank and I have just outlined, yes, they would. Right?

Frank
Yep. Agreed.

Chris
Simply because they’re on a visa does not change that. We’re talking about tenants. We’re not talking about where the person is from. We’re talking about the fact that they are a tenant.

Frank
So we’ve just spoken about what excessive hardship is and sort of coming towards the end of that. And I suppose for me as a lawyer, this is a tiny bit scary in terms of trying to talk in detail about regulations and laws that I saw for the first time a couple of hours ago. There’s another question there about if sublet people aren’t stated on the lace, does that impact the ruling? And it comes down to the literal wording of the regulation. However, if there is more than one tenant or resident under the residential tenancy agreement, I suppose actually, Chris, all rooming accommodation agreement because this regulation applies to residential tenancies and rooming accommodations. So that’s like, effectively, I suppose the students sharing a room in some sort of University Housing. So I suppose if you apply that, respectively, tenant under a residential tenancy agreement or resident under a rooming accommodation agreement, so probably my first glance at that is you got to be named on the lease, would be my take.

Chris
That would be my take as well, Frank. There’s been a couple of questions about that. I think it’s fair to say that if there is more than one tenant or resident under the residential tenancy agreement. So there it is, is the agreement that you’ve entered into, and it should name everybody on there.

Frank
And if it doesn’t, then probably the threshold criteria only the apply to the people named as tenants, would be my take on it.

Chris
Rob, what would you think?

Rob
Yeah, there was a reference to household somewhere that I think that might be further on. We’re talking about entry requirements and vulnerable people. So that goes further than just those names in the tenancy agreement, I think.

Chris
Okay, that that could work. Yeah. That’s a really good point actually hadn’t even thought of that. And this is it. I think, what you will find is that the more and more this goes on, the more and more questions and uncertainties of that type will come up. That’s just the nature of legislation. Has to be the case.

Frank
So we will just scroll through the actual regulation, I suppose. I’m not the quite line by line, but section by section?

Chris
Yeah. And try and respond to as many questions as we can. There’s a few few. I mentioned at the start that Frank and I are from a law firm that focuses on body corporate issues. It’s important to, I think, remember at this point that if you’re a tenant, you have rights and responsibilities under body corporate legislation. And that’s a point that sometimes people don’t always remember or realize. So if you’re a tenant, you have the ability to ask the body corporate to do certain things. For example, repair common property and enforce bylaws. Equally though body corporate has the obligation to ask you as a tenant to maintain your apartment, and also comply with bylaws. Rob and Frank, sometimes that’s a point that I think tenants, landlords and agents do not always hundred percent remember, isn’t it?

Rob
I think it’s part of the problem around training, Chris, you know for well from your past role a lot of real estate agents don’t get training in how body court works, a lot of them find a very overwhelming and confusing so we know that a lot of tenants don’t get given a copy of their bylaws even though they’re required to be. They are not informed on what their obligations are. So there’s a real lack of information there.

Chris
So, if time permits today, we might get to a couple of specific residential tenancies body corporate issues because there are actually a few that image from these new laws, which might pose a few challenges for not just tenants and landlords, but also for body corporate managers and caretakers. But we might go through a few more of the specific provisions. Frank or Rob, where do you go to next?

Frank
Moratorium on evictions is very simple. You can’t evict someone who’s suffering excessive hardship. Probably until 31 December I think is what I was looking at. The act sort of effectively defines the covert emergency period is from the 19 March through to 31 December this year. So, while this regulation stays in force, if someone’s suffering excessive hardship, you simply cannot kick them out for failure to pay rent because of that excessive hardship. They’re still, the way I read this, obliged to honour the rest of their obligations under the tenancy agreement. They can’t go and break it in 1000 other ways and those rights to terminate is still there for those reasons. But just the simple failure to pay rent is not going to be one of those if they’re suffering excessive hardship, which I think was one of the real big things from a REIQ perspective, wasn’t it Rob?

Rob
Yeah, it certainly wasn. We then had a range of owners saying, ‘All right, well, the lease expires in August. So how about we just don’t renew the lease?’ Well, the Act, the regulations go step further and actually require that we extend all tenancies through to September 30 for those tenants impacted by excessive hardship. So you can’t just say ‘All right, your lease is up, there’s your eviction’. You have actually got to extend that lease on the same terms through to September 30, as a minimum.

Frank
Yes. And that’s exactly the next section. Chris has spent some time doing the reading speeches and those sorts of things. Clearly, this is very much a, you call it a pro tenant piece of legislation. So it’s just important to be aware of that. So and I suppose the policy intent behind that is not having a whole lot of people that can’t pay rent out on the streets. So right, wrong or indifferent. That’s the way it is.

Rob
I think part of that Frank, that gets missed in all this is that the vast majority of landlords know that if they do turf a tenant out on the street, then they’re going to have a vacant property or greater chance that we know that vacancy rates increasing. There’s been a lot of short stay property added to the long term tenancy pool as well. So I know the legislation has got to cover these situations, but clearly, there’s a big misunderstanding that landlords and their agents want to have churned in their properties. They absolutely don’t. And I know many of the listeners will agree that everyone’s working to keep tenants in place, if they’re a good tenant, the landlord wants to keep them.

Chris
There’s motivations for all the parties, isn’t there, Rob, I mean, whether you are a tenant or an owner or a real estate agent, there are motivations for you to communicate, negotiate, and work out a solution that’s to everybody’s benefit. Because at some point, hopefully, all of this will be over. Life will return to normal, God knows when that is, but hopefully, that actually happens sometime soon. Really important to remember, you have to still be able to interact and get along with each other to a certain extent afterwards. So there’s this period now where everything is different and changed, and it’s challenging. I think we all accept that. But then there comes a period where we’re back to normal and you still have to have a relationship, for example, with your real estate agent. You still have to have a relationship with your landlord. You still need to maintain that it still needs to be ongoing. You need to do some work now to ensure it keeps going afterwards.

Rob
Yep, absolutely.

Chris
A couple of questions that come through about the timing. I think my understanding Frank and Rob, is that all of these laws are up until 31 December.

Frank
Yes. And I suppose the question there from Anna, who’s a very long term client of her ours, the obligations in relation to extending residential tenancy agreements only relate to agreements that are ending on or before 30 September 2020. So I suppose that’s tough. You got an agreement that expires in October, you don’t need to, under this regulation as it stands right now, automatically grant people a further extension of that. So that’s really covering people whose tenancy agreement might have expire on the 31 July that are suffering excessive hardship. Landlords can’t just get rid of them, they got to extend them through to the 29 September, which I suppose follows on there. What if the tenants was refused to sign a new lease? To me? I think you probably really, there doesn’t appear to be anything specific there.

Rob
A periodic tenancy, so the same terms apply.

Frank
Up until that 30? Yeah. And I suppose then you’d be operating on the same sort of two months notice rules you’d need now, Rob, in terms of asking people to leave and all that sort of stuff.

Rob
That’s right. I think it’s an important point to make, though, that the around the non payment of rent, clearly, there’s protections there for the tenant. But, you know, in the future, when that tenant goes to apply for another property, they’re going to ask their current agent for the rental ledger to give to the new and late payments or non payments will show on that ledger. So there is, as Chris said, an incentive for a tenant to do the right thing here and reach a mutual agreement with the landlord or agent because you can’t just not pay your rent or pay it late and expect that to not follow you. There might be some protections around being blacklisted on the tenancy databases, but because there’s another layer of checks that a future landlord or their agent is going to do.

Frank
Yeah, just in the unpaid rent, which is obviously been, I think, probably the single biggest issue of contention and all of this, hasn’t it. And the questions are starting to show there. So I suppose the regulation remains a little bit vague here for me. Rob, do you want to talk about what you’re going to do from a practical perspective here from managing properties?

Rob
So our tenants, if they are three or four days in arrears, our process would be to contact them to say, ‘hey, this can’t just be about timing of your payments. What’s happening?’ This regulation is now requiring us to not follow the normal process. If we get to day eight, we would normally be issuing notice to remedy the breach, if we haven’t had a conversation with them.

But now regulations are showing that if we are aware they’ve got an issue with COVID-19, or we ought reasonably be aware that they have an issue. Not sure how we do that yet. Frank, you’re going to tell us in a minute, but then we have to actually go a step further with the show cause notice, which is another 14 days added to that usual process. And maybe the timings aren’t as important because after a notice to remedy, we still had to follow the notice to leave process and we know they can actually end up with an eviction under this legislation. But it has still add another step so practically our property managers now, when they make that first call will now need to talk to the tenant say, ‘Is your late payment or non payment, because you are COVID affected and clarify that so we didn’t have a different set of rules that apply.

Frank
Yeah, and for me that is the threshold so I think it’d be bloody dangerous in this environment to issue a notice to remedy breach for non payment of rent as opposed to a show cause notice. Just in the circumstances where the wording of the regulation is the leaser knows or reasonably to know, the tenant is or has been suffering excessive hardship. So how do you do that? Obviously, direct communication is one line, if they’re not answering phones, if they’re not responding to emails, to me, that’s probably back to applications for tenancies at the time in terms of evidence of rent, who they’re employed by, etc, etc. Where you’ve got emails from, you know, if it’s Frank dot higgenson, at virgin dot com dot au that are you then clearly, you know that I’m probably likely to be affected by this at the moment. And Rob, I think you raise that you might have tenants that have been in properties for 12 years, who knows what’s happened job wise.

I think, from my end, I’d be saying it’s probably going to be a bit of an exhaustive process on the part of landlords or their agents to try to run down whether the people have been affected. I just don’t, again, back to that scorched earth policy, I just don’t think it’s going to work in this environment. You’ve got to try to find out where the people have been affected. And then I suppose going through the unpaid rent, if you go through that process, you issue the show cause notice. If the tenant doesn’t respond, then you absolutely can roll into the normal notice to remedy breach. If the tenant does respond and says ‘Actually, yes, I have been affected’, then there’s a requirement to negotiate.

Rob
Yes, and that’s the tricky part of course. There’s no real clear parameters there. But practically, we all want to get a result here. And we’re already experiencing this. We have quite a number of these situations in our office that have evolved over the last month and we’re getting results through negotiation. They’re mostly people being reasonable.

Frank
Yeah. And I suppose there’s nothing there at all about what happens with you know if I’m paying $1000 a week and I reduce it to $500 what happens with that $500 gap over a period of time? Nothing they’re about when it might revert or go back up. And so what are you seeing, Rob? Are you seeing anything specific? Are people relenting? Are they trying to back in some of it? Are they discounting it full stop?

Rob
When each State each first came out with their draft guidelines or changes to this, Queensland and Victoria went to the ‘Oh no, you can’t defer the rent. You must waive it’. Where New South Wales and WA who quickly said ‘No. We will allow the parties to agree and if they want to defer the payment too later, they can’. Queensland’s back flicked on that. And these regulations show that you can really negotiate whatever is going to work for you. So of course, the landlord’s preferences and our preferences their agent is to defer to a later time when they get their job back, those payments are coming through and they can afford it. I think a word of precaution, though, is that practically, not a lot of people, tenants, property owners, all of us included, run a hugely surplus cash flows. And I think you’ve got to be realistic about how much you’re adding on to your tenancy at the end in terms of unpaid debt. It might be okay to ask it but I think landlords and agents need to be practical about what really can get repaid at a later date.

Chris
Which ties into one of the questions asked Rob, does landlord insurance policy generally cover that non payment of rent?

Rob
Have we got any insurance experts on the panel?

Frank
Well, no I’m definitely not an insurance lawyer. I’m not licensed to provide insurance advice. But I can tell you what people have told me is that landlord policies don’t actually usually cover negotiated reductions in rent. So they covered default by tenants and damage and people leaving and breaching their agreement but not negotiated outcomes. It’s the same as what was really interesting to me from a business perspective, it seems that most business interruption policies don’t cover pandemics. They cover physical damage. So not these things. And then I suppose in terms of, if we negotiate and get an outcome, great, gets documented and away we go. If we don’t, then there’s a requirement to conciliate and that’s going to be by the RTA. So I suppose I’ve never been in that jurisdiction. Have you Rob?

Rob
Yeah, we have but not regularly, fortunately. Conciliation is a fairly common process. Keep in mind only about 4% of tenancies in Queensland end in dispute, so conciliation is not a hugely common thing, but we are told that this workload of mandatory conciliation, if you can’t agree, is going to be added to the RTA’s workload. We know that already their waiting time is about two months. So, just be practical. Again, it doesn’t matter what the legislation says, you’re not going to get to conciliation. You need to sort it out yourselves with a good agent in the middle now.

Chris
I think that’s absolutely right, Rob. And the other point I’d make is that having had a bit of experience in managing a Conciliation Service, it’s nothing to be afraid of. In fact, it can be a really positive experience because conciliation aims to educate parties as well. So you rock out to the conciliation usually, and by all means it’s about negotiating an outcome. But at the same time the conciliator plays a role in trying to make sure that everybody is on the same page with information and education. It can actually be a very positive experience moving forward.

Frank
I just might close out what happens then if you don’t reach agreement at conciliation. You make an application to QCAT. And beyond that, there’s no guidance there about what the order might be. So that that would inevitably have to deal with whether we are back ending the rent, no doubt the landlord would make an application say, ‘Well, I want that $500 bucks a week that I’ve been missing for four months’, the tenant will say ‘I can’t afford it’. Where it goes from there is not prescriptive in terms of this regulation.

Rob
Clearly, though, Frank at that point from a landlord’s perspective, they have placed the tenant into a notice to remedy breach and as we said that does appear in the future tenancy record so, the tenants are going to be aware of that.

Chris
Absolutely. Question which I think is a relevant one, Is there any offering of relief for investors? Not under this legislation, there’s not. And there’s some limited assistance that’s been floating around in some areas, but I think it’s fair to say that the focus at the moment has been on tenants and not landlords. It does, however, raise some interesting points from body corporate perspective, he says doing a nice segway. So in a lot of cases, an investor would be an owner of a lot in the body corporate. If you’re investor in an apartment, for example, that’s the obvious example. So as an owner of a lot in the body corporate you’re obliged to pay levies. And then body corporate can also apply a late penalty, can remove a discount and can apply interest to your payment of those levies. A body corporate can’t waive your levee obligation, there’s no capacity to waive that. But what they can do is they can waive some of those charges. There’s a legislative requirement for the body corporate to consider special reasons to do that. One of the questions that Frank and I have been dealing with a lot over the past couple of weeks is from bodies corporate and body corporate managers about how do we assess the basis on which we give a discount or waive those fees? I think this legislation actually is useful in doing that. We now have a definition in legislation of what hardship is. I would be thinking that the committee’s and body corporate managers, you take this definition in the residential tenancies regulation, about hardship, and you apply it to an owner, because I think the same thing has to apply. Gents, your thoughts?

Frank
I couldn’t agree more, mate. Lawyers make a lot of money from arguing over words in legislation and so from a body corporate perspective, Acting reasonably is the phrase that gets used all the time. What is that? It’s very subjective. I think when parliament has provided pretty clear guidelines about what means excessive hardship, in a financial context, I suppose of people’s financial obligations to pay something. I think it’s a very solid base to use that, to assess anything else we’ve got going forward against that. And in the body corporate context, I think it’s pretty hard to argue against that. You know, I don’t know you go to the admissions office at some stage saying, well, they didn’t give me a discount because they said that my incomes only come down by 40%. And it needed to be 50. Like, well, hang on a minute. This is where I’ve got to with rent.

Rob
Look, I agree with both of you and I think probably to give those running the budgets of bodies corps no conciliation. We did a webinar with about 100 of our landlords on Monday night and we did a poll as we were doing the webinar and asked have they already been impacted personally, their finances and 54 percent of them said yes. So we’ve got some looming issues around late payments or non payments of levies, that’s for sure.

Rob
And don’t forget, the whole point of body corporate levy is to pay bills to keep the body corporate going. It’s not as though they are, for example, that insurance companies are suddenly going to turn around and say, don’t worry about paying your body corporate premium. That’s not going to happen. Body corporate still has to pay for that. They still have to pay for repairs and maintenance. Levies will still need to be collected. There are ways and means to reduce and amend and how those levies are paid. We’re not going to go into that into too much detail today. But at the end of the day, a levy still needs to be paid.

We have a question about tenancy databases which is probably a bit of a relevant questions and it was hasn’t been a ruling on when TICA or similar can be made for rental data COVID. Well in fact, the regulation covers that. So if you are being exact, section 46 of the draft regulation talks about that. Basically, I’m paraphrasing here, the operator of a tenancy database be it a TICA or whomever must not list information in the database if the failure to pay rent happened during this current emergency, and was because of the person suffering excessive hardship or complying with a public health direction. So it again, it’s not a blanket, catch all. It’s if it happens in this period, and you’re suffering hardship, or you’re complying with the health direction, and that meant that you were behind, then it means that TICA should not be putting that information onto the database. There are a couple of exceptions listed there. One of those interestingly, includes that they did not inform them, that the failure was because of those circumstance. Rob anything to say?

Rob
Look, I would note that it’s around failure to pay rent. So if that tenant is COVID affected hardship, but then they go and destroy the property, then there’s clearly still an opportunity to list them on to TICA. It doesn’t go as far as saying it’s anything other than failure to pay rent or any new agreements. So it’s not all bets are off. This is about financial hardship.

Chris
And I think there’s also correct me if I’m wrong on that point, if there was action started from an agent against a tenant before COVID about non payment, then it continues, doesn’t it?

Rob
I’ve got personal experience with this. I have attended a property that I own, where the tent was well in arrears prior to March 29. Subsequent to march 29, she’s lost her job. So pretty confident she’s not watching this. I’m going to be very careful about how far I push that. Of course, because, you know, I think if it ever got to a tribunal, I’d have a hard time establishing that she could catch up on unpaid rent because she lost a job.

Chris
I think all that does is highlight the need to treat each case on its merits. There are absolutely guidelines and there’s now law and we should be applying that. But we have to always take into account specific circumstances. You can’t say that every tenant is the same. One tenant’s situation will always be different from another.

Shall move to the issue of entry to premises and people doing repairs. Because that’s an interesting one that has come up a lot in body corporate world and I suspect Rob, it’s come up a lot in real estate world as well. One of the issues that I’ve been hearing about a lot from bodies corporate and managers is the idea that you’ve got work that’s either been scheduled in the building, or needs to be scheduled, apparently, but to bring a tradie on site to do the work is probably going to mean a breach of social distancing rules.

Rob
Well, I guess the practical side of getting that work done, every tradie’s had to learn how to work in an environment where they honour that 1.5 meter, four square meters. I think typically most of us are adapting to that. So maintenance, it’s interesting that there is some protections in this regulation for Lessor that can’t perform maintenance because their tradie can’t attend the site to or can’t get supplies. They actually won’t allow the tenant to breach the landlord. So that’s some good news if that becomes the case, but as far as access to the properties more broadly, as agents and we’re relatively pleased with what the outcome has been.

Chris
I think there’s also the ability for the tenant to refuse entry to do work if they’re in a situation where they’re quarantining, or they’re vulnerable under that definition of vulnerability, Frank that you said before? As you say, Rob, that’s a really good recognition of some of the practicalities of the situation. Important to talk about the fact that there is a slight difference when it comes to body corporate legislation. So here we’re talking about a landlord either doing something proactively or responding to a request to do some maintenance. In body corporate world, the body corporate has a responsibility to first of all manage common property. And second of all they also have, would you say Frank, an obligation to do work if the owner isn’t doing it themselves?

And same, same with the tenant. This goes back to my point earlier about tenants having rights and obligations under body corporate legislation. There is a provision under body corporate legislation, which puts an onus on an occupier, which is the word used for a tenant to maintain their lot in a clean and tidy condition. So feasibly, if the tenant is not doing that, the body corporate can actually move to a position where they can do it themselves. And not only that, the body corporate has power under legislation to enter the lot, don’t they Frank?

Frank
Yeah, absolutely. After giving seven days notice. This is an example of what the normal process might have captured in terms of introduction of legislation on short notice were probably there would have been some attempt to make those rights a little bit more parallel. But at this point in time, there’s nothing there about bodies corporates at all, obviously. This is the residential tenancies and rooming accommodation Act, which really doesn’t mention body corporate in any way, shape or form. So BCCM Act obligations still sit there on their own. And body corporate rights, in that sense are obligations haven’t been affected at this stage. And I think we came back up a level to the act itself with the ability of the minister to make extraordinary regulations relating to certain things. Those things might be addressed at some stage. Who knows. And I know, probably one of the interesting things in that act, for me was, he’s got the ability to make regulations relating to obligations for people attending things. So that opens the door for body corporate meetings at the moment, which really can’t be conducted in this style of format, to basically be created without reference to Parliament for the time being.

Chris
This might be relevant for a lot of tenants who are tuning in today. Body corporate does have the power to enter a lot without permission. But now it’s under fairly extreme circumstances, emergency circumstances to be precise, but they do have that ability. Not only that the body corporate can seek a penalty to apply on somebody who obstructs that situation. So that’s a bit of a disconnect there. On the one hand, you’ve got these new laws, which are talking about a tenants rights to refuse entry under particular situations. On the other hand, the body corporate can enter, and there can be a penalty if the body corporate is obstructed in entry under those particular circumstances. Again, what that highlights is the need to communicate early and communicate clearly. So if the body corporate knows there’s a problem, get in touch with the landlord. Get in touch with the tenant, get the lines of communication open, but also explain the reason why. You don’t just enter for the hell of it, you enter with a defined reason, and particularly if it’s urgent, you must demonstrate why it is urgent.

Frank
There’s a really interesting new question there for Rob. That actually is interesting for me too. What are you doing fulfilling vacancies now? new tenants and that sort of stuff? Can Rob give advice on how he’s approaching new tendencies?

Rob
Well, the good news, not great news, but the good news is we’re still getting tenant inquiry. In fact, we’re letting property so our agency is in Brisbane. I can’t tell you the last seven days we’ve had 123 new tenant inquiries come in the door so the wheels are still turning in terms of letting them property and even some of those that are coming out of short stay and been added to the long term pool that we have. They are being let. Rents are being adjusted, which is no surprise but not wholesale discounts yet. So we were letting property. There are tenants to be found.

Chris
Can I ask you a very random question on that topic? Do you or any of your team ask people anything about COVID? Do they ask questions, for example, about where they’ve traveled or diagnosis?

Rob
Before we take someone to a property, we’re checking in on their health. So yes, we’ve been doing virtual tours on rental properties for over a year. We’ve now introduced video walkthroughs, as well. So hopefully by the time someone says, ‘Yeah, I like that place’, they’re fairly well qualified. And of course, we’re not doing open houses that all stopped about a month or so ago. But yes, before we actually attend that private viewing the one on one, we are checking in on their health so clearly, they’re not returning fresh from overseas now, the borders are closed, but that was an issue for us. We’ve had to be pretty careful with that one.

Chris
I asked Rob, because that’s been a question Frank and I have confronted many times lately from onsite managers in particular, who have been asking the question, can I ask somebody if they’ve been diagnosed? Or if I suspect that somebody has been diagnosed with COVID? Can I or should I be telling the rest of the residence in the building? And what Frank and I have been saying is you’ve got no power to ask that information. You can certainly ask it but, it depends on what you do with the information after that. It’s pretty intrusive.

Rob
Well, it’s part of our workplace. When we go out and do an inspection that becomes part of our workplace. So we believe we’re entitled to know what’s going on in the home. Very early on through our normal routine inspections, we had a tenant respond to our entry notes to say ‘look, you can’t come in. I’ve just returned from overseas and I’ve been diagnosed’, so we move to routine inspections virtually over a month ago now with our tenant’s cooperation and clearly under the new legislation, the regulations are going to require attempt to cooperate with that in the future. The world has changed and I think people are generally Okay having those conversations. A caretaker asking all residents in the building, yes, I’d agree. How is it relevant to them unless you actually needed to enter the property?

Chris
I might turn to the sometimes very vexing issue of locks. It’s a bit of a random one.

Frank
But I think it’s probably worth saying that the regulation they introduced last night includes more than just issues relating to rental law reform in terms of rent because there was a policy paper out earlier, November which is all about rental law reform and they have built some of those into this regulation, So Christopher, back to you on locks because this is one of them.

Chris
So, if a tenant believes that they need to change a lock due to domestic violence, they can do that. So effectively, these laws now give effect to a situation where somebody is in a domestic violence situation and needs to protect themselves. And one of the ways they do that is to change the lock. They can do that. They must give the lessor a key. There are some grounds on which that needs to happen. I don’t think anybody can argue with the idea that there’s a need to change a lock in a domestic violence situations and that none of that is in dispute. The interesting point it does rise though, is the issue of a lock itself. Because when we talk about locks. keys and fobs, particularly again, in a body corporate situation in a high rise building, it’s actually not very clear who is responsible for the maintenance of a lock.

So the general rule of thumb is, if the door is in a boundary wall between the lot and the common property, the maintenance of the lock would usually be the body corporate’s responsibility, and an owner or indeed an occupier, would usually need body corporate approval to change it. So important to remember that this goes back to my point again earlier about an occupier or tenant has a responsibility on body corporate under body corporate legislation. The new laws passed last night make it clear that that changing of the lock needs to be subject to body corporate bylaws, which is fine, but if a body corporate is already responsible for maintenance of a lock, the bylaw isn’t necessarily going to be applicable. But this might be a situation where there’s a bit of inconsistency between the two sets of laws.

Frank
Simple as that, absolutely. Bylaws don’t deal with locks. That’s a statutory thing. I suppose you’d say that’s a slight little miss from a government perspective, understandable in the circumstances. But yeah, that doesn’t really cover it. So we’re going to have the domestic violence components, people changing locks without reference to bodies corporates, and who knows what comes from that?

Rob
I think there is an obligation or at least there wasn’t a draft that we saw last November that the keys be provided to the managing agent in an unreasonable time.

Frank
That’s still there, definitely.

Rob
They can also then be provided to the on site management where appropriate.

Chris
I might go to a few questions that have come through and we might try and knock over in the time remaining, those and anything else that pops up. I’ll go right back to a couple that I missed earlier. Here’s an interesting one. If a reduced rent is agreed upon, can the rent be raised again after this period?

Rob
My understanding is yes. Yes, absolutely.

Frank
Absolutely. It seems that there are prohibitions under the existing RTRAA in terms of increasing rent, I think no more than two months before the expiration of a tenancy. I think they’ve relaxed those rules in the sense that if you discount the rent now, it can go back up without the need to give that two months notice and all that sort of thing, I suppose when we’re through this period, but only on the condition it’s not more than what was paid previously. $1000 a week now. We’re down to $800 for the next eight weeks while we get through this. You can kick it back up to 1000 bucks a week without having to give the required notice. But if you went to $1005, you wouldn’t be complying with that provision of the regulation.

Rob
I think it’s worth noting that the draft legislation or reforms that we saw in November tabled by the Minister, they intended to legislate prior to the October election. We don’t know what’s going to happen now, given all these changes. But phase two of that, which was openly talked about was that there may be some reforms that included conversation around limitations on rent increases, so we don’t have any detail around that yet, but that consultation paper in November was it said at the top of it stage one, and stage two, we are told is highly likely to include rent controls.

Chris
Okay. It’s good to know Rob. Another question is body corporate one can an AGM or an AGM vote to cease payments temporarily to the sinking fund? The short answer is yes, the longer answer is, it’s a process of adjusting your budget at one of those meetings and also taking into account what the body corporate actually needs to do. Frank?

Frank
Absolutely. The administrative funds are fairly finite. Bodies corporate have to spend $50,000 on insurance $50,000 on a caretaker, roughly $10,000 on repair and maintenance, $20,000 on your strata manager, whatever it might be. Those are fixed costs year in year out no matter what. So in theory, your admin fund should zero out at the end of the year. Sinking fund? Everybody corporates required to have a sinking fund forecast, but the quality of that is obviously wide and varied. There’s a range of experts that do them in the full blown report. And in theory, there’s no reason you can’t sit at the pub with the treasurer and do one on the back of a beer coaster and it still qualifies. So I think probably what we will be seeing is some sinking fund budgets get adjusted in terms of what’s needed to be spent or what may have been on the agenda to be spent next year to be spent in 2024 instead, and therefore the liability for those particular amounts, slowing down in the short term. And we sent a piece of content earlier this week about adjusting budgets that I think it’s important to be aware that just kicking the can down the road for six or 12 months doesn’t necessarily help. And I suppose, Rob subject to where, you know, the great crystal ball about where the property market goes in all of these circumstances. And obviously, in terms of selling real estate in due course, if we’re looking to sell units in bodies corporates, high rise or otherwise, if places are poorly presented because we’ve stopped raising money and stopped investing in sinking funds, that’s probably might save you a little bit in the short term in terms of the weekly cost, but might cost you more in the long run in terms of loss of capital value or an ability to attract the right buyer.

Rob
I think there’s more more awareness the last few years from buyers about sinking fund balances and what that means. They are slowly starting to educate themselves around the risks in buying in if the fees seem too cheap, there is probably a reason.

Frank
Couple of quick questions. The last one’s really interesting: loss of income from employers. I suppose from my end, an easy way to do that would be to look at Jobkeeper. So Jobkeeper, you need a 30% loss in revenue and you qualify for that so from a business perspective, assuming that most tenants are in less than billion dollar turnover territory, which they probably will be that’s probably very interesting. An immediate question if a self employed person qualifies for Jobkeeper, I think probably that’s an example that may get across that line straightaway. But, obviously, again, what’s the evidence? It’s a reasonable thing to ask.

Chris
Back to a TICA related question. And the next one: if rent relief has been agreed upon, and then that’s not adhered to, can that breach be listed on TICA? My take on that would be yes. Rob?

Rob
Well, the wording of that section is around ‘You can’t list them on taker if it’s the failure to pay rent, or the end of the agreement happened during the emergency period.’ So it actually seemed pretty broad to me.

Chris
That’s a tough one because to me, I take the view that if you agreed on a rent reduction and signed off on that, from the tenants point of view, you were doing so because that’s what you were capable of paying. So then if still didn’t pay? I think the first step would be to ask the question, what’s happened? It may well be that there’s been a change in circumstances which has made their financial position even worse than it first was, in which case you might have to renegotiate again. But how you tell that, that’s a really tricky one, isn’t it?

Frank
Does it reset? Does excessive hardship reset? As I sit there and look at it? So today, this is the position? I think in six weeks time, I’ll be back at work because pubs and clubs should be open. And then in six weeks time, it’s not. Do you go again and say, Well, is it now 25% less? Because I cut that deal at that time thinking that was going to be the position. These are some of the things that I suppose the minister at some stage may need to provide some more directional guidelines around because they legitimate questions.

Rob
I can tell you, looking at in the draft legislative changes we saw late last year, all the provisions around the tenancy databases are getting watered down even further than they were a few years ago. Tenants unions hate the databases. This government is very receptive to their voice. And I think you’d have to reasonably expect that there’s going to be more limitations. I can tell you practically that agencies have for some years now not relied on TICA and other databases. We do rely more and more on those Tenancy ledges, those questions to the past agent around where they issued notices to remedy, where they have issued notices to breach, notices to leave. You know, they’re the things we look at. Those databases have value still but not have the same value that they used to have.

Chris
I’m going to finish with one of mine and Frank’s and I dare say yours too Rob’s favourite questions, smoking. When is there likely to be some regulation regarding tenants and smoking in bodies corporate? It’s particularly important when people are isolating. Good question. I think there’s an emerging body of research which creates a very strong link between smoking and COVID. I’m pretty sure I have read that information somewhere. And it makes sense when you think about it, because it’s a respiratory ailment.

An answer to that very specific question, just to clarify the government pushed the issue of smoking in bodies corporate on the agenda and has had that issue on the agenda for some years. Has any position been taken on? No, no, there’s been no change to the law. The basic rule of thumb at the moment is that the body corporate can pass bylaws to regulate smoking on common property, but when it comes to a person’s individual lot, and the balcony is usually part of the lot, there’s not really any ability for the body corporate to regulate or indeed prohibit that. Frank?

Frank
Agree. I think maybe doing a seminar many years ago when you were the commissioner Chris, and it’s sort of, at the end of the day smokings legal. That’s the reality of it. How you regulate a nebulous substance that sort of drifts. The reality is that a lot of our body corporate disputes, human behaviour style issues, you’re never ever going to be able to legislate that. Maybe there is a bit of an angle to play here from a smoking perspective. In the long run, who knows?

Chris
Nikki tells us that there’s a smoking factsheet on the LookUpStrata site and that it is their most consistently most viewed factsheet across the country. Surprise, surprise! Very quickly, a question about cigarette butts. That’s a slightly different issue that might be dealt with under nuisance provisions. You might like to speak to a recognised strata law firm about that issue.

If you have a question about strata levies and COVID-19 or something to add to the article, please leave a comment below.

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This post appears in Strata News #342.

Chris Irons
E: chris.irons@hyneslegal.com.au
Frank Higginson
E: frank.higginson@hyneslegal.com.au
P: 07 3193 0500
W: Hynes Legal

Rob Honeycombe
Bees Nees City Realty
P: 07 5609 4924
E: md@beesnees.com.au

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

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