NSW rent relief laws must address power imbalance between owners and tenants, union says | Australia news

New South Wales’s rent relief laws need to go further and address the power imbalance between owners and tenants, and encourage mortgage relief for owners, according to the state’s tenants’ union.

On Monday, NSW treasurer Dominic Perrottet revealed early details of the state’s $440m rent relief package, which is still being finalised.

Renters who have lost 25% of their household’s income due to the coronavirus will be temporarily protected from eviction. For six months, they cannot be evicted until after the tenant and landlord have “negotiated in good faith”, as determined by the NSW Civil and Administrative Tribunal.

Instead of cash payments, or payments to tenants, landlords will receive a waiver on their land tax up to 25% if they reduce rent.

And there will be an “immediate 60-day stop on termination notices” given to renters already in arrears due to Covid-19.

On Monday, NSW Labor’s shadow treasurer, Walt Secord, called the package a “cruel hoax” that was “modest and claims to be much more than it actually is”. Labor leader Jodi McKay said only 16% of landlords in NSW pay land tax, and the package “leaves out tens of thousands of people”.

Leo Patterson Ross, senior policy adviser at the NSW Tenants’ Union, said he welcomed the package but key details in the final phrasing would be crucial.

Under the currently announced scheme, sharehouses where tenants lose income but the household income is not below 25% are not eligible, and there are no direct cash payments to either tenants or landlords.

“Because the government has gone for a fairly complex route, the detail in the regulations is going to make a difference,” Patterson Ross told Guardian Australia.

“The phrasing of that is important – if it is says you ‘have to make sure it is affordable’ to the tenant, that will change the dynamic, compared to if it is just ‘you have to consider it’.”

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He said that a negotiation-based system would need further measures to make sure rent was reduced proportionate to a tenant’s lost income, and landlords received concessions from banks to pass on to tenants.

“The worry is that there will be people who try and negotiate – and this is for the landlords as well – who don’t feel able to move far enough to make it affordable for tenants and banks and insurance companies. And the negotiation will fall down. And it is not clear to us that the tenant will be able to retain their home.

“We’re always concerned with these situations with individuals talking to each other that the power balances inherent between landlord and tenant aren’t addressed.”

Under the announced details, NSW Fair Trading will provide dispute resolution if landlords and tenants cannot agree on a rent reduction.

In the Australian Capital Territory, the rent relief package asks owners to grant 25% rent reductions, and for tenants and owners to split the cost 50/50. This is capped at $1,300 a quarter – which means a potential total of $200 rent relief a week.

Under the NSW scheme, tenants will not need to pay back rent reductions they are given. But Patterson Ross said there was a misconception among owners that a tenant could only be given a deferral of rent – to be paid later.

“‘Negotiate in good faith’ should mean that the landlord take into account the tenant’s position and are prepared to offer packages that relate to that,” he said.

“What it shouldn’t mean, as a blanket rule, is a rent deferral. Unless the tenant expects to have a higher income after Covid-19 than they did before Covid-19, it makes no sense to defer rent. Something like the commercial model, which is part waiver part deferral makes sense.

“The government are telling people to still pay your rent, the arrears are still going to accrue. That is being read that the rent negotiation is always going to be a payback scheme. That is not necessarily true.”

In Western Australia, premier Mark McGowan announced on Tuesday that he would introduce legislation for a relief package that includes a six month eviction moratorium, a freeze on rent increases, and no interest on rent arrears – but would not include rent reductions.

In Victoria, the CEO of Tenants Victoria, Jennifer Beveridge, said the state needed to move quickly on its own rent relief package.

“Prime minister Scott Morrison made it clear it is up to states and territories to put in place the evictions moratorium,” she said. “In Victoria, we are still waiting for action from Premier Daniel Andrews.’

“Two-thirds of the people we have heard from were turned down when seeking rent relief from their real estate agent or landlord. Many have received notification of rent increases. In addition to the evictions moratorium, Tenants Victoria is asking the Victorian government to put in place a freeze on rent increases and additional protections against eviction for non-financial reasons.”

In NSW, the Tenants’ Union are also calling for banks to provide more mortgage deferrals and relief for owners so they can pass on savings to tenants. Patterson Ross said the focus on only land tax was too narrow, and that state and federal governments should look at other kinds of payments.

“A minority of landlords pay land tax, and very, very few units would have an unimproved land value of $734,000,” he said.

“We also think the banks can do better on mortgage deferrals – the interest repayments should be paused. The difference is the mortgage is payment for an asset, which the landlord will still have. Tenants are paying for a service.

“[Land tax] is something that the NSW government can do. It’s a lever they can pull. But clearly the big levers are the mortgage, the insurance company telling landlords not to negotiate. Really, the commonwealth still has a role to play here. Tell the banks to do better on their mortgage relief package, tell the issuance companies to not have such a hard line negotiation position.”

He said that a more proportional, bottom-up structure of rent relief would be more efficient.

“The tenant should put their hand up and say ‘I need help’, which triggers a rent reduction, which triggers a reduction in the other costs for owners. At the moment, coming from the top down, it doesn’t make a lot of sense.”