Changes of VIC tenancy laws in response to COVID-19

In response to the ongoing COVID-19 pandemic, new laws have been introduced to address the financial and personal needs of both tenants and landlords in Victoria.

Tenants are often more financially vulnerable compared to landlords, therefore requiring additional protection and support in this unprecedentedly difficult time.

A new Part 16 – COVID-19 Temporary Measures has been inserted into the Residential Tenancies Act 1997 (VIC)(‘The Act’) which would take effect from 29 March 2020 until 28 March 2021 (or as extended by the government).

Some key measures, with a focus on the financial aspects, are outlined below:

No breach of duty or term if for COVID-19 reason

The biggest protection afforded by the new laws is the ‘lawful excuse’ of a COVID-reason. The Act now provides that a tenant or landlord is taken not to have breached a term or provision of a residential tenancy agreement if the tenant or landlord was unable to comply with, or it was not reasonably practicable for the tenant or landlord to comply with, that term or provision because of a COVID-19 reason.

A COVID-19 reason includes but is not limited to:

  • illness – whether or not the illness is COVID-19;

  • compliance with the exercise of emergency or public health risk powers by an officer appointed by the Department of Health and Human Services;

  • compliance with the term, provision or obligation of a residential tenancy agreement would result in severe hardship; and

  • any other exceptional circumstances in relation to COVID-19.

No notice to vacate from landlord to tenant

During the operation of the new laws, a tenant in financial hardship cannot be given a notice to vacate by a landlord. For clarity, a notice to vacate given before 29 March 2020 that specifies a termination date on or after 29 March 2020 is of no effect. A tenant cannot be compelled by a landlord to move out, and can only be evicted by an order of the Victorian Civil and Administrative Tribunal (‘VCAT’) if it is reasonable and proportionate to do so in the circumstances. For example, the VCAT may decide to make an order, on application of the landlord, to terminate the residential tenancy agreement if:

  • tenant could have complied with their obligations under the residential tenancy agreement or the Act without suffering severe hardship;

  • tenant or their visitor has caused serious damage to the rented premises;

  • tenant is endangering the safety of their neighbours, the landlord or the landlord’s agent

  • illegal use of the rented premises;

  • sale or occupation of the rented premises by the landlord;

  • assignment or sublet without the landlord’s consent; and

  • other circumstances that justify the making of such order.

 Suspension of rent increase

During the operation of the new laws, a landlord cannot increase rent or give a notice of a proposed rent increase to a tenant.

Negotiation and agreement on rent reduction

There is no prescribed minimum for the amount of rent payable as long as it is reasonable in the given circumstances. A tenant in financial hardship must first work out how much rent is affordable for them and then contact the landlord or property manager to request a temporary rent reduction. Upon receipt of the tenant’s request, the landlord can either agree to the request or negotiate with the tenant in good faith to agree on a reasonable alternative. The parties should always aim to agree on a rent reduction instead of deferred rent payment, in order to minimise the risk of non-payment which will end up as a debt on the part of the tenant.

Once the tenant and the landlord have agreed on a rent reduction, they should sign a rent reduction agreement and have it registered with Consumer Affairs Victoria (‘CAV’). If the parties cannot reach an agreement, they may start a dispute resolution process with CAV which, if necessary, may refer them to the Dispute Settlement Centre of Victoria for a free mediation service, with the goal of helping them reaching a written agreement on rent reduction or making a binding dispute resolution order.

If all else fails, the VCAT may make an order:

  • on application of the tenant, to reduce the rent payable for a specific period, and the tenant must abide by the payment plan specified in the order; or

  • on application of the landlord, to terminate the residential tenancy agreement.

Rent relief grant

A tenant experiencing financial hardship may be entitled to the government’s rent relief grant of up to $3,000, paid directly to the landlord on behalf of the tenant. The eligibility criteria for applying for the grant are as follows:

  • tenant and landlord have reached and registered a rent reduction agreement with CAV;

  • tenant would be paying more than 30% of their before tax (gross) income in rent even after the rent reduction;

  • tenant has less than $10,000 in savings (excluding superannuation); and

  • tenant has an income of less than $1,903 per week before tax.

Reduction in fixed term tenancy agreement

The VCAT may, on application of either a tenant or a landlord, make an order to reduce the term of a fixed term residential tenancy agreement by a specific period, and make any variations to the terms of the agreement that are necessary because of the reduction of the term. Such order can only be made if the VCAT is satisfied that the party making the application would suffer hardship that is greater than the other party if the term of the agreement is not reduced.

Tenant not liable to pay compensation or lease break fees and charges

A tenant suffering severe hardship is not liable to compensate a landlord for loss suffered by the landlord as a result of the early termination of a fixed term residential tenancy agreement, or to pay any lease break fee in relation to the early termination if:

  • tenant has given the landlord a notice of intention to vacate at least 28 days in advance; and

  • tenant vacated the rental premises on or after the termination date specified in the notice.

 

No listing in relation to non-payment of rent

A tenant cannot be listed in a residential tenancy database (i.e. blacklisted) by a landlord if they cannot pay rent because of a COVID-19 reason.

Land tax relief

As part of the government’s support to landlords and tenants package, landlords who have provided rent relief to tenants may be eligible for a reduction of up to 50% on the rented property’s 2020 land tax. Landlords who are unable to secure a tenant because of COVID-19 may also be eligible for a 25% reduction on the property’s 2020 land tax.

The COVID-19 pandemic has undoubtedly triggered one of the worst recessions in Australia. We understand how stressful financial hardship is and how it can affect you in many different aspects of your life. If you are currently going through financial hardship and are struggling to fulfil your obligations under a residential tenancy agreement, the above measures may be of your assistance. Whether you are a tenant or a landlord in Victoria, our experienced team of property lawyers are here to help. If you require further legal advice in relation to the above, please do not hesitate to contact Longton Legal.

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