Property investors fear ruin from six-month eviction ban

While renters fear losing their home during the coronavirus crisis, landlords fear they will be forced to sell their properties and be “financially ruined” by an eviction ban that potentially allows tenants to squat for six months.

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Landlords say they will be forced to sell their properties and be “financially ruined” by an eviction ban that allows tenants to squat during the coronavirus crisis.

Treasurer Josh Frydenberg sought to intervene late on Wednesday, telling The Daily Telegraph he was in talks with bank CEOs about not foreclosing on investment property owners.

At the same time, the NSW government was understood to be looking at how it could provide relief, with options under consideration said to include cutting or deferring land tax bills.

Treasurer Josh Frydenberg. Picture: Sam Mooy/Getty Images

Earlier, the NSW Greens had succeeded in adding a lease termination protection amendment to a COVID-19 “emergency measures” bill.

NSW government MPs voted against the amendment but it passed with the backing of Labor, the Shooters and Animal Justice Party.

In a debate before the vote, Coalition Finance Minister Damien Tudehope said: “I plead with those who are seeking to push this amendment that it is potentially not the right amendment and we should get this right.”

Member for Newtown Jenny Leong. Picture: Dylan Robinson

The amendment was drafted by Greens MP for Newtown Jenny Leong in concert with the NSW Tenants Union.

Ms Leong said “the amendments give the power to the relevant ministers in NSW to create regulations to put a moratorium on evictions, prevent people having their lease terminated and make other changes to what current powers landlords and owners have over tenants.”

Hundreds of thousands of people in NSW have an interest in an investment property and many are concerned they will be financially devastated by a ban, which could allow tenants to pay no rent for up to six months.

The Property Club, whose members own 40,000 investment properties across Australia, has been “inundated” with inquiries from concerned members, said national manager Troy Gunasekera.

“They are very fearful that they will now be financially ruined,” Mr Gunasekera said.

“If they are compelled to offer rent holidays then many will be forced to sell their properties which will put upward pressure on rents as the pool of rental properties will decline.”

Property Owners Association of NSW President John Gilmovich agreed.

“Many landlords are highly geared and barely cover costs even with the rent coming in, let alone without receiving any income for such a long time,” Mr Gilmovich said.

“If they couldn’t receive the rent for six months — or for many, an even shorter period — their hand would be forced, and this could have devastating outcomes for their tenants as well.”

Insurance could protect landlords however a source said it may be voided if owners don’t send warning letters to tenants during the eviction ban.

Banks are another hope, with several telling the Telegraph their new home loan debt deferral policies would cover investment property.

Mr Frydenberg said he was yet to see that in writing, so was working furiously to nail it down.

“I’m talking to the banks to make sure they don’t foreclose on any landlords,” he told The Telegraph.

“I was on the phone to one of their CEOS about 30 seconds before making this call and I’ve missed a call from another while I’ve been speaking.”

Prime Minister Scott Morrison will discuss a “national principles framework” for an eviction ban.

The impact of a six-month prohibition on lease terminations was due to be discussed at Wednesday night’s National Cabinet meeting between state premiers, territory leaders and Prime Minister Scott Morrison.

It is thought that the prohibition would be part of a broader set of measures that could reduce the impact on landlords but this could not be confirmed.

A “national principles framework” developed by NSW was to be presented at the meeting. It is unclear what the framework involves.

A NSW government spokesman on Wednesday night said “the states are working together to develop plans which protect tenants and also assist landlords from undue hardship.”

Originally published as Property investors fear ruin from six-month eviction ban