Rent negotiations

On 13 July 2021,  the NSW Government announced that it will provide financial incentives to landlords who provide rent relief to tenants during the July 2021 Moratorium which commenced on the 14th July 2021 and will end on the 11th November 2021. 

During this period a landlord is prevented from taking any action to evict an 'impacted tenant' for rent arrears if they have been notified that the tenant is an impacted tenant and the tenant has paid at least 25% of the weekly rent.

You will need to contact the landlord or the agent and let them know you are an impacted tenant and you cannot afford to pay the full rent and you would like to negotiate a rent reduction. You should ensure this communication is in writing. While you are negotiating with the landlord it is important that you continue to pay at least 25% of the weekly rent to ensure you are protected by the ban on evictions. You can use our Request a Rent Reduction Template letter to initiate negotiations with your landlord or agent. 

If your landlord waives some of your rent from the 14th July 2021, they can claim the amount waived (up to $4500) under the Residential Tenancy Support Program or as a deduction of any land tax (they cant claim both). The rent waiver can be for a longer period and they can also waive more than $4500. 

Many people do not have experience negotiating and this can be an intimidating prospect. The information in this section will help you prepare for negotiation to give you the best chance at an outcome that works for you. 

When you reach an agreement for a rent reduction with your landlord/agent, it must also be in writing. You can use this template Rent Variation Agreement (NSW Fair Trading) to ensure your agreement for a rent reduction is in writing. 

If you are having trouble negotiating with your landlord you can request the assistance of the NSW Fair Trading dispute resolution service. You will need to complete an Application for Rent Negotiation form. This form can be submitted through the usual NSW Fair Trading complaints process

These new laws do not affect any existing agreements that you currently have with your landlord to repay arrears or to waive or defer your rent payments due to COVID-19 but you may want to renegotiate with your landlord as there are now financial incentives for landlords who provide a rent reduction during this period.  

Financial incentives for landlords who provide a rent reduction

If you are a COVID-19 impacted tenant, you can ask your landlord for a rent reduction during this period. Landlords who provide you with a rent reduction are eligible for financial incentives from the NSW Government.

Landlords who provide a rent reduction can claim one of the following two types of government payments:

1. Residential Tenancy Support Payment

  • this is a grant of up to $4,500 per tenancy agreement.
  • the amount for each landlord is capped at the rent reduction passed onto the tenants, or $4,500, whichever is the lower.
  • landlords cannot ask tenants to repay the reduced amount of rent that has been paid to them under the Residential Tenancy Support Payment.
  • the online application process for the Residential Tenancy Support Payment will be available from Tuesday 10 August.
  • to apply, landlords or their managing agent will need to provide
  1. proof to show a tenancy agreement exists (the rental bond lodgement number is preferred, or if no bond has been lodged, a copy of the residential tenancy agreement)
  2. a copy of the written agreement with the tenant to reduce rent
  3. an authority (NSW Fair Trading) signed by all tenants to share their personal details with NSW Fair Trading, and
  4. a nominated account for payment.

Tenants will be notified by NSW Fair Trading when an application for this payment has been received by their landlord, and when the payment is approved. Tenants will also be notified when the payment has been made to their landlord. 

2. COVID-19 Land Tax Benefit

  • this incentive is available to landowners who have a 2021 land tax liability.
  • eligible landlords who provide a reduction in rent to a COVID-19  impacted tenant between 1 July 2021 and 31 December 2021, can receive a reduction in land tax payable for the relevant parcel of land
  • the amount for each landlord is capped at the rent reduction passed onto the tenants, or 100 per cent of the 2021 land tax attributable to the parcel of land, whichever is lower.
  • landlords can apply for the COVID-19 Land Tax Benefit here.
What are ‘good faith’ negotiations? 

 

In general 'good faith' negotiation means parties dealing honestly and fairly with one another to genuinely work towards a mutually beneficial agreement in a timely manner. 'Good faith' will depend on the circumstances of each case and parties must act reasonably and be prepared to change their position or make concessions to achieve an agreement.

Good faith requires:

  • a willingness of the parties to share loss not caused by either;
  • a willingness of the parties to share information; and
  • active cooperation in the combined aims of the parties and of public health.

Active cooperation includes putting forward options for consideration and considering options proposed by the other party or the facilitator.

Parties should consider the interests of both parties and be:

  • honest
  • fair
  • reasonable and proportionate

Negotiations should be undertaken on a 'without prejudice' basis. 'Without Prejudice' means that the communication between the parties is made in an honest attempt to settle the matter, and any concessions made in the communication cannot be later put into evidence in Court/Tribunal.

The Landlord’s Financial Situation 

As part of 'good faith' negotiations you are expected to consider the landlord’s financial situation and any hardship they might be experiencing, or that may result from a reduction in your rent.

Landlord’s Insurance

The landlord may say they are not able to enter into negotiations for a rent reduction or a repayment plan for the arrears because their landlord insurance does not allow them to do this. While a landlord’s demonstrated inability to claim against loss via landlord insurance might be one factor considered when assessing the landlord’s anticipated financial situation, it does not follow that a landlord can refuse to negotiate a rent reduction or repayment plan with their tenant.

Relative financial position

Just as the landlord and the Tribunal will consider any assets you might have, the comparison of 'relative financial position' also includes an assessment of the landlord’s assets. Often their main asset will be the property you live in. The property may have increased in value since they purchased it – this is relevant to their financial position.

The Government has announced financial incentives for landlords who provide a rent reduction to tenants during the July 2021 Moratorium. You should ask your landlord if they are eligible for these incentives. 

See below for the types of information you can ask of the landlord.

General market rents and trends

Landlords should consider the alternatives to not negotiating with you – if your tenancy is terminated due to arrears of rent or charges, the property may sit vacant, or they may need to drop the rent significantly. Refer to the result on our Rent Tracker Postcode Tool. You can adjust it to match your property type, size and postcode. This shows what similar properties in your area are actually being rented for.

You can download a PDF of your Rent Tracker result by clicking on the pdf download symbol download image at the bottom of the chart. You can then provide this to the landlord, agent or the Tribunal. You should also consider the vacancy rate in your area. If there are a large number of properties vacant, this is an indication that the landlord will find it more difficult to find a tenant (and also, that it may be easier for you to find a better deal if you need to leave).

 

What information needs to be shared in negotiation?

 

Establishing you are a COVID-19 ‘impacted tenant'

Initially when you approach the landlord about a rent reduction or a repayment plan for arrears they might ask you to demonstrate you are an ‘impacted tenant’. See eligibility criteria: COVID-19 Guide: Am I a COVID-19 'impacted tenant'?

You will need to provide some basic evidence of the change in your financial situation to demonstrate eligibility. This could include basic documents, such as:

  • proof of job termination/stand-down, or loss of work hours
  • other proof of reduced income
  • proof of any Government income support you are receiving or have applied for – indicate to the landlord or agent which of these is relevant
  • proof of prior income 

A landlord or agent may request a range of other financial information when you first initiate negotiations. Demonstrating eligibility should only require relatively limited documentation. However, it is likely you will need to share further financial information about your overall financial situation when you begin the next step of 'good faith' negotiations – but this is a two way street. You should also expect the landlord to be open and reasonable about sharing information about their financial situation during negotiations. 

Information to be shared during 'good faith' negotiations

During 'good faith' negotiations there is an expectation you will need to share the necessary personal financial information required to provide an honest and open indication of your financial position and any hardship you are facing.

Renters have sent us examples of very intrusive forms requesting all types of detailed financial information. There is no legal obligation to provide these details, however, refusing outright may lead to failed negotiations.

If you have lost your employment as a result of the health crisis, ask your ex-employer to provide you with a short email (if you don't already have some documentation) which you could forward to the landlord/agent. You could also choose to provide your bank statement with appropriate redaction so that, for example, purchases made cannot be seen. A letter or statement setting out of your financial position (which you have absolute control over in terms of content) may also assist. NCAT has a useful financial statement form which you can use to summarise your financial position in writing. You can also find a template letter from NSW Fair Trading here

Similar to negotiating the amount of information, you should negotiate the extent of the information provided.

The Australian Securities and Investments Commission warned real estate agents in this letter that they face up to five years jail if they ask tenants to withdraw super in order to pay the rent. 

Information from landlords

It is important to note that negotiations are not intended to be a one way flow of information. There is an expectation on landlords to also be open about their situation. NSW Fair Trading says the landlord should respond to you including information about:

  • their financial situation – being open and honest, including whether they rely on the rental income to cover mortgage repayments or other expenses;
  • conversations with their lender about waiving or reducing their own mortgage repayments;
  • the value of the property.

The Government has announced financial incentives for landlords who provide a rent reduction to tenants during the July 2021 Moratorium. You should ask your landlord if they are eligible for these incentives. 

Privacy concerns and considerations

You may be concerned about whether personal financial, health or other information you share may be held after negotiations, and if so how this will be stored. In negotiation, privacy should be discussed very early in the process. It may be possible for the destruction of any personal information and/or documents to be negotiated.

It is certainly worth asking about the destruction of documents created in the negotiation process, except the final agreement.

Real estate agents may have some reasons for keeping records of events/transactions under the Property, Stock and Business Agents Act. If they can demonstrate the need to keep a copy of any personal information shared, you can ask what measures are in place to ensure this information is stored securely and confidentially.  If an agent has annual turnover of more than $3 million they may be covered by Commonwealth privacy law, details can be found here.

If you are using the Fair Trading formal dispute resolution process ask early on how to clarify what will happen to information collected and used during negotiations. This should be clarified for each party, but also for information collected by Fair Trading in their mediation role.

Fair Trading's general Privacy Statement can be found here and a guide to NSW privacy laws is on the Information and Privacy Commission website. If health information is provided the Health records and Information Privacy Act will apply, see details here.

 

What can I expect in negotiation? 

While there is no guarantee what your first attempt at negotiating will look like, it is useful to be aware that NSW Fair Trading requires landlords and tenants to approach negotiations with an open mind and an empathetic ear. Understanding of both the tenant’s and landlord’s financial position will help to ensure a workable outcome. Parties should be prepared to look at a range of options where these are affordable, such as but not limited to:

  • agreeing to a longer repayment period for tenants to repay arrears;
  • waiving arrears;
  • allowing the tenant to end a fixed-term agreement early, possibly without or with a reduced penalty or by applying the break fee formula that applies in agreements entered into after 23 March 2020 to earlier agreements.

This information is good to keep in mind and refer the other party to.

 

The role of the agent

Where an agent is involved, the agent must contact the landlord as soon as practical to inform them of the tenant’s circumstances and explore opportunities for a repayment plan. 

It is important to always remember that agents are engaged by landlords to act in the landlord's interests, and their Code of Conduct requires them to generally act in the client’s (landlord's, not tenant's) best interests. The agent does not have you as a client – they work for the landlord. However, they do have obligations to act fairly. You should consider a complaint to NSW Fair Trading if they do not.

During this time it is useful to be able to draw to an agent’s attention that NSW Fair Trading has said the COVID-19 pandemic presents a highly unusual set of circumstances and means agents may have to change the way they relate to both parties. The NSW Fair Trading expects agents to play more of an intermediary role between the tenant and landlord to comply with both the letter and spirit of the tenancy laws and the government’s broader relief package.

They have said what was in the landlord’s best interests before COVID-19 may well not apply now, so due consideration should be given to whether maintaining an existing tenancy with changed terms may be more viable than seeking termination and attempting to re-let the property.

NSW Fair Trading have outlined that it is important agents are aware of the rules in relation to eviction of COVID-19 impacted tenants and help to make claims for financial assistance, where appropriate. Agents who don’t do this, may: 

  1. be in breach of their obligations under the Property and Stock Agents Act to act in the interests of their clients, or
  2. negatively impact the landlord’s rights to later recovery of the premises for arrears. In proceedings for these matters, the NSW Civil and Administrative Tribunal must consider whether a landlord has entered an arrears negotiation process and whether an application for financial assistance has been made.

NSW Fair Trading encourages agents to:

  • Ensure the process for tenants is accessible and easy to understand
  • Ensure both parties are aware of the option to engage Fair Trading for dispute resolution if the parties cannot reach an agreement
  • Ensure that correspondence is passed on/communicated in a timely manner
  • Ensure any evidence required from tenants is reasonable and sufficient to demonstrate the person is COVID-19 impacted and has suffered a loss of household income
  • Keep good documentary records of their interactions and discussions with landlords and tenants during negotiations, which will be especially important if the matter eventually progresses to NCAT and good faith negotiations must be demonstrated.

 

What if the landlord won't negotiate?

Rent reduction during the July 2021 Moratorium

You should keep paying at least 25% of your weekly rent to ensure you are covered by the stop on evictions. These provisions commenced on the 14th July 2021 and will end on the 11th November 2021. 

If you are having trouble negotiating with your agent/landlord you can request the assistance of the NSW Fair Trading dispute resolution service, see above. You will need to complete an Application for Rent Negotiation form. This form can be submitted through the usual NSW Fair Trading complaints process