Terminating Tenancies during the Covid-19 Pandemic

The NSW Government has introduced restrictions on terminating tenancies during the Covid-19 pandemic.

The Residential Tenancies Amendment (Covid-19) Regulation 2020 (NSW) (Regulation) commenced on 15 April 2020. For 6 months from the commencement date (moratorium period), landlords will only be able to issue a tenant who is financially impacted by COVID-19 a termination notice or apply for a termination order in relation to rental arrears if certain conditions are met.

The Regulation also extends the termination notice periods in certain circumstances to 90 days during the moratorium period.

To give you clarity around these new restrictions, we explain the new changes below:

New changes

A landlord is prohibited from doing the following during the moratorium period:

• giving a tenant who is a member of a household financially impacted by the COVID-19 pandemic (impacted tenant) a termination notice for non-payment of rent or charges;
• applying to the New South Wales Civil and Administrative Tribunal (NCAT) for a termination order relating to a termination notice given to an impacted tenant for non-payment of rent or charges; or
• otherwise applying to NCAT for a termination order solely on the grounds that an impacted tenant has failed to pay rent or charges.

A household is impacted by the COVID-19 pandemic if:

• Any one or more rent-paying members of the household have:
  • lost employment or income as a result of the impact of the COVID-19 pandemic;
  • had a reduction in work hours or income as a result of the impact of the COVID-19 pandemic; or
  • had to stop working, or materially reduce the member's work hours because of:
    • the member's illness with COVID-19;
    • another member of the household's illness with COVID-19; or
    • the member's carer responsibilities for a family member ill with COVID-19; AND

• As a result of any of the matters stated in the first paragraph above, the weekly household income for the household has been reduced by at least 25% compared to the weekly household income for the household before the occurrence of any of the matters. 'Weekly household income' means the total of the weekly income, including any government payments, received by each rent-paying member of the household.

• During the moratorium period, a landlord can only issue an impacted tenant a termination notice or apply for a termination order for non-payment of rent or charges if:
  • at least 60 days after 15 April 2020 has passed;
  • the landlord has participated, in good faith, in a formal rent negotiation process relating to the rent or charges payable (run by NSW Fair Trading); and
  • it is fair and reasonable in the specific circumstances for the landlord to give the termination notice or apply for the order.

• During the moratorium period, a landlord must now give at least 90 days' notice of termination:
  • when ending a fixed term tenancy at the end of the term (see section 84 of the Residential Tenancies Act (Act) – the notice period has increased from 30 to 90 days); or
  • when ending a tenancy because of breach of the residential tenancy agreement (other than for non-payment of rent or charges, the requirements of which are set out earlier in this article) (section 87 of the Act – the notice period has increased from 14 to 90 days).

• A landlord cannot list an impacted tenant on a residential tenancy database for the non-payment of rent or charges.

• NSW Fair Trading is offering a dispute resolution process if no agreement can be reached between the parties or if they prefer that option. Either party may apply to NSW Fair Trading to use their dispute resolution process. Before a landlord applies to NCAT, they should enter into good faith negotiations with the impacted tenant with the involvement of NSW Fair Trading because NCAT is likely to have regard to the outcome of that process.

• Factors that NCAT may consider include: any advice from NSW Fair Trading in relation to the parties' participation in the formal rent negotiation process, including if a party refused, or refused to make, a reasonable offer about rent.

• Schedule 2 of the Act sets out the new laws with respect to residents affected by COVID-19 who live in boarding houses.

No Changes (Existing Law Applies)

• Although a 90-day notice period is required to be given when ending a periodic agreement on no grounds, section 85 of the Act already requires a minimum termination notice period of 90 days. In effect, there is no change by this clause in the Regulation.

• Although clause 41D(2)(d) of the Regulation requires a landlord to give 90 days' notice when ending a tenancy of 20 years or more, in effect, there has been no change because it is NCAT who orders when vacant possession is to be given in these circumstances and it cannot be earlier than 90 days after a termination order is made.

• Nothing has changed with respect to terminations for the following reasons (noting that termination orders are made by NCAT for these grounds, except with respect to section 88 (non-payment)):
  • the non-payment of rent or charges not due to the tenant being impacted by COVID-19;
  • the landlord is suffering hardship;
  • the tenant has intentionally or recklessly caused or permitted serious damage to the property or injury to the landlord, their agent or neighbour;
  • the tenant is using the premises for illegal purposes;
  • the tenant has threatened, abused, intimidated or harassed the landlord, landlord's agent or other person;
  • the landlord has sold the premises; and
  • the tenant has not complied with a rectification order.