NSW COVID-19 Boarding Houses Relief Measures and Implications for Operators

21 April 2020

The Residential Tenancies Amendment COVID-19 Regulation 2020¬†introduces a 6 month moratorium period which commenced on 15 April 2020 (‘moratorium period’) that applies to both residential tenancies and boarding houses in New South Wales.

This article discusses the application of the regulations to boarding houses. For more information on residential tenancies please review our residential tenancy relief article.

During the moratorium period, certain restrictions apply to proprietors of boarding houses for residents under occupancy agreements.

Termination Dates Extended For Certain Termination Notices

During the moratorium period, proprietors must give a minimum 90 days written notice to evict any residents except:

  • Due to non-payment of fees where the resident is not a COVID-19 affected resident;
  • Where the resident has intentionally or recklessly caused or permitted serious damage to the premises or other residents property;
  • Where the resident is using the premises for an illegal use; or
  • Due to abusive or threatening behaviour by the resident.

The existing termination and notice procedures apply to these exemptions.

Who is a COVID-19 Impacted Resident?

A resident of a boarding house is impacted by the COVID-19 pandemic through lost employment or income or reduction in work hours, where their weekly income has been reduced by at least 25% after tax, when compared to the resident’s weekly income before those matters occurred (‘impacted resident’).

This includes residents that have had to stop working or materially reduce hours because of:

  • Illness with COVID-19; or
  • The resident’s carer’s responsibilities for a family member ill with COVID-19.

The resident’s weekly income includes government payments relating to COVID-19 such as Job-keeper payments.

What restrictions apply to a COVID-19 Impacted Resident?

During the moratorium period, a proprietor must give a minimum written notice period in order to evict a COVID-19 impacted resident based solely on non-payment of fees (including occupancy fee, rent, or fees for services) as follows:

  • A minimum 60 days’ notice where the proprietor has participated, in good faith, in a formal rent negotiation process with an impacted resident but an agreement about fees was not reached because the impacted resident did not participate in good faith; or
  • Otherwise a minimum 6 months’ notice.

What is a formal rent negotiation process?

A formal rent negotiation process involves the parties participating in a dispute resolution process facilitated by an independent third party (such as mediation) to negotiate the residency fees payable having regard to the specific circumstances of both parties.

NSW Fair Trading website contains useful information and guidance with respect to similar measures in place affecting residential tenancies, to assist parties reaching an agreement before proceeding to mediation.

Dialogue usually initiated by a request from the impacted resident for a fee reduction.

A resident’s request should include details of the resident’s original weekly income, its change in circumstances due to COVID-19 and impact on its income, its proposed fee offering proportionate to the new weekly income and any additional income support received.

A proprietor or manager of the boarding house acting in good faith should be prepared to consider and negotiate the fee payments with a COVID-19 impacted resident according to resident’s circumstances as well as their own.

Relevant considerations for a proprietor includes whether they rely upon the fees to cover mortgage repayments, other sources income available to the proprietor to meet its financial commitments and access to COVID-19 loan relief packages (such as loan deferrals).

The parties should consider an appropriate fee reduction, the period in which to apply the reduction, and whether it is appropriate for the fees in arears to be waived or be repayable at a later stage having regard to the circumstances of both parties.

There is no requirement to reach an agreement with respect to the whole 6 month moratorium period.

It may be appropriate to reach an agreement for a shorter period such as 6 weeks and assess the situation further. Any agreement reached should be appropriately documented in writing.

It is appropriate for the proprietor to request proof of the impacted resident’s circumstances as a requirement to the agreed fee relief. This may include proof of lost employment / stand-down / loss of work hours or reasons for not being able to work due to COVID-19 illness, proof of Government income support, and proof of prior income.

If an agreement cannot be reached, the proprietor may initiate the formal dispute resolution process by mediation facilitated through the NSW Community Justice Centre.

How does a proprietor satisfy the good faith test in order issue a termination notice to a COVID-19 Impacted resident?

Two element must be satisfied. First the proprietor must have participated in the formal rent negotiation process in good faith. Second, an agreement about fees was not reached because the impacted resident did not participate in the process in good faith.

Whether the parties participated in good faith will ultimately be decided by the NSW Civil and Administration Tribunal (‘Tribunal’) having regard to the circumstances.

At common law a duty of good faith generally encompasses the following obligations:

  • An obligation to the parties to co-operate in achieving the contractual objects;
  • Compliance with honest standards of conduct; and
  • Compliance with standards of conduct which are reasonable having regard to the interests of the parties.

Based on the above principles, it is likely that the conduct of the parties during the formal negotiation process will be closely examined including whether the proprietor or impacted resident made or refused a reasonable offer concerning fees, whether the impacted resident has continued to make any payments toward fees, any financial hardship experienced and the general financial position of both parties.

What if a resident is not impacted by COVID-19?

Residents who are not impacted by COVID-19 need to honour their existing occupancy agreements and keep paying fees in full according to those terms. Failure to comply with their existing agreements risks termination and eviction.

How can HWL Ebsworth help you?

At HWL Ebsworth our team is made up of Partners, Special Counsel and property experts dedicated to providing support to our clients in relation to the widespread ramifications of the COVID-19 pandemic, including providing guidance and advice to boarding house owners, operators and managers negotiating with COVID-19 affected residents and documenting agreed arrangements.

This article was written by Christopher Conolly, Partner and Maged Jebeile, Special Counsel.

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