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COVID-19 termination rules recap & a reminder for would-be vendors

Tuesday, May 19, 2020

IMG CREDIT: UNSPLASH

As investors grapple with the economic effects of COVID-19, some may consider deleveraging by selling off a few under-performing properties. If these properties have tenants in situ then it is advisable for would-be vendors to be well aware of the new tenancy termination rules and plan well in advance. 

Tenancy termination during COVID-19
We specifically refer to the rules under the COVID-19 Response (Urgent Management Measures) Legislation Act. Generally (and very cynically), termination is very much in the hands of the tenants (until at least 26th June 2020, more on that later).
 
  • All termination notice given by the landlord prior to 26th of March has no effect.
  • All termination notice/order given/applied for/agreed to by the tenant prior to the 26th of March can be ’taken back’ by the tenant.
  • The Act requires that termination can only take place if:
    • It is initiated by the tenant;
    • Both tenants and landlords agree in writing;
    • The tenant engages in anti-social behaviour to an extent that exceeds the Act’s threshold;
    • The sole tenant is dead;
    • The tenant has abandoned the property;
    • Rents are 60 days in arrears
  • All fixed-term tenancies set to expire during this period automatically convert to a periodic tenancy on ‘expiry’. The above termination rules then apply.
  • By Order of Council, the Act can also be extended (only once) for a further three months at its expiry.
  • Any landlord who gives a termination notice that contravenes these requirements commit an unlawful act and could be fined up to $6,500.
What to do if you are selling?
Vendors can still list the property while the Act is in effect but the tenant must be notified in writing per s47(1) of the Residential Tenancies Act. But, as you can surely see, there will be significant challenges for vendors if the purchaser requires vacant possession before 26th of June 2020 (and as extended).
 
For those investors who are intending on or have not ruled out selling a property in 2020, we suggest that you seek out financial advice as early as possible and plan out your marketing campaign as well as notices according to these new rules. As things stand, the balance of power has tipped in favour of the tenants (at least when it comes to termination). The landlord would be well-advised to keep good records, ensure that all obligations are discharged promptly and that your relationship with the tenant remains amicable. 

 


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