COVID-19 - Key Issues for Landlords
Current at 31 March 2020
The rent freeze means from 26 March 2020 you cannot increase the weekly rent for any tenant for at least the next six months. Tenants are still required to pay rent in full. You may need to call your tenants to clarify this if they are misunderstanding what a rent freeze is.
If your tenants are working for an essential service, or working from home, or receiving the Government Wage Subsidy and being paid at 80% through their employer, or are a beneficiary they are likely to still be earning similar levels of income and therefore should be able to pay rent as normal.
Where tenants have lost their jobs or are unable to pay all of their rent, advice given by the NZ Property Investors Federation is: “If your tenants still have an income but it is reduced then consider, if your cash flow allows, a temporary reduction in rent payments. The balance of the rent owing can then be carried forward and paid down at a later date when the current crisis has been resolved. This is a compassionate thing to do if it is possible, and may be better than losing an otherwise good tenant completely. Just ensure that any such agreement is fully documented and signed off.”
If you are suffering from a significant loss of income because tenants can’t pay rent, and/or you have a vacant property, options to help with cashflow include:
You may be eligible for the Government Wage Subsidy. This applies to the self-employed, partnerships and companies, and provides $585.80 pw if you work 20 or more hours in your rental property business, or $350 pw if you work less than 20 hours. One of the key criteria for eligibility is “the business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month, when compared with the same month last year, and that decline is related to COVID-19. Read full details here and the Wage Subsidy Declaration here before deciding if you are eligible.
Landlords with mortgages can contact their bank to see if they are eligible for an interest-only period for term loans (you pay interest but not principal), or a mortgage holiday (which means the payment of both interest and principal is delayed for several months, but you will still have to pay it back at a later date).
Delay any non-urgent repairs or improvements until cashflow improves.
If you have trouble paying provisional tax by the due date, talk to the IRD as they have the discretion to waive the late-payment penalties and interest.
No Inspections or Non-urgent Repairs
During the Level 4 Lockdown, there must be no in-person contact with tenants, including inspections and non-urgent repairs & maintenance.
You can organise a tradesperson to carry out essential repairs “if this is immediately essential to maintain the necessities of life or critical to safety. This includes electricians, plumbers and builders.” Full details here
Lower Value Assets
The low value assets threshold increased from $500 to $5000 for assets purchased between 17 March 2020 to 17 March 2021, with the threshold falling to $1000 for assets purchased from 18 March 2021. This means you can get a full tax deduction in the year of expenditure for assets costing less than the threshold.
The tax rules which require ring-fencing of losses made by residential property investors still apply from 1 April 2020, although the NZ Property Investors Federation is currently lobbying for its introduction to be delayed.
Resources for Landlords
If you have any questions or need immediate assistance please email us at firstname.lastname@example.org