Elite Agent TVEPM: News

Property management in the era of COVID-19 with guest Hannah Gill

Managing Director of Canberra's Independent, Hannah Gill, has a constructive discussion about the recent changes in the industry as a result of COVID-19 from the perspective of real estate and property management. She talks about how a large property management company are handling procedural changes, team morale and opportunities to innovate during the coronavirus pandemic.

Key points covered in this webinar:

Rent reduction – There are no requirements currently, which may change if and when Government make announcements – but for now it’s really up to the tenant and landlord – through their property management – to come up with their own agreements.  There is no standard rent reduction – landlords’ and tenants’ circumstances vary. Hannah has had some landlords not in a financial position to help at all, and others prepared to waive rent entirely for a period of time.

Rent deferment vs discount – This needs to be a case by case business decision, but rental discounts do pose a risk to the industry in terms of management fees if there is a mass reduction in rents or rent-free periods. Chat to your principal and come up with a plan for your business.

Full lockdown – property should still be regarded as an essential service so make sure you have plans in place to service your clients. Take note of what New Zealand is doing.

Remote work – Independent’s leasing and new business team already operated remotely. Now the whole team is working remotely except for a skeleton staff in the office who are there for picking up/dropping off of keys for tradies etc, but they are moving to contactless drop-offs.

Building a change plan – Independent started with a brain dump of everything they needed to change by walking through a standard day and looking at what things needed to be adjusted.

Communication – Independent is keeping their team and their clients across everything as it changes. This was important for reducing anxiety and uncertainty.

Silver linings – This is a huge opportunity as an industry to innovate, challenge the norms and put in practice some things we have talked about but haven’t done because we didn’t know how the tenant would receive it – for example, how a tenant can do their own routine inspection. We are innovating at a rate faster than what perhaps the market was ready for, but if we get it right it could change property management going forward, and that is exciting.

Routine inspections – These are often a pain point for tenants who don’t want you coming into their home, now that we’re not doing that and there’s a benefit to them (by reducing spread of COVID-19) it’s a path forward. Educating them on how they need to do that is key – what they need to look for, what the PM needs. Independent has replicated the last report using photos and added a Zoom inspection to that.

Maintenance and trades – Independent asked tradies to inform them if they had any symptoms and to check with tenants before they turned up to make sure they weren’t in isolation. Tradies are also taking extra precautions like masks and gloves

Landlord insurance – Some have embargoes and are not taking on extra policies at the moment after a mad rush of people taking up policies in the last few weeks. There are still some offering insurance under certain conditions. Long-term, we may see a rise in premiums

Team morale – It’s a difficult time for PMs dealing with landlords who are sometimes unsympathetic and being the messenger of this news to the tenant who might have lost their job. Hannah has her staff give a score out of 10 for the day so she knows where they’re at.

Innovation – Changing expectations around routine inspections will hopefully continue and will improve the experience for the tenant and a be a cost saving to business.

Improving tech – Those with outdated software or not using cloud-based software will forced to change. Everyone will be forced to consider systems that are contactless.

Tenants in hardship – It’s fair to request verification of circumstance if a tenant is requesting a rent reduction – either an employee severance letter or Centrelink documentation. Those who still have jobs who are requesting rent reductions aren’t a priority. As a proactive measure, Independent has developed a fact sheet of local resources for tenants experiencing hardship/job loss.

Vacant properties – Prepare now! Independent has created walkthrough videos of every property vacant now in case we go into full lockdown. This will give them the capacity to act quickly rather than having to react in a 24-48 hour period.

Rent increases – When these are due, Independent will still have those conversations with landlords, but would approach it with more empathy around this conversation.

Final points:

  • “You have to remember in our role there is only so much we can do – we can’t control travel bans, we can’t control restrictions, all we can do is communicate with the tenant and the owner.”
  • Factor self-care into your day as well and tap into resources now available online such as exercise classes.
  • Communication is more important than ever – wherever possible phone and Zoom rather than email, whether that’s your team members, your clients or other people in your community.
  • Practice kindness. “It’s a challenging time for everyone, we don’t know all the answers, everyone is doing the best they can in the circumstances so let’s just be kind to one another.”

Specific Q&A – Added 30/3

With our thanks to Hannah Gill for penning specific responses to participants questions.

Is there any requirement to offer tenants a rent reduction?

There is no requirement at this stage. Note: since the webinar, the Government have announced a six-month moratorium on evictions.

Is there a standard accepted amount of reductions?

This would be a case by case situation depending on each landlord and tenant circumstances

Can we do a rent deferment instead of a discount?

Yes, if both parties agree but this could be more damaging to the business – if we are collecting no rent, we are collecting no fees. A discount in rent from a business perspective is better than an overall deferment or rent freeze.

Will property managers be considered essential if a full lockdown occurs?

Housing is considered essential, so one would assume the services provided to enable housing would fall into the same category, but time will tell.

If an owner decides to reduce the weekly rent payment for a tenant, do we do a rent credit when receipting the rent? Or do we change the rent amount in the system to this new rent amount? If the second is the case, then the management fee that we receive will be reduced, effectively reducing the income to the business. What would be the right way to do this?

This would be a business by business decision. Important to note that for tenants to secure some of the Government support services, they will need to demonstrate they are in arrears to qualify, so how an adjustment is demonstrated or managed is important and the tenant should be encouraged to explore their options first

If we reduce rents now if landlords are happy to do we need to then give a rental increase notice? 

This may vary state by state, and without precedent, it’s hard to know. At the very least, ensure you have clear instructions and agreement in writing from both parties to avoid any disagreement or confusion later

Are landlord insurers are now ceasing to do new policies/cover… ?

Yes, some are starting to put embargoes in place or change policy inclusions or premium costs

How is Hannah going to conduct exit and entry reports if we go to stage 3 

In full lockdown, I’d assume we cannot conduct any appointment which requires us to leave our home. Equally, incoming and outgoing tenants will be in the same situation and we will all have to wait it out.

Wondering how Landlord Insurance would work if the government advises we cannot evict tenants for rent arrears – ie follow that process … Guess can’t really comment until such time as the Govt gives a clear directive.  But if we cannot follow the arrears process no cover will kick in… 

Each policy will be different and I’m sure insurance businesses will respond with this advice. Until we have clarity from the Government, we can only speculate.

How are you managing your one on one inspections for vacant properties and are you doing inspections on tenanted properties? 

We ceased one on one inspections last week and have moved to fully virtual inspections of vacant properties. As we have such low vacancy rates in Canberra, we’ve not needed virtual tours in the past, so as an interim step we have taken iPhone recordings while we set up more permanent and higher quality walkthroughs. While properties are still tenanted we are accepting applications from prospective tenants but not attempting any sort of viewing.

Does anyone have any tenants stuck overseas and unable to get back into Australia – how are you handling that, or is it still a wait and see? 

We haven’t had this come up recently but certainly saw it when parts of China were in lockdown. Each case was different based on the tenants and owners circumstances

We’ve had a lot of tenants request a rent reduction, not just due to unemployment from covid-19 but more so due to the change in economy and market – has anyone else experienced this and if so, how are PM’s managing this with owners? We’re not sure genuine these requests are and want to protect our owners from tenants taking advantage of the situation 

Prioritise people in genuine need over those just seeking a discount. We can put forward a tenants request to an owner, but the owner is not obligated to make any changes at this time

So clearly no leasing whatsoever during lockdown. Any properties being advertised for lease will be in a state of flux for 1, 2 , 3 or more months. 

Quite possibly yes, so it’s incredibly important to be prepared as possible to educate our clients if this happens

Fact sheet sharing is a great idea, and shows care towards tenants

Absolutely, each state will have its own local resources, and it doesn’t need to be only financial support. There are many services which offer access to food and other essentials which can help people in a time of need.

What about virtual tours – say someone approved gets keys and inspects physically. Will there be an opportunity to retract based on initially not physically viewing and then simply changing their minds? Legally how will this hold up with a lease break situation? 

This is a hard one (and a great question). It comes back to contract law and ensuring the tenant understood what they were signing up for. I’d encourage current photography/video tours, avoid anything that is outdated as it could leave you exposed. Important also to make clear throughout the leasing process at multiple touchpoints that the process has changed, and also to have an endorsed clause/sight unseen waiver in your agreement. I don’t know how it will stand up legally if challenged later, so at this stage, we can only apply reasonable and sensible measures to best educate the ingoing tenant about the property and to best protect the agency.

What are you telling your ingoing tenants and outgoing tenants that are moving in and out next 2 and 3 weeks if we go into lockdown?

We haven’t had these discussions yet so as to avoid any unnecessary panic or further anxiety. If a lockdown is announced, everyone will be in the same position, so we will move quickly to educate and communicate with those affected.

What about rent increases, if an owner requests a rent increase to be done in this time? 

We have a fiduciary obligation to our clients to have this discussion with them. It doesn’t mean we have to encourage an increase, nor does it mean they have to apply one, but from a best practice perspective, I’d recommend you do not stop conducting rent reviews. If anything, the main change here will be the conversation with your owner about their tenant’s circumstances and letting them make an informed decision

Stage 3 could cause havoc with urgent repairs if/when suppliers are cut off. Have you heard if the government has considered emegency back up and should SES be given the heads up.  

Unsure about this, but no doubt if Stage 3 is announced, we will be given some clarity and guidance. I suspect urgent repairs will still have to be conducted as housing is viewed as essential, but how this looks in practical terms I don’t know.

Can we allow people to move in earlier than the leave commencement date 

If both parties agree I don’t see why not – just check the owner’s insurance policy or shift the lease dates to an earlier commencement to ensure you and your owner are covered.

Are you having discussions with your owners and tenants who are due for lease renewal to encourage new lease for a 4-6 month period at reduced rent?

We’re having lots of different conversations with our owners as they are all in different financial situations. If this suits a certain owner then absolutely it can be done. (Depending on State) it will be important to ensure you have an agreement from both parties to then increase the rent if it’s been less than 12 months.

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