Letter to members Level 4 Covid-19
24th March 2020
The measures that Government are taking to limit the effect of Covid-19 are going to have a variable effect on different business and employees. We must all do our best to support those who are wearing a higher burden in the fight against Covid-19.
While residential rental property should not be directly affected as much as other industries, there will be job losses, reduced income from self-isolation and reduced work from decreased business activity.
Yesterday's lock down announcement will make it harder for some tenants to pay their rent as a lot of industries are now affected,
The stimulation package announced last week and extended today will help cushion some of our tenants. For those that are losing their jobs, removing the stand-down period before they can apply for WINZ help is a good move. We have written to the Minister of Social Development requesting tenants under financial pressure receive assistance as quickly as possible. However a substantial number of our tenants will actually experience no reduction in income, and will remain worthy and desirable clients.
WINZ will be under pressure and it may take some time for them to process any new benefits and accommodation supplements. If you haven't already, check your own financial situation and make sure you can handle at least two weeks without rental income. This will help your tenants to get through. Banks are considering mortgage holidays, but realise you will still need to pay the full cost of the mortgage just a little bit later.
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.
You may be able to reduce the rent received through suspending your mortgage principal repayments for a period. Banks should be willing to do this. Consider putting off planned maintenance to allow you to help out your tenants, although be aware that you may also affect trades people as well.
Unfortunately, some tenants will not be able to continue with their tenancy. They are likely to move into the homes of families and friends. Please be lenient with maximum occupant rules should this be required. Also be prepared for losing a tenant and not being able to find a replacement for some time.
If your financial situation is tight or your own income is affected by the Covid-19 situation, work out where you stand financially as soon as possible. Contact your bank and lenders to discuss options as soon as you can. Depending how you have your investment property portfolio set up, you may be able to get assistance through the Assistance Package. You may also be able to have your KiwiSaver payments stopped to help with your finances.
Part of the Government's relief package included increasing the small asset depreciation threshold from $500 to $5,000 for the 2020/21 tax year.
This could be a good opportunity to bring forward buying heat pumps and insulation and claim them as a tax-deductible expense rather than a capital expense. The saving could also allow you to reduce your tenants' rent.
Better heat pump deals for members are already being investigated, and we will announce these as soon as we are able. The depreciation threshold increase doesn't apply until 1 April 2020.
The NZPIF realises that the new ring-fencing rules may limit the benefit of this for many rental property providers, so we have written to the Ministers of Finance, Revenue and Housing asking for ring-fencing rules to be delayed until the 2021/22 tax year. We are also asking for the Healthy Homes and the RTA Bill Reform to be pushed out.
In most cases you will not be able to do property inspections. A method to overcome this is to get the tenants to do a virtual inspection by asking them to take photos or a video of potential problem areas, like under sinks, around toilets, and the hot water systems. Ask them also to report any areas of concerns and, if necessary, get them fixed as soon as you can. We have just received a statement from the NZ Insurance Council that normal property inspections can be suspended until it is safe to do them.
Try to stay in contact with your tenants and make sure you have open paths of communication. Ask them to let you know as soon as possible if they can foresee any issues with their rent payments.
We will continue with initiatives to help members through this difficult time. If you have any ideas or thoughts that may help other members, please pass them on.
All the best.
Sharon Cullwick NZPIF Executive Officer
Peter Lewis NZPIF Acting President
Statment from the NZ Insurance Council
The wellbeing of customers is a top priority for insurers. ICNZ's members are taking the current Covid-19 situation very seriously and wouldn't want to impose any requirements that would expose anyone to the risk of infection or play a part in spreading the Covid-19 virus. Periodic inspections should remain a business as usual response for any property owner, but due to the lockdown inspections should take place as soon as is practical after health clearances. If in any doubt ICNZ recommends that landlords check with their own insurer about their specific requirements and how they are treating it.