Warning from corporate regulator comes as tenants complain of heavy-handed demands from landlords during the coronavirus crisis

This article is more than 5 months old

This article is more than 5 months old

The corporate watchdog has warned real estate agents they face up to five years jail if they ask tenants to withdraw super in order to pay the rent.

In a letter to peak real estate bodies, the Australian Securities and Investments Commission’s head of enforcement, Tim Mullaly, said the regulator was closely monitoring the situation and “will not hesitate to act swiftly to protect vulnerable consumers”.

“Financial advice must only be provided by qualified and licensed financial advisers, or financial counsellors, not by real estate agents who neither hold the requisite licence, nor are an authorised representative of an Australian financial services licensee,” Mullaly said.

The move comes as tenants complain of heavy-handed demands from landlords for rent payments and ahead of a meeting of national cabinet on Friday that is expected to consider the issue.

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With hundreds of thousands of people suddenly thrown out of work by the shutdown of hospitality, entertainment and retail industries due to the coronavirus crisis, many households are struggling to pay the rent.

The federal government has announced a six-month ban on evictions this requires each state to legislate and so far only Tasmania has given the moratorium the force of law.

Landlords, who face a fall in rents due to the pandemic, have been pushing back against the move and some have taken to online forums to vent their spleen against their tenants.

Some landlords have asked tenants to pay the rent by withdrawing super under new rules, introduced by the Morrison government in response to the Covid-19 pandemic, that allow people hit by the shutdown to take out up to $20,000.

The chief executive of Tenants Victoria, Jennifer Beveridge, said that despite the moratorium the legal service was still getting calls from renters who had been threatened with eviction.

“We are also aware of people who have lost their jobs and have informed their agent, only to be told they have to pay the rent on time or find somewhere else to live,” she said.

“We are also seeing letters telling renters they need to withdraw money from their super or making them provide detailed information on their spending habits before rent relief would be considered.

“Some unlucky people are having their rent put up at the same time as they have just lost their job due to coronavirus.”

Under Australian law, financial advice can only be provided by someone who holds a license.

In addition to jail time, breaches are punishable by a fine of up to $126,000 for individuals or $1.26m for companies.

In his letter to peak bodies, sent on Friday, Mullaly said Asic was aware of real estates asking tenants to withdraw super.

“Recent media reports and social media commentary outlining this conduct by some real estate agents is of significant concern to Asic and, we would hope, you,” he said.

He said Asic would also raise its concerns with the state agencies that regulate real estate agents asked the peak bodies to pass the letter to their members as “a matter of priority”.

“Tenants facing financial difficulty need sound financial guidance and potentially debt counselling,” he said.

“Specifically pointing them to and recommending them to consider the specific possibility of accessing superannuation is, again, likely to amount to a breach of the [Corporations] Act.”

In one email sent to tenants this week, an agency asked a series of detailed questions about renters’ financial situation, including their ability to get new benefits.

It also asked: “Have you checked with your superannuation fund as to whether you can access your super early?”

TortillaManLTD (@lochlanwatt) This is what my real estate agency reckons is what's up lol seeya pic.twitter.com/ONzZJi4maZ

Asked if it was appropriate for landlords to ask tenants to withdraw their super, Real Estate Institute of New South Wales chief executive Tim McKibbin said this was the wrong question.

Speaking before Mullaly sent his letter, he said: “There is an assumption the landlord hasn’t lost their job.”

“The question is, should the landlord draw down on their super and provide the tenant with free accomodation.

“We have a lot of sympathy for tenants, however there is an enormous amount of opportunism going on.”

He said there was confusion around the state of the law.

“There is a lot of tenants out there who saw that and thought, that’s my chance.”

He said stopping the flow of cash from renters would disrupt the entire property sector.

“I don’t think it is the responsibility of the landlord to provide social housing,” he said.

“The landlord is an investor. They’ve chosen to invest their money in residential or commercial property.

“I can’t jump to the conclusion that the landlord should take on the financial difficulties of the tenant.”

He said that although New South Wales parliament passed legislation to ban evictions, the regulations making it law were not yet in place.

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“I have a feeling that those with carriage of this have had cause to go back and re-think their plans,” he said.

The director of the Grattan Institute’s household finances program, Brendan Coates, said renters’ finances had been bolstered by the federal government’s package of wages support and the increase to unemployment benefits.

“The case for wholesale rent holidays is now pretty weak because the government has now come to the party,” he said.

“A lot of low-income Australians are going to see their income doubled.

“A ban on evictions makes sure no-one gets kicked out at a time when it’s physically hard to move.”

He said an exodus of overseas workers and students meant rents would probably fall.

“It’s going to be very hard for landlords to lease out their property at the moment,” he said.