Bleeding people dry: The Need to Cancel Debt

The Moratorium – No Evictions?

As it currently stands, you can’t be evicted with a Notice To Vacate until March 29th, 2021. That said, there have been loopholes landlords have used to force renters out of their home during the COVID-19 Eviction moratorium.

In response to the COVID-19 pandemic, the Australian Federal and State governments helpfully issued an “eviction moratorium” in March of 2020; that meant, if you can’t pay rent, you won’t be kicked out of home. Unhelpfully, it was then left to the States to individually determine how that would work practically.

In Victoria, the Andrews government extended the moratorium, not once but twice, to March 29th, 2021. Andrews encouraged renters and landlords/real estate agents to enter into “good faith” negotiations when it came to rent reductions and an inability to pay rent.

The few reasons still allowed to apply for termination were still used by landlords, and RAHU have supported our members to defend against these applications that would have seen our members on the street.

The legal framework is far from perfect, and the moratorium is a case in point. All that said, if you don’t fight – you lose.

But what happens to the debt?

Without any legislative framework, there is a lot of confusion about whether or not renters, unable to pay any or all of their rent through 2020, are on the hook for that money. Far too many people are looking at March 2021 as the month when landlords will come knocking and expect them to pay a huge amount of rental debt or face eviction. Given that we are still in the middle of a global pandemic and a nation-wide recession – with all the job scarcity and wage insecurity they bring – we think that’s unacceptable.

The Federation of Community Legal Centres VIC (among others) think that it’s unacceptable too. They’ve put forward a number of recommendations, many of which are similar to what RAHU have been advocating since the moratorium was announced last March, in order to help Victorian renters stay housed and secure, no matter their circumstances. They recommend waiving or reducing deferred rent and rental arrears that accrued during and because of COVID-19. They also call for a “transitional rent reduction scheme” until September 2021, which would provide renters with a pathway of negotiating more affordable rent from March 2021 onwards. These measures all reflect the reality that the pandemic and the recession aren’t likely to resolve themselves instantly on 01/03/2021.

RAHU aligns with these recommendations, because we believe no one should have to pay for this crisis.
Our demands are clear:

Cancel Debt

Stop evictions.

Extend Rental Protections

Judgment in the Eyes of the Law

As renters, we’ve become painfully aware that many real estate agents will attempt to be the judge, jury, and executioner when it comes to tenancy matters, and often their conduct and the things they tell renters do not match up to the law.

The COVID-19 legislation in Victoria states that if your circumstances have changed due to COVID-19 and you are suffering hardship, your tenancy can’t be terminated due to failure to pay rent.

Throughout the pandemic, some landlords have continued to apply for leases to be terminated due to renters falling behind on their rental payments. But when the day comes where the matter is heard before the Victorian Civil Administrative Tribunal (VCAT), and tenants can prove that they are suffering hardship and have had their circumstances change due to COVID-19, VCAT will not order for a lease to be terminated.

Our union’s efforts to help each other to achieve this outcome is crucial.

Despite this reality, real estate agents have coerced thousands of Victorian tenants into accepting rent deferral agreements, instead of rent reduction agreements, which means that the rental debt is simply deferred to be paid at a later date, rather than waived.

Deferrals are never the responsible fix – they often lead to situations where renters owe landlords enormous debts that they may never be able to pay off.

That said, there is legislation in Victoria that protects some of us renters. The Judgment Debt and Recovery Act 1984 (Vic) started being used more widely in practice from approximately 2010, predominantly in defence against enforcement of debts in relation to credit cards, motor vehicle accidents, mortgages and payday lenders. It is a hard-fought piece of legislation that has protected thousands of low-income people from the debt trap.

Judgment Proof1

The law in Victoria states that there is a category of persons against whom orders for payment of debt are not able to be enforced for a variety of reasons, i.e. these people are considered “judgment proof”.

Section 12 of the Judgment Debt and Recovery Act 1984 (Vic) states that a Court will not allow a debt to be collected from a person whose only income is a pension, or some other social security payment.2

A person may also be judgment proof if they have no significant assets, a car worth more than $8k, and they have no significant savings. It also potentially includes:3

  • People who are bankrupt
  • Folks whose debt is “statute barred” – meaning it is too old to be collected.

If you are on a government support payment or pension, or you are in insecure employment and have no assets, you might be considered ‘judgment proof’. If someone is judgment proof, you cannot be expected to pay your debts, even if they technically exist according to the law.

To Collect or Not to Collect – That is The Question

For many landlords, they will cry poor that rent debt is owed to them.

For agents, they have a vested interest in persisting that renters owe this debt.

For VCAT, or any court in Victoria, they may also agree that the rental debt exists, under the law.

As renters, we may also accept that there is rental debt, but we emphasise that in some cases, the inability of the person to pay makes the enforcement of the debt impractical, and therefore it is in no-one’s interest to bother trying.

If a landlord tries to collect rental debt from a tenant, this would mean having to pay for legal representation, court fees and stamp duty to transfer the claim from VCAT to a Court. In circumstances where the tenant is judgment proof, these costs would significantly outweigh the probability that they will recover any of the debt because even if that court rules that the debt is owed, the Court will not order that the debt be collected.

On top of this, there are significant fines payable by real estate agents and/or landlords if they continue to pursue a tenant for debts once they are notified that a tenant is judgment proof.

The Bottomline

There is currently too much confusion as to whether or not renters, through no fault of their own, are about to be saddled with mountains of debt, or face the prospect of eviction and potentially homelessness.

RAHU is prepared to fight against these outcomes every step of the way.

If you are in financial hardship, are on a government support payment or pension, or are in insecure employment and you have no assets – you may be “judgment proof”, and if this is the case, you should not be forced to pay off your debts.

It is vitally important for tenants to seek legal advice if they have had orders for arrears made against them or have entered into agreements containing clauses about paying off rental debts and/or deferred rent. It may be that those debts are not legally enforceable.

If you’re in hardship, or struggling with rental debt, get in touch with RAHU for assistance.

Finding out if you’re judgment proof can be tricky, which is one of the reasons why being in a collective union can help.

You can become a RAHU member here and join us in the fight for safe, secure and affordable housing.

1 Is the client judgment proof? Homelessness Law Centre

2 No instalment order if judgment debtor is pensioner etc. see Judgment Debt Recovery Act 1984 (Vic) s 12

3 Reasons you might not have to pay – Victoria Legal Aid