Commercial landlords ask for government bailout as some large tenants stop paying rent

Property

The Property Council warns of commercial property foreclosures as some tenants stop paying rent - seeks Government assistance for landlords

27th Mar 20, 10:55am by Greg Ninness

Commercial property landlords are crying poverty and pleading for a government hand out.

The Property Council, which represents many larger commercial property investors and landlords, says the sector is facing hundreds of millions of dollars in lost revenue.

The Council has released a statement saying some large commercial tenants are simply refusing to pay rent, which could have devastating consequences for the commercial property sector.

"We are hearing of a multitude of scenarios regarding rental payments," Property Council chief executive Leonie Freeman said in statement.

"At one end of the spectrum there are many landlords working constructively with tenants on their particular situations and discussing rent relief such as postponement or other relief measures.

"However, there are many examples of large tenants sending letters announcing they are refusing to to pay rents with no consultation.

"This move could devastate the commercial, industrial and retail property sectors."

Freeman said the Government's recent decision to assist commercial landlords by allowing building depreciation as a tax deductible expense did not go far enough.

"It is simply not enough to bridge the gap in what is becoming a crisis of cash flow for many property owners," she said.

"Support for property owners and tenants could be a targeted subsidy or another form of support package."

She warned that the outlook for some landlords was "dire" and that some risked losing their properties if their bank foreclosed on their mortgage.

"There's little point in having a tenant survive with the landlord foreclosed on and vice versa. We must work together to get through this period of unpredictability," she said.

However the news has not been all bad for landlords recently.

Those with mortgages are likely to have benefited substantially from the drastic cuts to mortgage interest rates that have occurred, especially those that have used the reduction in interest costs to reduce the size of their mortgage.

However those who kept debt at high levels will be the ones most likely to be squeezed by a cash crunch.

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179 Comments

by Rosenstein | 27th Mar 20, 11:06am 1585260408

We're all beneficiaries now.

by M Munson | 27th Mar 20, 4:49pm 1585280961

I don’t recall the Property Council, in the past decade, asking to voluntarily pay more tax due to unexpected capital appreciation. I have two words for their latest diatribe.... First word “Get”. Second word has six letters...first letter”F”, sixth letter “d”........Ahhhhh you all guessed it...”Forked”

by itsme | 27th Mar 20, 6:22pm 1585286573

Landlords, both residential and commercial have had a windfall with plummeting interest rates. The Government should make all landlords pay tenants a 2 month rent holiday. In times like this, the true colour of landlords comes out!

by murray86 | 27th Mar 20, 11:07am 1585260448

This possibly look like the business model some landlords are applying. If they haven't figured in a downside they may be suffering on their margins through being over leveraged. Any Government assistance should come at a cost.

by Computer | 27th Mar 20, 11:40am 1585262419

Maybe the cost is that the government assistance is a secured loan not a handout. We help you out but you pay it back.

by RickStrauss | 27th Mar 20, 11:52am 1585263152

Won't their mortgage protection insurance kick in?

As the article notes, some would have taken advantage of the extra cash from lower interest rates to build a buffer or pay down some of the mortgage, too. There's been a lot of assistance from that avenue in the past year or three.

by RealAgent | 27th Mar 20, 12:18pm 1585264734

Since when did any investment NOT come with a possible downside? If you own any real estate and can't pay your mortgage because you don't have a paying tenant, then you will need to cover this shortfall as the owner YOURSELF or sell it and clear your debt. That's how it works and it should be the same for residential and commercial regardless. Why should everyone bail out these people when times get tough, I don't remember seeing them share the upside they have all been getting. This madness needs to stop and failure needs to fall where it does. Everyone needs to stop putting their hand out when an investment they made goes sour and take responsibility THEMSELVES for whatever situation they are in.

by thebrian | 27th Mar 20, 12:30pm 1585265424

Everyones a socialist when it suits them.

by Te Kooti | 27th Mar 20, 4:09pm 1585278580

I am burning my books now comrade

by HeavyG | 27th Mar 20, 12:59pm 1585267189

Well maybe they should sue the Government. You cannot shut down a person's business for 4 weeks and not expect them to hit you up for compensation.

by RealAgent | 27th Mar 20, 1:29pm 1585268977

Or maybe they should thank the govt for trying to keep them alive and come to the realisation that perhaps they are too highly leveraged if they cannot combat their tenant missing two or 3 mortgage payments. You can buy a blue-chip commercial property with a national tenant, that has signed a 20-year lease, and if that tenant goes bankrupt for whatever reason, then your signed lease is worthless. Bad things can happen in any investment, that's why its an investment, a gamble as such and your research and preparedness for any external shock is what makes the difference. If people are making investments without thinking of all possible consequences...well their days as an investor will be short-lived regardless, and perhaps investing is not what they should be doing. It's not up to the rest of us to cover investors risk. Everyone needs to deal with their own problems.

by HeavyG | 27th Mar 20, 3:43pm 1585277039

Why pay workers a subsidy then? They should be happy to be alive even if they all lose their jobs and have to live off the dole.

Bad things can happen in any job, that's life, a gamble as such workers should be prepared for any external shock and be thinking of all possible consequences... perhaps working is not what they should be doing. It's not up to the rest of us to cover workers' risk. They should have got income protection insurance. Everyone needs to deal with their own problems.

by Ocelot | 27th Mar 20, 2:22pm 1585272166

The government should be helping people survive, not helping the wealthy maintain their money trees.

by HeavyG | 27th Mar 20, 3:53pm 1585277627

So we're all in this together when the Government takes taxes from landlords, we're all in this together when Government forces leasing businesses to shut down for Covid-19, then when $12.1 billion is paid out as compensation piss off landlords you need to harden up. I know most on this site are like f*** the landlords, but don't try and pretend they have failed in a free market where everyone else has survived on their own two feet.

I am all for helping people when they are down, I just don't like the Government only helping SOME people when they're down. It reeks.

by RickStrauss | 27th Mar 20, 6:37pm 1585287438

In fairness, they haven't had to cope with a free market for a while now. RBNZ support in the last decade, plus rental subsidies to prop up their yields. Would that there might have been a free market instead.

by murray86 | 27th Mar 20, 2:51pm 1585273898

No the working classes seldom have reserves. In fact the consequences of the 'free market' capitalist economic policies has been to ensure that. Essentially making them beholden to the wealthy, elites. In Chris Trotter's article about Mike Moore he pointed out that one piece of wisdom Moore bought to the Labour party then was that one group the politicians can never afford to piss off are the business owners. This is what is wrong with our economies.

I believe people are fundamentally innovative, but given untrammelled freedom, some run roughshod over all and sundry. Governments role is to prevent that, but when even the Government are afraid to piss them off then the battle is already lost. Our Government is in place to represent us, we the people. In this they have failed dismally in many respects.

by Dale Smith | 27th Mar 20, 7:02pm 1585288925

That's the issue, it's not a free market. A free market is a competitive market and is what Govt. regulation needs to ensure, not give monopolies/cartels to a few.

A truly competitive residential and commercial market would have given us far lower prices, rents cheaper but still at a higher yield than at present.

If that had happened, we all would be in a better financial space to weather the storm.

by Ocelot | 29th Mar 20, 11:58am 1585436307

For a competitive market with landholdings, you need a land tax.

by Dale Smith | 29th Mar 20, 3:40pm 1585449635

why?

by MisterB | 27th Mar 20, 8:15pm 1585293353

They arent paying the workers a subsidy. They are paying employers a subsidy in order to stop or at least delay mass lay offs.

by Clementé | 27th Mar 20, 1:56pm 1585270563

Indeed... i think il write to jacinda every time crypto takes a 20% hit and ask her if she'll just top it up so i dont feel so bad

by Becnz | 27th Mar 20, 3:19pm 1585275544

I watch with interest when millions of Americans are now unemployed yet the share market is being pumped back up for the 10 percent.
How long till the have nots start to riot etc.
I for one say if you cannot cover your rent you need to sellup and face some hardship like many others.
No investment should be risk free. Not everyone can be a winner all the time but lessons like this will teach us to be more astute in the future and think about what if my property will be empty maybe for 5-10 years.
I think tourism may never be the same again and that will set NZ back 10 -15 years in growth.
This maybe the start of more business being started backup in NZ and keep our dollars in NZ and the and everything will go in a full circle and maybe people invest in real businesses rather than houses.

by zayneboi | 27th Mar 20, 6:42pm 1585287773

Everyone is on the same boat here.

If the government doesnt cover the shortfall or the the lessee continue to default payments then the property will eventually be sold as a mortgagee. But it wont be one or two sales it will literally be in the 000's. Making these commerical property sell for proportionally less than what are worth.

Rich will get richer and the cycle continues.

by Anhonestdaysmahi | 19th Apr 20, 10:00pm 1587290442

I would agree in normal situations, but not in this circumstance, it’s different than financial miss management, poor decisions or an expensive habit, have a heart.

by mikekirk29 | 27th Mar 20, 11:12am 1585260754

leverage = risk.
No buffers, just debt.
Our sensible business class and rentiers.
Micawber would turn in his grave
Meanwhile, mortgage "holidays" (delayed debt) and no rent relief for people who generally have less to live on after paying their housing costs, than do mortgagees

by refactornz | 27th Mar 20, 11:43am 1585262610

The wage subsidies surely would mean that there's no need for residential rent relief.

by HeavyG | 27th Mar 20, 2:04pm 1585271081

I would give my tenants a rent mortgage if they could put up a house (or other valuables e.g. cash, gold or jewellery) as collateral. Maybe the Government should change the law to allow rent mortgages with interest at market rate if the tenant provides $500k collateral as security.

Fair's fair.

by MisterB | 27th Mar 20, 8:17pm 1585293444

what's a rent mortgage?

by Henry_Tull | 27th Mar 20, 11:15am 1585260942

It's a thing in commercial leases to say in case of state emergency, and being barred for premise, rent stops.

It's in many agreements.
People learnt from the earthquakes.
The letters referred to may be tenant serving notice as per lease.

by Fritz | 27th Mar 20, 11:19am 1585261173

Good point

by THE MAN 2 | 27th Mar 20, 11:25am 1585261537

We have a commercial property and our lease has a 90 day clause in it before a tenant doesn’t pay if they don’t have access to the building!
Why would a landlord/commercial property owner sign off on a lease that says immediately????
We also have a loss of rents cover in our insurance property.

by bw | 27th Mar 20, 11:30am 1585261845

Force Majeure.
"unforeseeable circumstances that prevent someone from fulfilling a contract."

by Good Samaritian | 27th Mar 20, 11:48am 1585262880

I'd be interested to know your forward advice received on the loss of rent provision with your insurance, including who you are with.

Our family group are already down $60k a month in rent, but thankfully we are conservatively geared and have essential services as tenants to pull us through.

What we can learn from this is banks and insurance companies say they can withstand a 200 year event, and lobby government for more profits and less consumer protection. I would suggest they are probably one of the most under capitalised businesses around, and lets hope governments are brave enough to even the playfield when the dust/bust settles. Large banking profits are not a sign the economy is healthy, but rather the opposite. They are nothing more than middle men taking the majority of profit.

And its a poor sign their board and chief executives arent fronting the media. Nothing more than fair weather sailors.

by Independent_Observer | 27th Mar 20, 11:58am 1585263502

Good post - I was asking yesterday if anyone had heard about bankers taking pay cuts yet? If I were an executive I'd be quick to get that statement out before attention starts focusing on them if/when things turn sour.

by murray86 | 27th Mar 20, 12:10pm 1585264200

Insurance companies withstanding a 200 year event? I think Christchurch showed that is just pure BS. I suggest insurance companies are worse than banks. They take as profits any premiums not paid out in any year so have no reserve to cover catastrophic events. Parasites!

by middleman1 | 27th Mar 20, 11:49am 1585262986

TM2, loss or rentals policies don't usually cover tenants simply refusing to pay or going bust. There has be physical damage or prevention of access due to such things as nearby damage, utility shut down or compulsory closure by authorities.

by gordon | 27th Mar 20, 11:51am 1585263113

Look at clause 27 in ADLS Deed of Lease form The Boy. This form is probably at least 90per cent of the lease precedent in New Zealand. All commercial landlords are being asked for help unless their tenants are an essential service. We all will pay for this for many years either through direct or indirect taxes. Unprecedented times.

by Independent_Observer | 27th Mar 20, 12:02pm 1585263755

I just don't know if socialising losses at the moment is the best move. Many businesses in the property game have done their very best to pay no taxes at all in recent history - now they want support?

by frazz | 27th Mar 20, 1:01pm 1585267292

Great point - a firm no to CGT tax and now they have a cheek to ask for a bail out, beggars belief.

by RickStrauss | 27th Mar 20, 1:46pm 1585270000

They sound less of free marketeers and more of basic leeches on society. Heads they win, tails society loses.

by fender bender | 27th Mar 20, 12:19pm 1585264761

First response from my broker on "loss of rent" when I enquired on one entity I own was "Pandemic, no cover", I'm not giving up there... no phase in policy docs saying that

by CourtJester | 27th Mar 20, 11:16am 1585260962

So do you want free market or not? Demand dries up => your income dries up. Even if you could get rid of your tenant, who would take their place in the current environment?

by dictator | 27th Mar 20, 11:32am 1585261975

When I started my company during the GFC I ended up with a lot of work relating to office fitouts with businesses moving in when the previous one went bankrupt. However I'm expecting this to be worse, and it will take a while to fill up any empty office space.

I was hoping for some time off or a lower workload but that doesn't seem likely now.

by Good Samaritian | 27th Mar 20, 11:52am 1585263120

You're dreaming you going to be busy.

Landlords and tenants are in the same boat here. You can't spend money when you havent got it.

Two to three years back to normal maybe?

by dictator | 27th Mar 20, 12:09pm 1585264156

I'm still busy right now. My work increases when the economy is on the way up and on the way down. If I didn't make it clear I don't really want to be busy as I've been overrun for the past two years.

It's realistic for things to be better but not back to normal in two years. However if you look at 1987 and the commercial property collapse in Wellington it took many years to come right. Although the Wellington market was massively oversupplied into the 2000s.

by DaveB1978 | 27th Mar 20, 1:02pm 1585267340

The government has majorly intervened in the market. So they have some responsibility to help deal with the consequences. This event is completely different to the GFC. You can't expect people to be able to have their business completely destroyed by government policy and say tough luck you should have planned for this better.

by Independent_Observer | 27th Mar 20, 1:27pm 1585268841

The government majorly intervened in the market on the way up to the benefit of property owners. Should the non-property owners have a back claim against the government for those actions that made home ownership out of reach for them? (dropping interest rates, introduction of LVR's, mass immigration, no foreign buyer ban to too long, no capital gains tax).

by RickStrauss | 27th Mar 20, 1:48pm 1585270100

Does seem reasonable. All that coddling also used up a bunch of the Reserve Bank's ammunition in order to blow up asset bubbles. Thus the contra should probably be that people stop ranting against the idea of mass building of houses (for example) and start thinking about how they could help make it happen so housing is more affordable for more Kiwis. One good turn deserves another.

by Andrewj | 27th Mar 20, 11:16am 1585261002

And I have had no rain and i'm down 50k, where do to I apply?

by Fritz | 27th Mar 20, 11:21am 1585261289

Where does it stop

by Nzdan | 27th Mar 20, 11:41am 1585262473

Raining in the Wairarapa!

by frazz | 27th Mar 20, 1:03pm 1585267396

Drought assistance program kicked in - so assistance was available.

by Doris | 27th Mar 20, 1:08pm 1585267728

Drought relief payments are minuscule.

The kind volunteers who man the Rural Support Trust got $80,000 per region (which might cover paying the phone bill and putting some gas in their cars).

Otherwise if you have completely exhausted every other source of funding and have nothing in your bank account, there's a drought support allowance which is the same as the unemployment benefit.

Other slightly larger sums were given to help small rural towns maintain their water supplies.

by Pat.T | 27th Mar 20, 4:30pm 1585279853

Rain coming down now in the Bay, you should be out there in your jocks singing.

by Andrewj | 27th Mar 20, 5:14pm 1585282464

had 2 ml but I see we are in for good soaking early next week.

by Dale Smith | 27th Mar 20, 7:11pm 1585289461

No Rain - apply/pray to your God.

Or if you can price its due to man-made climate change, then look for someone with the deepest pockets.

Yes, where does it end.

by nymad | 27th Mar 20, 11:17am 1585261035

All the reward, no risk.
Sounds like a pretty good business to be in, this landlording thing.

by Fritz | 27th Mar 20, 11:21am 1585261262

Yeah.
And many landlords are people who usually throw their scorn at beneficiaries. Ironic, ey?....

by dictator | 27th Mar 20, 11:48am 1585262931

Complain about beneficiaries but ask for social welfare after 1 day of lockdown.

by CourtJester | 27th Mar 20, 11:57am 1585263461

Be prepared for serious threats and backlash when you tell them to get a job.

by Independent_Observer | 27th Mar 20, 12:06pm 1585263977

Its almost unbelievable to be honest. Hypocrisy of the highest order.

by blobbles | 27th Mar 20, 1:19pm 1585268381

You just need to go around to a landlords house and look for avocado and toast.

They should have put all that money from avocado and toast away for a rainy day, it definitely would have covered their missed rent.

by dictator | 27th Mar 20, 1:26pm 1585268810

What's the chance they have Sky TV and a smart phone?

by Pragmatist | 27th Mar 20, 2:54pm 1585274089

probably drink alcohol too..

by Camel's back | 27th Mar 20, 11:24am 1585261475

I also have a cash flow issue, where do i apply for government assistance?

by youngdumbandbroke | 27th Mar 20, 3:19pm 1585275579

Sorry mate, its only assistance for asset speculators

by Davo36 | 29th Mar 20, 6:57pm 1585461448

Heard of the wage subsidy? Or the help for small businesses?

by Panther | 27th Mar 20, 12:33pm 1585265627

Two questions:

Are they an essential service?

Even if they are an essential service, will commercial premises evaporate if they go broke?

I'm going with no on both - it's the building that's of value not the business model of the owner.

by DoTheMath | 27th Mar 20, 11:36am 1585262178

Private profits, private losses.

by company of heroes | 27th Mar 20, 11:36am 1585262180

Every investment has risks, commercial and residential properties are no exceptions. Now the risks are coming. Don't rely on government. Take benefits from the lowest interest rates, sell some of the properties to keep a good cash flow, you also wont get taxed by CGT. All of us are in a difficult time, if you own multiple properties, I don't think you are in a very bad situation as property prices are still stable at the moment. You gonna respect the free market, right?

by MadMax | 27th Mar 20, 12:27pm 1585265234

Exactly

by DaveB1978 | 27th Mar 20, 1:04pm 1585267470

The free market says no government intervention, I think you will find they are intervening so you can't really just say, oh well, tough luck.

by Independent_Observer | 27th Mar 20, 6:30pm 1585287037

Oh well I guess we need to withdraw and accommodation supplements for people who are renting as that is government intervention in the rental market.

by Dale Smith | 27th Mar 20, 7:24pm 1585290288

The free market has never said that. What the free market expects from Govt. is to ensure the right regulations are put in place to ensure a truly competitive environment.

They instead put in Command and Control structures and regulations that favoured a few and helped create cartels across many industries.

by meh | 28th Mar 20, 1:11pm 1585354310

The "free" market says rules for thee, not for me and govts. are just as captured. The rules are always written by the rulers and those who can persuade them. The history of civilisation as we know it has always been a command and control structure, it's nothing new.

Laissez-faire (allow to do) adapted from wu-wei (action without doing) was cherry picked by French mercantilists from the Tao. It's a philosophy of "being" and is an individual practice, ie, the rules that one places on themselves that advocates compassion, humility and frugality or moderation of behaviour. The Tao emphasizes inner contemplation and mystical union with Nature, wisdom, learning and simplicity.

The free market is what the rulers say it is and will always be a fallacy while we have top down authoritarian rule. Which is the same as it ever was. We, the people are too enamoured by bread and circuses, baubles and trinkets, still divided over race and religion, making ends meet or living the portrayed lifestyle to agree on anything visionary let alone unite to achieve it.

by Independent_Observer | 27th Mar 20, 11:43am 1585262605

Poor old darklords - been creaming it for years. Am I meant to feel pity for them?

I feel terrible for the workers who have been providing real goods and services for the benefit of the economy. I understand that landlords have a role BUT I feel no pity for those who have leveraged up with the intent of taking money from others and speculating on capital gains.

by Smalltown | 27th Mar 20, 12:10pm 1585264253

Listen IO, landlords are the salt of the earth, providing a service that the govt doesn't, never interested in Capital Gain, they look after their tenants needs and always provide a warm comfortable house. Just like everybody's favourite uncle in fact.

(Actually I really think theres a little bit of schadenfreude in all of us at these fools misfortune - I have two sons who have been priced out of the market for 9 years, going to auctions where professional investors have ramped up the prices to levels where I calculated their rental would generate 1% net return. It was always about capital gain and while I am obviously a fan of JA I regret her walking away from CGT. Probably dont have to worry about that for a while actually)

by Snow | 27th Mar 20, 1:30pm 1585269000

Good time to bring it in once the dust settles. No one will be too worried about it which would reduce the risk of people voting against them over it.

by GenerationXY | 28th Mar 20, 9:33am 1585341209

Indeed. I'm actually okay bailing landlords out provided we recoup the money through CGT and other taxs or elimination of loopholes.

by i am not a nimby | 27th Mar 20, 12:00pm 1585263602

time is not now to talk about rescuing com property investors, or for that matter, any investors. time now is to focus on eradicating corona virus. lets hope the govt does not run the tank empty on unneccessary rides and only on neccessary ones.

by Independent_Observer | 27th Mar 20, 12:08pm 1585264129

Imagine if we had a capital gains tax for the last 10 years - all of the tax take we could have used now as a buffer to help in a situation like this.

Instead it will be paid by PAYE income tax earners - in a society were GDP is likely to fall like a stone. Sounds like a wise and beneficial appraoch.

by redcows1 | 27th Mar 20, 1:52pm 1585270332

Personal income tax including paye. Only saying that because we have one instalment of provisional and one terminal tax due in the next 10 days. With a drought happening I really don't want to pay but....

by Beanie | 27th Mar 20, 12:10pm 1585264237

I am tiring of people and corporates holding their hand out to the government.
Think of society as a big wagon being pushed through soft sand. Some citizens are able enough to help push, but some can't and need to be carried on that wagon. In my mind you better have a bloody good reason to be sitting on it watching everyone else push.

by RealAgent | 27th Mar 20, 12:17pm 1585264659

by cmat | 27th Mar 20, 12:25pm 1585265154

100% spot on.

by Independent_Observer | 27th Mar 20, 12:34pm 1585265693

Peoples behaviour responds to sticks and carrots. We've been giving people carrots when they need sticks, and sticks when they need carrots.

I'd personally give the landlord class a decent size stick - greater than the rule of thumb...

by DaveB1978 | 27th Mar 20, 1:08pm 1585267720

This is a bit different. The government has basically said you can't do anything about non payment. Under normal circumstances you can manage the risk. The government has taken that opportunity off the investor for residential property completely and pretty much for commercial as well.

The businrsses that the government has been

by Independent_Observer | 27th Mar 20, 1:24pm 1585268665

The younger generation have had no control over the Reserve Bank dropping interest rates the last 12 years post GFC causing house prices to grow unsustainably and their deposit requirements to get too high for many due to LVR's introduced. As a result many have been priced out of the market.

Should that group of people be allowed to a back claim against the government/reserve bank?

by Snow | 27th Mar 20, 1:33pm 1585269186

Or a handout for losses in a compulsory saving scheme further reducing opportunity to get into the market?

by Pragmatist | 27th Mar 20, 2:57pm 1585274271

The ones that were priced out of the housing market but had their funds in conservative low risk investments (bonds, TDs etc) may be the biggest winners from this.

by Independent_Observer | 27th Mar 20, 6:29pm 1585286958

In which they had to pay taxes on interest/income earned - while darklords claim anything and everything as an expense in order to pay little or no taxes.

by meh | 28th Mar 20, 12:04pm 1585350297

Not just landlords though is it? Look at any number of corporations that legally avoid taxes, now putting their hands up for a bailout.

Apparently the 3 major cruise ship operators with HQ's in the US but registered in tax havens don't qualify for the recent stimulus package. Allegedly they have paid less than 1% in taxes and legislation will need to be rewritten to include them. But, hey it's all legal and you need us cause we "create" jobs and serve the people.

by cmat | 27th Mar 20, 2:25pm 1585272301

Rubbish, if that's the case then this is also true:

You can't "manage risk" in an Earthquake.
You can't "manage risk" in an Volcanic Eruption.
You can't "manage risk" in the wake of a Cyclone.

Natural disasters (incl pandemic), black swans and exogenous shocks happen.
You should insure and retain adequate buffers and headroom for *any* eventuality.
Not profit immensely in the biggest bull run in history then cry to the Govt / RBNZ at the first hint of trouble.

Remember we are *ONE* month into this thing and industries who couldn't keep their mouths shut about how amazing they were doing in the past few years are already squealing.

by Fritz | 27th Mar 20, 2:15pm 1585271736

Great last paragraph

by RickStrauss | 27th Mar 20, 2:38pm 1585273129

...some people claim that the pandemic is a “Black Swan”, hence something unexpected so not planning for it is excusable. The book they commonly cite is The Black Swan (by one of us). Had they read that book, they would have known that such a global pandemic is explicitly presented there as a white swan: something that would eventually take place with great certainty.

- Taleb, the investor who stands on his own two feet and plans for unexpected events.

https://medium.com/incerto/corporate-socialism-the-government-is-bailin…

by Dale Smith | 27th Mar 20, 7:47pm 1585291632

Exactly, As I have also said previously, an event that has been known to happen previously and will happen again, is not a Black Swan. If people could not perceive this, then a better word for this is ignorance.

And as they say, 'it is hard to make someone understand something when their income is dependent on them not understanding.'

And that is were half the disagreements have come from on this site with those that champion the status quo. Their vested short term self-interest makes them ignore any other possibility, talk about non-conscious bias.

And they will, of course, think that when this ends, then everything will return them to their pre-crisis position if not better (for the inconvenience they have been put through)

by RickStrauss | 27th Mar 20, 8:52pm 1585295541

H1N1 caused according to the WHO an "estimated 151,700 to 575,400 deaths total". And it was in 2009/10. And it wasn't the first by any stretch, indeed.

by fender bender | 27th Mar 20, 12:30pm 1585265402

When considering whom to provide subsidies to it should be some type of scale like:
Total tax / contributions the business generates, GST, PAYE, ACC, KIWISAVER, divided by profit. Or the like, what's the point of propping up entities that contribute next to nothing?

by cmat | 27th Mar 20, 12:39pm 1585265967

I don't see how that makes any sense.

Businesses that employ the most aggressive tax avoidance will seek to reduce their taxable 'profit'.
So in your calculation, the denominator would be lower - therefore the ratio, whatever you're calling this thing, will be higher.

Counter-factually, a company with all else equal employing less aggressive tax avoidance will record higher taxable profits so will also be paying higher (corporate) income tax AND making all the other contributions (GST, ACC, PAYE and KiwiSaver).

So again, no sense in this idea.

by fender bender | 27th Mar 20, 12:48pm 1585266505

I'm no bean counter but do employ 28 people, as a business we contribute a large amount of GST, ACC, PAYE & KS and make marginal profit 3-6% depending on the year. We train people, employ them out of school and provide careers that take people around the world, they bring their money back to NZ to settle. We have zero income at present with all fixed expenses expecting to be paid, we will support our staff till were insolvent. My formula is not perfect but the jist of what I'm saying is there needs to be a scale to identify business that are contributing to society over contributing to shareholders to select whom may get assistance.

by redcows1 | 27th Mar 20, 1:56pm 1585270616

I'd just like to point out you don't pay PAYE as a business. You collect it and pay it on behalf of the employee and the government.

by fender bender | 27th Mar 20, 2:30pm 1585272638

Only if I'm prepared to take on risk & create a job for you & the govt, so I'd say I create it. Also depending how much I'll pay for that position is how much PAYE the govt gets.

by frazz | 27th Mar 20, 4:10pm 1585278659

GST - no cost to you as well, you only collecting a tax for the government. And the profits are all yours (after tax). Not sure what your point is really, anyone can start a business and take the risk, but if it fails tough.

by Good Samaritian | 27th Mar 20, 2:20pm 1585272029

Agreed.

Time investors realised the majority of public companies are jobs for the boys, who at the executive and board level set their own pay at the expense of the workers below. The leadership (or lack of) guarantees nothing other than a large inflated paycheck completely disproportional to their business accumen. Most are employed as political strategics, to blind the masses and lobby government to enhance their position of control.

The government are full of yes minister people by design, where people with high morals and ethics are not allowed to rise to the top, as the hierachy below the executive are hand picked like the executive to pamper to crocked business people.

If anything comes out of this cycle, one hopes theres a clean out of those who dont act ethically and executive salaries pegged back to not more than 10 times the wages of the average worker below; including better regulation on businesses over exercising their market power for excess profits.

Certainly going to happen in the airline industry, where the good times for the highly (over) paid are over.

by Fritz | 27th Mar 20, 5:20pm 1585282828

So so true about jobs for the boys (and the occasional token girl). Which is awful business practice, especially in terms of boards which are meant to be independent and objective.

by Houseworks | 27th Mar 20, 8:33pm 1585294384

Much like cabinet then lol

by cmat | 27th Mar 20, 2:23pm 1585272196

What if other businesses are making a profit and continuing to pay their staff in full though? (so making all the same contributions you are)

Perhaps they're either in a more defensive sector with less risk / exposure to systemic volatility.
Or perhaps they're a better manager than others in your sector.

What if, novel idea, we just had no subsidies.
And didn't try to pick winners?

by fender bender | 27th Mar 20, 2:32pm 1585272724

So they are not burdened with zero income, essential business? Increase their tax to cover the businesses paying for staff sitting at home. Were in this together? ehh aren't we?

by cmat | 28th Mar 20, 9:09am 1585339766

No. No way.

You're arguing that we should bail-out rubbish businesses for being rubbish.

That's called moral hazard.
Don't wrap it up in an emotive ribbon.

by fender bender | 28th Mar 20, 11:34am 1585348441

Ok "rubbish businesses" makes me wonder from what window your looking at this thing from. Picture a business that rents a large warehouse and derives 50% of its revenues from human labour, the other 50% is only achieved through attached products if the labour is achieved. So, total shut down, govt pays wage subsidy, nothing else, only offers of more debt. Rent etc all the rest still has to be paid. Insurance is useless because of Pandemic. What contingency plan do you propose? Let these types of business crash and burn? Everyone is unemployed? I'm curious as to what the consensus is. How many commentators here are paying there bills with the wages subsidy? Is that not a bail out?

by fender bender | 27th Mar 20, 2:33pm 1585272812

Yeah all businesses with no income, lay off all their staff. A novel idea...

by Independent_Observer | 27th Mar 20, 12:39pm 1585265951

Yip agree 100%.

by CN | 27th Mar 20, 12:37pm 1585265851

Comment from Houseworks 15 March 2020 (i.e only 12 days ago).

"This is total crap BS from you CN you just trying to cast a shadow on what has been good. Is it because of envy? Yes there are exceptions and some investors who have a bad experience. Apart from that comm property has been highly highly successful."

by Houseworks | 27th Mar 20, 2:40pm 1585273211

Thanks CN you know that I'm a property cheerleader however speaking for MyselF commercial property works for us and that's what you want isnt it. The alternative is startup businesses that cant find premises as the landlords went out of business or the developers refused to take a risk. Most businesses do not own their own premises as they use the money to plough into their trade so landlords are integral to Their Success. So it goes that if landlords feel they cant make it then help them out and give them a handout. The govt started this whole drama by going into LOCKUP for FOUR weeks against many peoples wishes including my own. Their softly approach at the border with tourists being interviewed laughing at not doing self isolation has led to heavy handed lockup for all. But its good daily PR media for the PM leading up to an election isnt it. Finally if you dont like the thought of landlords being subsidized then Grant Robertson should shut his mouth and not make comments directed at landlords demanding they provide rental relief to tenants. Will I be applying for govt assistance? Depends

by frazz | 27th Mar 20, 4:12pm 1585278760

So glad you don't run the country.

by Houseworks | 28th Mar 20, 7:40am 1585334450

Thank god I dont know you. We will see in 3 or so weeks what the consensus is

by CN | 27th Mar 20, 12:47pm 1585266456

There have been mum and dad investors who have entered the commercial real estate market in recent years. Many may not have financial flexibility to weather missed rentals from a tenant, or vacant space due to closure by the tenant.

Also beware of hidden property portfolio fault lines.

by RealAgent | 27th Mar 20, 12:54pm 1585266853

So what, these mum and dad investors knew there were risks. It's not up to everyone else to cover their losses.

by CN | 27th Mar 20, 1:30pm 1585269048

Fully agree with you. Since they have taken the risk of earning returns on the upside, they should also take the risk on the downside.

Was just highlighting that there are some potentially financially vulnerable owners in commercial real estate.

by CN | 28th Mar 20, 5:32pm 1585369930

Hidden portfolio fault lines explained further here in comments - https://www.interest.co.nz/property/93543/mixed-use-character-building-…

by CN | 28th Mar 20, 11:41pm 1585392063

The non payment or delayed payment of rent by a commercial tenant to a commercial landlord may put the landlord in cashflow stress. Some landlords may not have cash available and this may result in some urgent need for cash via asset sales. If a commercial landlord has little financial flexibility, there may be a rush to raise cash by many commercial landlords. Refer potential portfolio fault lines, highlighted in comments section here.

https://www.interest.co.nz/news/101715/dairy-prices-2-us-fed-quells-mar…

by Houseworks | 27th Mar 20, 2:39pm 1585273195

Grant Robertson has been in the media demanding commercial landlords provide rental relief. And who asked for this 4 week lockup certainly not me. Should landlords be compensated for loss of income Yes. Will I be asking for compensation? Depends

by Sluggy | 27th Mar 20, 3:18pm 1585275481

You just got handed a massive tax break in depreciation, in my opinion Robertson would have been better compensating the business leasing the building directly. The trickle down effect doesn't work.
Been waiting to hear from my landlord........ crickets .....

by Houseworks | 27th Mar 20, 4:00pm 1585278055

Hang in there. Regarding deprn the small asset write-off threshold is to be increased from 500 to 5000 over 2 income years which might assist you

by Independent_Observer | 27th Mar 20, 12:57pm 1585267051

Will this be another case of people using equity in one property to purchase another property? (what I'm claiming to be a ponzi scheme)

by CN | 27th Mar 20, 1:16pm 1585268216

Very likely. Equity release / deposit recycling from residential property portfolios used as deposits for commercial.

by Independent_Observer | 27th Mar 20, 1:21pm 1585268518

If this turns out to be as bad as what I think it might be, one change I'd love to see going forward is that if you want to buy an investment property, you have to buy it with a cash deposit.

No use of equity in other properties - that works fine in good times, but if we get into trouble, its going to make the downside terrible.

by CN | 27th Mar 20, 1:41pm 1585269676

Imposition of debt to income ratio limits for borrowers on banks by RBNZ would probably be the most effective measure.

That should have been implemented years ago, but it was vetoed by a certain Finance Minister, when the RBNZ wanted to implement it.

by CN | 27th Mar 20, 2:12pm 1585271574

IO,

Read comments here about potential imbalance in residential property market
https://www.interest.co.nz/news/99060/we-look-changes-average-loan-size…

by CN | 27th Mar 20, 2:28pm 1585272500

Refer

1) https://www.stuff.co.nz/business/115181374/residential-property-investo…
2) https://www.landlords.co.nz/article/976516471/syndicates-take-big-share…

by Independent_Observer | 27th Mar 20, 2:44pm 1585273457

Thanks - will have a read.

by meh | 28th Mar 20, 11:44am 1585349093

And that's only the second branch of the ponzi. The first branch being the new money (fhb) used to pay out the old money.

by RickStrauss | 27th Mar 20, 2:40pm 1585273220

Would they not have taken mortgage protection insurance to cover their risks?

by Zachary Smith | 27th Mar 20, 12:58pm 1585267102

Thinking about it from a residential tenant's point of view, if they were barred from using the house and had to stay away by law it would be unreasonable for the landlord to demand they continue paying rent.

Commercial landlords should probably provide a true rent holiday at least for the four weeks. Most commercial landlords would have resources for long periods of no occupancy while between tenants or while refurbishing. They should already have this factored into their finances, shouldn't they?

by sharetrader | 27th Mar 20, 1:26pm 1585268818

at the very least they should do a deferred payment schedule where their tenant can pay the outstanding over a period of 12 months - 2 years when things are up and running.
i dont feel sorry for the ones that used leverage to maximize profits in good times and now are caught short, that was the risk you signed up for
as the man says positive investing has it advantages at its at time like this, gives room to take on debt and ride out the tough times

by bw | 27th Mar 20, 1:28pm 1585268921

"Virus set to hammer Australian property"
https://www.youtube.com/watch?time_continue=9&v=D-TQn4ISqY8&feature=emb…

by RealAgent | 27th Mar 20, 1:47pm 1585270061

New Zealand is next... and by the way, this has very little to do with covid-19 and more to do with levels of debt people are carrying. What sounds better" I lost my house because of coronavirus" or "I lost my house because I stupidly borrowed too much" Covid-19 is going to be used as the go-to-excuse for everything now.

by THE MAN 2 | 27th Mar 20, 1:56pm 1585270570

Australian property is generally a lot more expensive than Nz and many investors will be negatively geared so they will feel the pinch!
NZ investors are far more better placed to manage.
What we will find that many will be locked out from buying for a few years and therefore investors will have no problem filling their rental property to paying tenants

by bw | 27th Mar 20, 2:11pm 1585271482

Not just Aussie....

The (UK) housing market was halted on Thursday night by the Government after financial institutions said they could no longer operate properly.

Ministers are discouraging buyers from going ahead with house sales and purchases unless they have already exchanged contracts ....

Britain’s biggest banks have already pulled hundreds of mortgages from the market, as experts warned that they are being overwhelmed by homeowners with demands for payment holidays.

(Telegraph)

by lastredact | 27th Mar 20, 2:12pm 1585271571

Still offering up to 95% LVR on residential as well. Granted, there'll be lenders mortgage insurance that covers the above 80% component from the likes of QBE et al. But it'll be interesting to see the domino effect of who winds up wearing the losses.

by bw | 27th Mar 20, 2:21pm 1585272101

Lender Insurance! Do we think so?
Genworth is leveraged at over 300% loans-under-cover/equity ( Equity that isn't very much from memory). 300%! Now not all lonas will go belly-up, but there's not a lot of margin there for even a significant set of claims all in one hit.
As with the GFC, those who thought they were covered against loss by a counterparty transaction may find that when they come to claim - the counterparty is bankrupt!
(More than likely they'll become a newly nationalised part of the Government, though. Lenders will get some recourse to mass default - but unlikely to be the cover they expected or in the time they had 'banked' on)

by Fritz | 27th Mar 20, 2:18pm 1585271905

Far more expensive? Not true, apart from Sydney

by RealAgent | 27th Mar 20, 2:46pm 1585273617

Australian property is not more expensive than NZ, its the other way around.

by Fritz | 27th Mar 20, 5:23pm 1585283016

Don't let facts get in the way of The Man's narrative!!!!

by VictimOfOCR | 27th Mar 20, 1:43pm 1585269808

We’re entering phase 2 of this economic crisis; unemployment and defaults. Phase 3 will be liquidity tightening and phase 4 will be a currency collapse. I’m watching gold very closely right now; a slight strengthening of our dollar and some gold sales for margin call and I’ll be converting half my savings to gold - expecting the opportunity to present next week.

by Becnz | 27th Mar 20, 8:32pm 1585294326

Watch the USD we may gain another 1-2 cents max 61cents and then heading down to sub 50cents.
I am hoping gold gets a big dump next 7 days and I will top up before takeoff.

by StuckAtHome | 27th Mar 20, 1:43pm 1585269828

Same kind of debt repayment holiday would make sense, but nothing more than that. Did nobody think to save for a rainy day? The current lock-down period is just a month isn't it (albeit likely to extend)?

by RickStrauss | 27th Mar 20, 6:44pm 1585287865

I was discussing with a broker the merits of using cash to self-insure vs. paying for mortgage protection insurance.

Have people deliberately chosen to do neither, in the assumption that nothing bad could happen or that if it does the government will pay?

by theglc | 27th Mar 20, 1:45pm 1585269955

Next residential landlords will putting their hands out

by Davo36 | 29th Mar 20, 8:57pm 1585468658

Their tenants are being paid a wage by the government now. So they are being supported actually.

by Averageman | 27th Mar 20, 1:50pm 1585270217

Socialising "to much debt"...a very dangerous path but I guess it ultimately protects the banks which seem to be status quo these days. Personally Id like to see a few of the over leveraged get shutdown and the property come back to market at a more reasonable price/rent.

by RickStrauss | 27th Mar 20, 2:41pm 1585273318

Surely if that's the case the cost to the banks should be equity or some other method through which they repay the country adequately.

by iconoclast | 27th Mar 20, 1:55pm 1585270511

Breathtaking

The lock-down is only into its second day and already the fat-cats have got their hands out

by iconoclast | 27th Mar 20, 2:06pm 1585271163

To sumarise the comments .....
The fat-cats should have embraced the CGT instead of opposing it

by Harry B | 27th Mar 20, 2:05pm 1585271105

Due to cancellation of an overseas trip we have lost money due to airline cancellation fees, loss of deposits on abnb and a few more things
Insurance company doesn’t want to help
And yet all these businesses are wanting handouts
There is no govt help for our losses

by Andrewj | 27th Mar 20, 2:23pm 1585272197

there's going to a hole in Gov't revenue the size of Africa, when someone finally realises this, things will change fast.

by thebrian | 27th Mar 20, 2:26pm 1585272417

You could say these bailouts are buying compliance and submission to the government, and their actions....runs for cover.

by Sanz | 27th Mar 20, 2:40pm 1585273218

It Amazes me how many businesses have put their hand out so early , did they not think to save for a rainy day or is it live for the day an let other people pickup the pieces.

by RickStrauss | 27th Mar 20, 2:43pm 1585273406

I am not against supporting businesses and their employees, but this is indeed an issue.

Taleb again:

Third, as we have been warning since 2006, companies need buffers to face uncertainty –not debt (an inverse buffer), but buffers. Mother nature gave us two kidneys when we only need about a portion of a single one. Why? Because of contingency. We do not need to predict specific adverse events to know that a buffer is a must. Which brings us to the buyback problem. Why should we spend taxpayer money to bailout companies who spent their cash (and often even borrowed to generate that cash) to buy their own stock (so the CEO gets optionality), instead of building a rainy day buffer?

https://medium.com/incerto/corporate-socialism-the-government-is-bailin…

by Independent_Observer | 27th Mar 20, 2:48pm 1585273709

Yes current form of capitalism is actually quite corrupt - its hard at this point to say its less corrupt than any social/communist state - just corruption in a different form.

by Fritz | 27th Mar 20, 5:25pm 1585283113

That guy is a legend. And not read (and understood) by far too many.

by Houseworks | 27th Mar 20, 2:51pm 1585273915

This situation is not about business risk the pandemic was a health risk the govt failed to handle. The lockdown lockup is the government's fault. They did not control the border adequately being totally hands off. They had ample ample warning that the tourists were thumbing their noses at the 14 day self isolation requirements. Why didnt they test at the border or even do a simple temperature test. Nzers have been badly let down. Now they have to compensate for all the consequential losses they have caused

by RickStrauss | 27th Mar 20, 7:42pm 1585291323

So if they'd closed the border down investors would be responsible for managing their own risk?

But if they'd closed the border down there would also have been dire economic effects.

by Houseworks | 27th Mar 20, 8:54pm 1585295650

They would probably be better learning from Sweden's example. With monitored isolation for all arrivals china included, none of this hope and pray business. Instead now we have swung the other extreme to virtual police state
Sweden Is Staying Open for Business During Its Coronavirus Outbreak
https://foreignpolicy.com/2020/03/24/sweden-coronavirus-open-for-busine…
If NZ has a next wave what will we do then? Not another costly 4 week lockDOWN I hope

by Houseworks | 27th Mar 20, 2:42pm 1585273370

The gubmint has created this highly unprecedented situation. They HAVE to foot the bill and compensate all people for their losses.

by Independent_Observer | 27th Mar 20, 2:51pm 1585273905

So the government created COVID19? I said to be open minded Houseworks, but you might be getting a bit carried away?

If people didn't make hay while the sun was shining - which the landlord industry has gloated handsomely about for more years than I like to remember - then tough I say.

They shouldn't have been so leveraged. Should have just paid off their own home and built up some cash/gold/liquid assets.

This is where the benefit of shares may shine - very liquid. 5min call with the broker and they were sold. Need to buy some more gold - another 2min call.

by Houseworks | 27th Mar 20, 2:54pm 1585274044

I have said my piece for now IO please read my comments above thanks.

by Becnz | 27th Mar 20, 8:36pm 1585294567

3 months minimum wait for physical gold and silver now but you can still lock in and wait for delivery if you trust your dealer.

by Sluggy | 27th Mar 20, 3:02pm 1585274524

I don't understand this at all. They were given a huge tax write off by way of depreciation, for God knows what reason, now they are crying poverty. If you are that highly leveraged, surely the market should take its course, as it will with other highly leveraged businesses. If someone misses one payment, and your business is falling over, maybe you should be having a good hard look at yourself ?

by Wrong John | 27th Mar 20, 3:11pm 1585275107

I hope we have the courage to take this on the chin, but with this socialist govt I doubt it, sadly. All they do is talk & give money away, have you noticed? Anything involving money is risky. Contrary to popular opinion, risk is very widespread but not that well understood. Most of us begin to understand risk when we lose something. That is certainly true of our family situation. Looking back, we probably cost ourselves in excess of half a million dollars in one decade, and considering it happened between 20-30 years ago it's probably a million or more in today's money. As a business today, we have just taken the risk to keep our employees on for the next 12 weeks. Most of this time we will have no income. This is a risk that we think will pay dividends on the other side of this shambles, hoping it's only a 3 month lockdown. If after 12 weeks there is no end in sight, those wages have gone & we're 50K the worse for wear, then at least we can say we tried before we lay them off. PS: As an aside, I've spoken to 6 neighbours this week, 3 have been laid off.

by Sluggy | 27th Mar 20, 3:26pm 1585275982

I own a business, employ 5 people, we are in a position where we will not trade for at least a month. We have good cash reserves and no debt, and access to a large overdraft, we have worked hard to get to this position, we will survive. I mitigated the risk by not leveraging the shit out of it, by choice. Society needs to change, this is a tough pill to swallow, but swallow we must.

by murray86 | 27th Mar 20, 3:44pm 1585277085

LJM are they really socialist or just doing what is necessary? Any Government's role is to serve and protect the people, they seem to be doing this well, and they are also trying to help out business's too. Your employee cost for the next four weeks will be subsidised to a degree, if not fully covered, what else do you need?

by Glitzy | 27th Mar 20, 3:41pm 1585276900

The Property Council is a trade association for commercial landlords.

Sorry guys, your members ain't eligible for anything. Commercial property isn't a low risk investment ~ it's at best medium risk and the years of high returns your members have had need to be taken into account.

Instead of whining and trying to suck at the government teet, offer rent holidays (not deferred, periods of zero rent) so shops and other businesses can bounce back when this is over.

Owning a commercial property you are in partnership with your tenants. Never forget that.

by Fritz | 27th Mar 20, 5:29pm 1585283390

'In partnership with your tenants'. Well put. I think a minority view it that way, however. Because there has been such a power imbalance, for so long.

by vaultdweller | 27th Mar 20, 8:17pm 1585293473

Question: I am a small commercial landlord (husband and wife) working with my tenant (a 'mum & dad' owned motel operator) to lower rent to match their drop in revenue (down 90%). Have requested bank to support this by breaking fixed term loan @ 6% and lowering to something more reasonable, where they (bank) can still make some margin but we are provided relief. If this occurs, I can afford to slash rent with only moderate pain. If this does not occur, I'll need to demand full rent from motellier. Bank has responded saying we should take a mortgage holiday, i.e. they will keep charging full interest we'll just pay them later! This seems crazy and totally against the bank messaging of 'support' their customers. Has anyone had any luck in a similar situation. HELP! Thanks, V

by Houseworks | 27th Mar 20, 9:18pm 1585297120

How much longer on the term I suspect not too long now given the relatively high rate. Is there a break fee and how much would it be to break the fixed term and refix. I also heard that if you pay yourself a wage you can get an employer subsidy from the govt. May help you through the trying times

by Chris-M | 28th Mar 20, 9:00am 1585339217

As people have commented. They have benefited greatly from capital appreciation and the leverage they benefit from when things are good caries an equal down side when things are bad. That is the risk they took, therefore consequences rightly must stay with them. Otherwise this would be a unjust case of privatised profits and socialised losses. If they go broke it is not of any great public concern. The buildings will still be there, owned by someone, who probably will be happy to accept lower more realistic rents because they will have bought the distressed assets at more realistic prices.

by dragongold | 28th Mar 20, 12:28pm 1585351720

Would like request anybody can give advise regarding the residential/ rural area about rent?if the tenant take this as excuse advantage refused to pay rent how long,so happened agreement to end in June.? If the tenant don't pay ,can we claimed from government gazette lock down system affect my every weekly repayment?But the tribunal protect the tenant for this difficult period. What and how to handle and hope for good advise.
cheer.

by Nzdan | 28th Mar 20, 4:48pm 1585367318

If you treated your tenants nicely throughout the tenancy, you shouldn't have to worry about non-payment from the tenant.