The Real Estate Institute of New South Wales (REINSW) has urged the government and insurance groups to provide support for landlords amid the COVID-19 outbreak.

Leanne Pilkington, president at REINSW, said landlord insurance policies offering cover for rent defaults discourage landlords from complying with the government's instructions to negotiate with their tenants.

"Landlords have been asked by the government to negotiate in good faith, yet the insurers are saying they will not honour their rent default cover in the policy if the landlord voluntarily agrees to a rent reduction," she said.

This, Pilkington said, puts landlords in a difficult position, given that if they refuse to negotiate, tenants will take the case to the NSW Civil and Administrative Tribunal.

"Effectively, if the landlord agrees to reduce the rent for their tenant then their landlord insurer abandons them. This is clearly an appalling requirement and contrary to spirit of what is required across the entire community," she said.

REINSW is calling on the government to direct the insurance companies to allow landlords who negotiated for a reasonable reduction in rent to make a claim. Another option is for the government to allow landlords to compel their insurers to take over the negotiations.

"That way, when the landlord negotiates an outcome with their tenant, if the insurer wishes to call a halt to it then the landlord can give the insurer the right to take over the negotiation," Pilkington said.

In an earlier report, Carolyn Parrella, insurance executive manager at Terri Sheer, explained that rent reductions are not considered as default and are not a valid trigger for a claim.

"Landlords who choose to negotiate lower rents with tenants will remain covered under their existing policy to the new rental amount," she said.

REINSW also urged the state government to release the $2,500 subsidy for landlords forwarded by the NSW Parliament on 16 May 2020.

"Let's state the obvious here. In the current environment, providing landlords with some financial assistance is ultimately and directly supporting tenants," said Tim McKibbin, CEO of REINSW.

Some states, which include Queensland, Tasmania, Victoria, and Western Australia, have already implemented supports for landlords, offering $2,000 in assistance.

"We are calling on the minister to prioritise this parliamentary directive, bring the support package to life and in doing so, address some of the distress in the residential rental market," McKibbin said.