EAMONN MAGUIRE offers some insight into the new Residential Tenancies Amendment Bill.
At the time of going to press, the much-publicised Residential Tenancies Amendment Bill is expected to come into force before the year’s end. Together with measures in the Finance Act 2015, the proposed bill is being heralded as a new deal for tenants by Minister Alan Kelly TD.
But rent certainty is a far cry from rent control, and the “new deal” as envisaged by Government can be summarised as follows:
Amendment of the Residential Tenancies Act (2004) will provide for future rent reviews at 24-month intervals, rather than the current 12-month cycle permitted. This may, however, be a temporary legislative measure.
There will be an obligation on landlords to provide more evidence that rent increases sought are in line with the local market rate, and to inform tenants of their rights to appeal such rent increase demands to the Private Residential Tenancies Board (PRTB).
Deposit protection scheme
In future, any security deposits required by landlords under new tenancy agreements will be held in trust by the PRTB, rather than by the property owner.
Termination of a tenancy
Landlords who intend to sell their property or terminate a tenancy in order for a family member to use the property will have to supply a ‘statutory declaration’ of their intent to a tenant. A landlord could be liable to a fine if it is subsequently proven that there has been an abuse of this process.
Minor errors in Notices of Termination will no longer cause entire proceedings against problem tenants to fail, as is currently the case.
Determination orders concerning tenancy terminations will now be dealt with at the district court level, as opposed to the Circuit Court.
Where landlords control a large number of units in the same development, future lettings will be carefully managed to ensure greater control over market rental evidence, impacting on future rent reviews for long-term tenancies.
A tax relief measure was introduced in the Finance Act to allow landlords who lease to tenants in receipt of social housing supports, such as rent supplement or the Housing Assistance Payment (HAP), to avail of 100% mortgage interest relief on their borrowings, where they commit to accommodating tenants in receipt of the above payments for a minimum period of three years.
Housing Assistance Payments (HAP)
Current limits for these payments are being increased in Cork, Galway, Kildare and Meath, where flexibility allows for a 20% payment above rent supplement thresholds. For families in emergency accommodation in Dublin City, HAP payments will be allowed for 50% above rent supplement levels.
Rent certainty is not rent control; indeed, the imposition of a two-year cycle on rent reviews will have an immediate impact on the current market and not necessarily along the lines that the Minister intended. The new regulations will ensure that landlords are more keenly aware of the need to effect rent reviews promptly. The small investors will seek, in the case of new tenancies, to build in future proofing by maximising the initial rent secured, and perhaps by incorporating into the lease additional charges to be passed on to the tenant. The production of reliable, analytical market transactional evidence will be critical in the case of future rent reviews, an advisory role best fulfilled by Chartered Surveyors.
Where landlords control a large number of units in the same development, future lettings will be carefully managed to ensure greater control over market rental evidence, impacting on future rent reviews for long-term tenancies. The requirement that security deposits will be held in trust by the PRTB is by far the most controversial element in the proposed bill. While I applaud the measure in terms of ensuring fairness to tenants, my concern will be that the PRTB is given adequate additional resources to settle disputes in a timely and competent manner, releasing funds held to the appropriate recipient. The retention of the security deposit by the PRTB will have the welcome effect on both parties of applying greater scrutiny to proposed lease agreements, be it the drafting of Special Conditions, an agreed inventory of contents or, most importantly, an agreed schedule of property condition at the outset of the tenancy. All of these measures will greatly assist the conclusion of any subsequent PRTB dispute process. The Finance Act provisions increasing to 100% the level of property debt interest relief in the case of certain social housing support payments is to be welcomed. However, the current anomaly between the tax treatment for residential investment property and commercial property puzzles me.
I would certainly advocate that there is a strong case for our legislators, in the pursuit of their goals to achieve rent stabilisation or more moderate rental growth, to extend the Finance Act tax relief provisions to all residential investment property.
Such a move could be linked to an adherence by landlords to a PRTB-approved benchmark rent for certain property types in a given geographical location, or alternatively to an annual indexation of rent increases. By extending property tax relief in this manner, I believe it would have an immediate and very positive impact for all stakeholders.
Information contained in this article is correct at time of going to press.
Eamonn is a general practice Chartered Surveyor and a member of the NPC Partnership.