February-01-2017 in Property
The Government passed legislation which restricts the ability of a landlord to increase rent on a residential property, with effect from 24th December 2016. If you own, rent or intend to acquire an investment residential property in Dublin or Cork City Centre, you will be immediately affected by these changes.
Rent Pressure Zone (Dublin and Cork)
The Planning and Development (Housing) and Residential Tenancies Act 2016 introduces the concept of “Rent Pressure Zones” (currently Dublin and Cork City). The legislation restricts the manner in which landlords can impose rental increases for residential properties in these zones. The changes are limited to Dublin and Cork City at the moment, as these are deemed to be areas where rents are highest and above the national average, and where demand for accommodation is greater than in other parts of the country.
Rental change for existing tenancies
If you have an existing tenancy agreement in relation to a property, the rent cannot be reviewed until such time as a period of 24 months has passed since the rent was last reviewed. When 24 months (from last review date) have passed, the landlord would be entitled to review the rent, but must do so in accordance with the formula prescribed by the legislation.
The formula is: (“Formula”):
R x (1 + 0.04 x T/M) where:
R equals the amount of rent last set under a tenancy for a dwelling i.e. the current rent
T equals the number of months between the date the current rent came into effect and the date the new rent will come into effect.
M equals the number of months since the last rent review. This will be 24 months for an existing tenancy or 12 months for a new tenancy or a subsequent review of an existing tenancy.
Effectively, rents cannot be increased by more than 4% every 12 months.
It is important that both landlords and tenants of properties are aware of the new provisions introduced. In terms of determining the levels of rent for existing tenancies, it is important that the current level of rent would have been registered with the Residential Tenancies Board. It is an ongoing responsibility of landlords to register tenancies and to keep them registered for as long as they exist.
New tenancies post 24th December 2016
If a tenancy has been granted since the 24th December 2016, the rents can be reviewed annually. However there is an additional requirement on landlords in respect of these new tenancies. The landlord must provide the tenant, in writing, with information in relation to the rent under previous letting agreements for the property, the date that the rent was set under that tenancy, and also a statement as to how the rent under the new tenancy post 24th December 2016 has been set, having regard to the Formula.
Exceptions to the formula in Dublin and Cork
New build properties which are let, and properties which have been substantially renovated and are now being let (although the extent of the renovations is going to be important in falling within this exemption) will not be subject to the restrictions introduced by the legislation.
Renting properties outside Dublin and Cork
If you rent a property outside the Rent Pressure Zone, while the restrictions introduced by the legislation in terms of increasing rent and the frequency of rent reviews are not binding, pre-existing measures about reviewing residential rents continue to apply. Landlords cannot increase rents to such a level that it will be greater than the market rent at the time. Tenants must be given at least 90 days notice of rental increases and in determining the increased rent, the landlord must show evidence of three comparable properties advertised for rent at that level within the previous four week period.
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