It is always interesting at this time of the year to stand back and look at what are the most significant changes in the property market over the past 12 months. It is fair to say that 2019 has been a busy year. There were changes which impact on home owners and investors in both the residential and commercial property market. We set out below a snapshot of some of the more fundamental changes that arose during the year.
Closing the Deal
There were important changes to the way in which property transactions are structured since 1 January 2019. This applies to both residential and commercial properties. Now most of the due diligence is done upfront at the initial stages of the transaction which has streamlined the process. For anyone who bought or sold a property this year, this change has resulted in the transaction moving quicker and helped get the deal closed.
Local Property Tax
Local Property tax affects anyone who owns a residential property. During the year, it was announced that the next valuation date for the Local Property Tax (“LPT”) was again deferred. It is now scheduled to take place on 1 November 2020 instead of 1 November 2019, meaning that there will be no change in LPT bills until 2021. This is positive news for homeowners as despite increasing house values, they can continue to rely on the original valuation date of 1 May 2013 for a little bit longer. The exemption for the owners of newly constructed properties also continues to apply.
For those of you who are in the rental market as either a Landlord or Tenant, it is important to note that Tenant’s rights were bolstered by the introduction of the Residential Tenancies (Amendment) Act 2019 (“the 2019 Act”). In an effort to regulate the rental sector more effectively, and prevent the flagrant disregard of rent restrictions, the Residential Tenancies Board (RTB) was granted much stronger investigative powers. For the first time, the RTB can sanction landlords for “improper conduct” with a financial penalty of up to €15,000 and an obligation to pay up to a further €15,000 in respect of costs incurred by the RTB. It is important for landlords to be aware that non-compliance with tenancy registration requirements or with rent restrictions in a Rent Pressure Zone (RPZ) is now a criminal offence with corresponding consequences including imprisonment.
While there is no change in the notice period where a tenant is terminating a tenancy, there were significant changes to the notice periods, and termination criteria, where a landlord is terminating a tenancy.
The Act provides that the designation of the existing RPZs and the 2 year restriction on rent reviews within RPZs will both be extended until the end of 2021. A change in criteria for calculating whether or not an area should become an RPZ is also likely to result in an increased number of RPZ’s. More and more landlords nationally are now finding that their property falls within a RPZ and is subject to the strict rent restrictions. If a landlord is relying on an exemption from the RPZ restrictions they must now serve a notice on the RTB confirming the new and old rent and explaining how the exemption applies.
These changes need to be reviewed carefully by any Landlord operating in this space, particularly with the threat of criminal sanctions.
Planning for Airbnb
Planning for Airbnb now has a greater significance than one would have thought a year ago. This summer, regulations were introduced significantly restricting short-term letting in a designated rent pressure zone.
A continuous short-term lettings is now deemed to be a material change of use and planning permission is required if the entire property is going to be let for a maximum period of 14 days or less at one time and for a total period of 90 days or more within a calendar year.
The restrictions do not apply where a property is the owner’s principal private residence and they continue to reside in the property. However, they do apply if the homeowner temporarily vacates the property. Homeowners who currently sublet an investment property on a short-term basis on Airbnb can no longer do so without applying for permission from the relevant local authority. Even where planning permission is not required and a homeowner is availing of the permitted exemptions they must register each short –term letting with their local authority.
The legislative changes in relation to short-term letting do not currently apply outside of rent pressure zones. Furthermore, the changes will not affect the operation of holiday homes or rent-a-room schemes (i.e. for periods longer than 14 days).
So if you are planning on using your property for Airbnb, make sure that you plan for planning!
Budget 2020 and the subsequent proposed Finance Bill 2019 introduced a number of changes to the Irish property market. Some of the more relevant changes are:
- Help to Buy Scheme: this Scheme was introduced in 2017 to assist first-time buyers with obtaining their deposit when purchasing a new build. It provides relief to first-time buyers in the form of a rebate of income tax. The Scheme was due to expire at the end of this year, but the Finance Bill 2019 proposes extending the Scheme until the end of 2021.
- Stamp Duty: on Non-Residential Property was increased from 6% to 7.5% for all instruments executed on or after 9 October 2019.
- Living City Initiative: this initiative allows for tax relief to those refurbishing or converting certain buildings within the “Special Regeneration Areas” of certain inner cities. This was due to expire in May 2020 but is now to be extended until the end of 2022.
Nearly Zero Energy Buildings
The European Union (Energy Performance of Buildings) Regulations 2019 (the “2019 Regulations”) came into operation on 1 November 2019. Although some exceptions and transitional arrangements apply, all new dwellings commencing construction from 1 November 2019 must be nearly zero energy buildings. This means all new dwellings must have an energy rating of A2, instead of the previous A3 BER standard.
The 2019 Regulations will also apply to existing dwellings undergoing “major renovations”. “Major renovation” is defined as the renovation of a building where more than 25% of the surface of the building undergoes refurbishment. Where such renovations are carried out, the energy performance of the property must be upgraded to a BER Rating of B2 or equivalent. The 2019 Regulations do not apply to protected structures and although there are other certification requirements, the current Building Control Regulations offer an “opt out” from the Building Regulations if you are building a once off house or domestic extension.
If you are planning on renovating your home in 2020, you will need to consider these new requirements.
It would be impossible to summarise events over the past 12 months without mentioning Brexit. Whilst this has created opportunities, it is also fair to say that it has created the need for flexibility. We have seen this as a recurring theme, particularly, when negotiating leases. Negotiations relating to break options are often one of the most controversial parts of any new letting arrangement and this continues to be the case.
It is clear to see that the changes introduced this year will continue to impact on property transactions well in to the future. With a busy year in store we look forward to assisting our clients with the changes and challenges that lie ahead.
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About the Authors
Jackie is Head of the Property team at Hayes solicitors. She is a highly experienced adviser to clients in the banking, public and retail sectors on all aspects of the sale, purchase, leasing, development and financing of properties. She has extensive experience of advising landlords and tenants in insolvency situations and has advised in recent high profile examinerships.
Sarah is an associate solicitor in the Property team at Hayes solicitors. She has worked with a wide variety of clients throughout her career, and has extensive experience advising clients in relation to a broad range of transactions. In particular, Sarah has acted for clients in relation to the purchase, sale, mortgaging and refinancing of both residential and commercial properties.