IMPORTANT READ FOR ALL LANDLORDS
Minister Covey has introduced the “Strategy for the rental sector”
With effect from 13th December 2016 the following applies.
Rent rises in Dublin will be confined to a maximum of 4% per year. The rent may not be more than the market rent. Three examples of rents of similar properties in the area must be supplied.
A review is only permitted every 24 months for the first review then every 12 months thereafter and this is retrospective. A formula is provided to allow you calculate the new rent.
The only properties exempted from this are :
Properties being rented for the first time or not let in the past two years.
Properties that have been substantially refurbished. (needs clarification)
For every new letting the following information MUST be provided to the incoming tenant,
- 1/ The amount of the last rent for the previous letting if any.
- 2/ The date the last rent was set.
- 3/ A statememnt showing how the current rent was calculated.
This is the equivalent of a rental valuation and will cost in the region of €150 per letting. The document and its contents must stand up to external scrutiny by the PRTB.
The part four tenancy is changed insofar as tenants will have a right to occupation for 6 years, where previously they had 4. This will apply to all future tenancies but does not appear to be retrospective.
The normal grounds for terminating a tenancy still exist. They are as follows.
- The tenant has failed to comply with the obligations of the tenancy (having first been notified, in writing, of the failure, and given an opportunity to remedy it.)
- The landlord intends to sell the dwelling within the next 3 months.
- The dwelling is no longer suited to the needs of the occupying household.
- The landlord requires the dwelling for own or family member occupation.
- Vacant possession is required for substantial refurbishment of the dwelling.
- The landlord intends to change the use of the dwelling.
In digesting all of the above it is apparent that the most crucial element going forward will be tenant selection, the importance of choosing the right people.
It is now possible that that your hypothetical new tenant could challenge the rent he has just agreed to pay with the PRTB and win. A sobering thought.
They have suggested that tax incentives for landlords will follow, nothying specific has appeared so far except for the phased reintroduction of mortgage relied for investors over 5 years.
Some of the unintended impacts of the above may include.
Landlords will need to increase rent at every available opportunity as if they do not, their rent could fall well behind the current open market rent without a legitimate way to increase it in future years. So the idea of leaving the rent untouched because you have great tenants will have to go by the wayside.
Landlords will need to prepare a rental valuation of their propety that they can provide to incoming tenants or risk being hauled before the PRTB. There is a real cost in doing this as mentioned above.
Landords will need to check the last rent charged on an investment property before they make a decision to buy it as the achievable rental income may be below market rent.
Only time will tell if these new measures work, an unintended consquence may be that they will curtail supply as Landlords leave the business and that rents will rise more quickly in the long term, as every opportunity to increase rents will be grabbed with both hands by landlords who are concerned about the potential erosion of their future incomes.
If you have any queries please call Carddock Estates Ltd the office at 001 3531 830517.