LAW IN PRACTICE
Ultimately, however, the report expressed concerns that rent controls would
(iii) the information in rent review notices that landlords are required to give
not be appropriate at that time, having regard to the danger that this would
– if this information is excluded, the rent review notice will not be valid.17
reduce supply (i.e., with nearly 40,000 buy-to-let properties in serious
There is no change in the 2015 Act to the fundamental mechanism for
mortgage arrears and with 29% of landlords in the RED C poll intending to
determining rents, which is by reference to “market rent” as was introduced
sell their properties as soon as they could, the risk to supply in the rental
under the 2004 Act and which is considered below. As such, it will be interesting
market was even more acute at that time).7 The PRTB Report concluded that
to see whether the 24-month restriction on rent reviews for a four-year period
the overriding concern in the Irish market was that any form of rent regulation
will be the “significant overhaul of tenants’ rights”18 some have described.
could potentially reduce the supply and quality of rented accommodation, and
Where the lack of supply of rental accommodation remains, the savings for the
thus distort the market further, in the absence of any incentives to stimulate
tenant will be neutralised somewhat, where the new rent set at the end of the
supply.8 The PRTB Report concluded that rent control was the second best
two-year period reflects the increased market rent over that 24-month period
option, dealing with the symptoms of the problem rather than with the cause
or where landlords attempt to ‘front-load’.19
of the problem, being most notably a lack of supply:
The new provisions on rent review introduced by the 2015 Act have been described by the Irish Property Owners Association, an umbrella organisation
"While some may argue that initial introduction of rent regulations on a
acting on behalf of landlords, as unfairly targeting landlords. In their view the
short-term basis may have merit, the reality is that the politics of regulation is
amendments would result in landlords being pushed out of the sector.20 On the
such that it becomes increasingly difficult to remove such provisions in the
other hand, housing organisations have called for greater rent regulation, and
future. Any intention to introduce rent regulation in an Irish setting needs to
in particular have called for the linking of rents to the consumer price index.21
take account of the particular circumstances which prevail here at present and the reasons for the lack of new supply to the sector which is likely to be a
Procedure for setting or reviewing rent
function of the financial markets, taxation in the sector and the level of return
A review of rent
available to both property developers and landlords".
9
A ‘review of rent’ for the purposes of the residential tenancies legislation is in effect anything that causes an increase or decrease in the rent payable for a
Approximately one in five households are now renting their home in the private
dwelling. The 2004 Act provides some guidance as to the concept of “a review
rented sector. The sector provides housing for a wide range of households,
of rent”, defining it as including:
including households who have postponed house purchase for one reason or another, and others who have lost their home during the recession, as well as families, students and individuals who choose to rent. The recent escalation
(i) any procedure for determining whether and to what extent a reduction or increase in an amount of rent ought to have effect; and
in rents has given rise to an increase in disputes being referred to the PRTB in
(ii) the effect of the operation of a provision of a lease or tenancy agreement
relation to rent increases, with 185 cases in 2014 relating to disputes where
providing for a reduction or increase in rent by reference to any formula,
the rent was increased by more than market rate, and 815 cases relating to
happening or any event or other matter whatsoever, regardless of whether
rent arrears. These figures were 109 and 999, respectively, in 2013, and up
any act, decision or exercise of discretion on the part of any person is
from 61 and 719, respectively, in 2012.10
involved or not.22
The reform
When can a rent review take place?
The Residential Tenancies (Amendment) Act 2015 (“2015 Act”) was enacted on
Relevant periods
December 4, 2015. Most of its provisions require commencement orders before
A rent review cannot take place more than once every 24 months up to (and
they take effect, with the notable exception being the provisions on rent review,
including) December 3, 2019.23 Thereafter, a rent review can take place
which came into force on December 4, 2015. The amendments were introduced
annually, as was previously the position under the 2004 Act.24
11
as a response to significant increases in rental levels and to provide some
The 2015 Act seeks to address any uncertainty that may exist where a tenancy
‘quick-win’ solutions in the interim to tenants who found themselves unable to
was in existence prior to the 24-month restriction on rent reviews coming into
12
afford the substantial increases in rent. The provisions on rent reviews aim to
force on December 4, 2015. The following applies where a tenancy commenced
provide "for greater rent certainty" and "improved operation of the sector".13 The
prior to the enactment of the 2015 Act:
2015 Act introduces amendments to the frequency and manner in which rent reviews can take place in respect of tenancies that fall within the remit of the residential tenancies legislation. Those provisions concern:
(i) where a 12-month period has not yet elapsed since the date of the commencement of the tenancy, a rent review may not occur until a period of 24 months has elapsed from the tenancy’s commencement;25
(i) the length of time between rent reviews – up to December 3, 2019, rent
(ii) where 12 months has elapsed but a rent review has not taken place, the
reviews can only take place every 24 months (as opposed to every 12
landlord cannot conduct a rent review until 24 months has elapsed from
14
15
months). After this date rent reviews can once again occur annually;
(ii) notice of rent reviews that landlords are required to give – this has been
the date of the commencement of the tenancy;26 (iii) where a rent review has taken place prior to the enactment of 2015 Act,
increased from a minimum 28 days’ written notice to at least 90 days'
a further review cannot be carried out until 24 months has elapsed from
written notice;16 and,
the most recent review.27
THE BAR REVIEW : Volume 21; Number 2 – April 2016
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