Landlords of residential properties are subject to a number of statutory restrictions including a cap on rent increases if the property is located in a Rent Pressure Zone, and restrictions on tenancy termination. There are a number of exceptions to these restrictions and the Residential Tenancies Board (RTB) has issued guidance on two of these exceptions to help landlords and tenants understand when they can be relied upon.
In December 2016 restrictions on rent increases were introduced for residential properties located in designated Rent Pressure Zones. Rents for properties located in these zones cannot be increased by more than 4% per annum, subject to the following exceptions:
- Properties new to the market or those that have not been let in the previous two years; and
- Properties which have undergone a substantial change in the nature of the accommodation that affects the letting value.
What constitutes a substantial change in the nature of the accommodation?
- The nature of the property must be materially changed. By way of example, the RTB refers to the property being structurally changed, extended, reconfigured or modified in some way.
- In general, works carried out to bring a property up to meet minimum standards, ongoing repairs and maintenance, and upgrade and modernisation works are not considered substantial changes to the nature of the property.
- The changes to the property must be of such a kind and extent that they have a significant effect on the letting value of the property over and above any change that is due to changes in the rental market.
- The works must be substantial. When considering if the works are substantial, the following should be considered:
- The value of the works, to include their value comparative to the rental value of the property; and
- Whether the works are so substantial as to require the property to be vacant for some time.
Restriction on ending a tenancy
Under existing legislation, a residential tenant that has been in occupation of a property for a minimum period of 6 months is entitled to remain in occupation for up to 6 years from the commencement of the tenancy. This protection is subject to a number of exceptions, one of which is that the landlord is to undertake a substantial refurbishment or renovation of the property in a way that would require it to be vacated for that purpose.
What is substantial refurbishment for the purpose of ending a tenancy?
- The duration of the works must be considered. If the property only needs to be empty for a short number of days then it may not be appropriate to end the tenancy. Instead the landlord may come to an agreement with the tenant regarding the tenant leaving the property during the works period.
- In general, works to bring a property up to meet minimum standards, and ongoing repairs and maintenance are not considered to be a substantial refurbishment that would allow a landlord to terminate a tenancy.
It is important to note that what constitutes a substantial refurbishment which would allow a landlord to terminate a tenancy, will not necessarily satisfy the requirements of a substantial change in the nature of the property for the purposes of the rent restriction exception.