New Regulations for rented properties

Friday, 10 February 2017

In this update, we outline some of the key changes relating to rental properties brought about by the introduction of the Planning and Development (Housing) and Residential Tenancies Act, 2016 (the “2016 Act”) and the Housing (Standards For Rented Houses) Regulations 2017 (the “Regulations”).

The changes are outlined below. Click each link to read in full:

• Rent pressure zones introduced in Dublin, Cork and a number of Local Electoral Areas around the country


• New rules for rent reviews in rent pressure zones
  


• Part 4 tenancies increase from 4 years to 6 years
  


• New minimum standards set for rented accommodation

1. Rent pressure zones introduced

With effect from the 24 December 2016, specific rent pressure zones have been identified in Dublin and Cork and include all Local Authority areas in Dublin. In these rent pressure zones rent increases will be capped at 4% per annum and the rent pressure zone will be for a period of 3 (three) years from December 2016.

The Government announced the extension of the rent pressure zones beyond those introduced in the 2016 Act in the following Local Electoral Areas with effect from 27 January 2017:

• Ballincollig-Carrigaline, County Cork;
  
• Galway City Central;
  
• Galway City East;
  
• Galway City West;
  
• Celbridge-Leixlip, County Kildare;
  
• Naas, County Kildare;
  
• Kildare-Newbridge;
  
• Ashbourne, County Meath;
  
• Laytown-Bettystown, County Meath;
  
• Ratoath, County Meath;
  
• Bray, County Wicklow; and 
  
• Wicklow, County Wicklow.

There are 26 towns included in the above Local Electoral Areas including Sallins, Rathangan, Slane, Julianstown, Duleek, Dunboyne, Dunshaughlin, Enniskerry, Douglas and Passage West.

2. New rules for rent reviews in rent pressure zones

The new rules brought in under the 2016 Act will only come into effect when rent can be next reviewed under an existing letting.  This is currently a minimum of 24 months from either the start of the tenancy or from the date that the Tenant was notified in writing of the last review.

In the case of a new letting (i.e. a letting after 24 December 2016) in a rent pressure zone, a landlord is obliged to furnish the following to a tenant:

• the amount of rent that was last set under a tenancy for the dwelling;
  
• the date the rent was last set under a tenancy for the dwelling; and
  
• a statement as to how the rent set under the tenancy of the dwelling has been calculated having regard to the rent review formula (discussed further below).
  

Rent cannot be set higher than the market rent and this was always the case under the Residential Tenancies Act, 2004 (the “2004 Act”). Pursuant to the 2016 Act an amount of rent shall not be provided for that is greater than the amount determined by the rent review formula below for a dwelling in a rent pressure zone.

Below outlines the Rent Review Formula to be used with examples of how to apply it to existing and new tenancies:

Rent review formula
The rent review formula for dwellings in a rent pressure zone is as follows:

R x (1 + 0.04 x T/M)
R = The amount of rent last set under a tenancy for the dwelling/the current rent.
T = The number of months between the date the current rent came into effect and the date the new rent amount will come into effect.
M = 24 or 12 months

A. Existing Tenancies
For tenancies that are already in existence, a review is only permitted 24 months after the tenancy came into existence or 24 months from the date the rent was last set. In this instance M = 24. For this initial review, after the 24 months period as specified above, a maximum rent increase of 4% will apply, and this in effect, amounts to 2% per annum pro rata over the 24 months period. Following on from the initial review after 24 months a landlord is now entitled to review the rent in a rent pressure zone every 12 months using the formula above.

Example 1 - Review of Existing Tenancy

A tenancy commenced on 1 March 2015 of a dwelling in a rent pressure zone with a monthly rent of €1,400. The Landlord intends to serve a rent review notice on 1 February 2017, providing a minimum of 90 days’ notice indicating the rent will take effect from 2 May 2017. (Please see schedule attached hereto for a sample rent review notice).

R = €1,400;
T = 27 (1 March 2015 to 30 May 2017);
M = 24;
1,400 x (1 + 0.04 x 28/24) = 1,463
The maximum rent that can be set for this letting is €1,463 per month as per the rent review formula.

B. New tenancies from 24 December 2016
A landlord of a new tenancy within a rent pressure zone is entitled to review the rent annually, with a maximum increase of 4% annually to apply. In this instance M = 12.

Example 2 – New Tenancy 

New letting of a premises in 2017 in a rent pressure zone. Tenant vacated on 1 January 2017 and was paying a rent of €1,200 per month from 1 March 2015 and assuming that the new tenancy will commence on 1 February 2017.

R = €1,200 (The amount of rent last set under a tenancy for the dwelling);
T = 23 (1 March 2015 2015 to 1 February 2017)
M = 12
1,200 x (1 + 0.04 x 23/12) = €1,292
The maximum rent that can be set for this letting is €1,292 per month as per the rent review formula.

Exceptions
The following dwellings are exempt from the provision in relation to rent review set out of Section 34 of the 2016 Act:

• Properties that are new to the rental market – i.e. dwellings that have not been let in the past two years; and
  
• Dwellings that have been substantially refurbished can be exempt.

To download a sample Rent Review Template, click here.

3. Part 4 tenancy increase from 4 years to 6 years

The 2016 Act also increased the period for Part 4 tenancies from 4 years to 6 years. This means that once a tenant is in occupation for more than 6 months they are entitled to remain in the property for up to six years. This applies even if the rental agreement is for a fixed term of less than 6 years.

A landlord can only terminate a Part 4 tenancy for one of the reasons specified in Section 34 of the 2004 Act (set out below), and by service of the required termination notice with the correct notice periods. The grounds for termination under Section 34 are:

• breach of covenant;
  
• the dwelling is no longer suitable to the accommodation needs of the tenant;
  
• the landlord intends within three months to sell the property;
  
• the landlord requires the dwelling for his own use or that of his family;
  
• the landlord intends to substantially refurbish the property; and
  
• the landlord intends to change the use of the dwelling.

4. New minimum standards for rented accommodation

As of 1 July 2017 landlords of rented houses, flats and maisonettes, will be required to ensure that their properties meet certain minimum standards as set out under the Regulations.

The Regulations, although quite short, set a considerable number of obligations on landlords which will be set out in more detail below.

Structural Condition
Rental properties must be maintained in a proper state of structural repair. The Regulations state that a proper state of structural repair means that the property structure is sound both internally and externally. A list of specific internal and external structures are set out in Regulation 4 and there is a requirement on the landlord to ensure that such structures are maintained in a good condition and that they do not become defective due to dampness or otherwise. The structures expressly referred to in this regulation include:

• Roofing;
  
• Roofing tiles and slates;
  
• Windows;
  
• Floors;
  
• Ceilings;
  
• Walls;
  
• Stairs;
  
• Doors;
  
• Skirting boards;
  
• Fascia;
  
• Tiles on any floor;
  
• Ceiling and wall;
  
• Gutters;
  
• Down pipes;
  
• Fittings;
  
• Furnishings; and
  
• Gardens and Common Areas.

Furthermore, this regulation places a specific obligation on landlords to ensure that suitable safety restrictions for windows with an opening section through which a person may fall and the bottom of the opening section is more than 1,400mm above the ground. The Regulations are silent as to what constitutes a suitable safety restriction.

Sanitary Facilities
Landlords will be required to ensure that the rented property is fitted with a water closet (flush toilet), sink and a bath/shower. There is a requirement to have a continuous supply of cold water and a facility for the piped supply of hot water. These facilities are to be provided in a separate room by a wall and door as well as having separate ventilation. In essence, this Regulation provides that the house must have a properly fitted and functioning bathroom/toilet. As with most of the Regulations the landlord is under an obligation to ensure that these facilities are maintained in a safe condition and good working order.

Heating Facilities
Every room in a rented property which constitutes a habitable room must be fitted or connected to a heating system capable of providing “effective” heating. A habitable room is defined as a room used for living or sleeping purposes but does not include a kitchen having a floor area of less than 6.5 sq. meters.

Furthermore, the Regulations place an obligation on the landlord to ensure the safe and effective removal of fumes from such heating appliances/systems and that houses shall contain suitably located devices for the detection and alarm of carbon monoxide.

Food Preparation and Storage and Laundry
The Regulations set out a number of specific basic requirements for the preparation of food and washing. Every rented property must be fitted with the following:

• 4 ring hob with oven and grill;
  
• Suitable facilities for the effective and safe removal of fumes;
  
• Fridge and freezer;
  
• Microwave oven;
  
• Sink;
  
• Suitable and adequate number of kitchen presses for food storage purposes;
  
• Washing machine; and
  
• Dryer where the house does not contain a garden or yard for the exclusive use of that house.
  

Ventilation & Natural Lighting
Every habitable room in the house is required to be adequately ventilated as well as having adequate natural lighting. All windows in bathrooms are required to be suitably and adequately screened to ensure privacy.

Fire Safety & other
All houses must be fitted with a fire detection system and alarm system and contain a suitably located fire blanket. Further requirements to have an emergency evacuation plan together with emergency lighting are placed on multi-unit developments.

Landlords are required to ensure houses have access to suitable and adequate refuse storage facilities and that general gas, oil and electricity installations are maintained in good repair and safe working order. The tenant is to be provided with sufficient information about the rented property.

Summary
In reality the majority of rental properties in Ireland today would comply with most, if not all, of the standards set out in the Regulations. Every property is different however and landlords will have to assess their rental properties to ascertain if remedial works are required in order to bring their rental properties in to line with minimum standards.

For further information on the 2016 Act, Regulations or any general queries in relation to residential property and tenancies, contact Michael Walsh, Neil Dunne or a member of our Residential Property team.