Rules of Renting in a Rent Pressure Zone: what landlords need to know

Cobh in Cork, Baltinglass in Wicklow, Piltown in Kilkenny and Sligo-Strandhill in Sligo are the latest areas to be designated as Rent Pressure Zones (“RPZ”) at the end of the last quarter of 2019. An RPZ is a designated area where rents cannot be increased by more than 4% per annum. RPZs were first introduced by the government under The Planning and Development (Housing) and Residential Tenancies Act 2016 in an effort to curtail the rise in rents in the parts of the country where rent was rapidly rising. This act was amended by The Residential Tenancies (Amendment) Act 2019 (the “2019 Act”). The 2019 Act has amended how the average rent in the state is calculated by excluding the average rents in the Dublin or Greater Dublin Area. This has seen a greater number of areas being brought into the fold and being designated as RPZs. The total number of RPZs now stands at 48. The original RPZs were due to end in December 2019 but the 2019 Act has extended the time of existing RPZ designations to 2021.

New Tenancy in an RPZ

There are different treatments of tenancies in an RPZ depending on whether a tenancy is new or existing. Prior to the 2019 Act, rent restrictions did not apply to tenancies which had not been let during the preceding two years before the area was designated an RPZ. The 2019 Act provides that rent restrictions will not apply when the rent is first set however thereafter rent can only be reviewed in every 12 month period and these tenancies must now adhere to the 4% cap in rent increases per year. Furthermore, the reviewed rent cannot be more than the local market rent for similar properties in the area.

Existing tenancies in an RPZ

The position remains the same for tenancies already in existence when an area is designated an RPZ. In those instances the rent cannot be reviewed for a period of 24 months from either the start date of the tenancy or from the date of the last written rent review notification. Initially the maximum rent review permitted is 2% per year for these existing tenancies. Rent reviews can take place on a 12 month basis thereafter with the RPZ rules then being applicable.

Exceptions to rent limits in an RPZ

Certain properties can be designated as exempt from the RPZ rules. These exemptions are as follows:-

  • As noted above properties not let within the previous two years before the area was designated an RPZ. The rent restriction will not apply when the property is first let. However, the restrictions apply to any subsequent setting of the rent;
  • Tenancies in a protected structure or proposed protected structure and which have not been let in the previous year;
  • Properties which have undergone substantial changes since the date the rent was last set. It was previously unclear as to what constituted a “substantial change”. The 2019 Act clarifies the position by introducing a new definition of what constitutes a “substantial change” with effect from the 4 June 2019. The change must involve either:-
    • A permanent extension to the dwelling which increases the floor area by at least 25%; or
    • An improvement in the Building Energy Rating (BER) by seven or more ratings; or
    • At least 3 of the following:-
      • A permanent alteration to the internal layout;
      • An adaptation for use and access by persons with a disability;
      • A permanent increase in the number of rooms;
      • An improvement in the BER by three or more ratings, where the BER is D1 or lower;
      • An improvement in the BER by two or more ratings, where the BER is C3 or higher.

The works must not consist of works that a landlord is obliged to carry out in accordance with the Residential Tenancies Acts. Further it will also not apply to works in the process of being carried out before the legislation came into effect.

The 2019 Act also provides a new obligation on the landlord to notify the RTB if they are relying on an exemption by completing an RPZ Exemption Form and sending it to the RTB within one month of the new rent increase. From the 1st July 2019 landlords must use the RTB’s Notice of Rent Review Form when issuing a rent review and must give at least 90 days’ notice to the tenant before the revised rent can be introduced. They must also notify the RTB of the new rental amount within one month.

Sanctions

The 2019 Act provides for an investigation and sanctions process which allows the RTB to monitor and enforce the legislation. Failure to comply with RPZ rent restrictions, failure to comply with notice requirements and knowingly and recklessly furnishing false information to the RTB in connection with a notice of reliance on an exemption is an offence. The 2019 Act introduces new powers to authorised officers to deal with any complaints and impose sanctions which include payment of a financial penalty up to €15,000, payment of the RTB costs up to €15,000 and a written caution. It also introduces criminal offences.

Landlords should ensure they familiarise themselves with the 2019 Act to ensure they are on the right side of the  law otherwise they may inadvertently find themselves the subject of a complaint by a tenant with an ensuing investigation resulting in a fine, caution and possible criminal sanctions.

How we can help

If you have any queries or concerns, or would like to discuss the above in further detail, please feel free to contact Siobhán Whelan in our Real Estate Department on swhelan@bhsm.ie / +353 (0)1 440 8339.

This article is for general information purposes.  Legal advice must be obtained for individual circumstances.  Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.

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