New Rent Predictability Measures affect me badly - what can I do?

[drunat]

Hi. I am a landlord. I am renting my property to a good tenant for the last 3.5 years. Last time the rent was increased 1.5 years ago. I intended to significantly increase the rent in line with current market value in 6 months time.
Current rent paid €1,350
Current market rent on similar properties €1,700 (I'd be happy with 1,600 given tenants are good)
New measures suggest that I will only be able to increase by 4%, which means 1,404 which leaves me 200-300 per month below market rent. This potentially leaves me out of pocket for 3,600 per year. Is there anything I can do? The new measures created two tear system whereby some recently rented properties enjoy higher rent whereas those that have been rented out for awhile are significantly at a disadvantage.
I was considering giving tenants termination of tenancy notice, given 4 years tenancy will expire soon (in 6 months) and getting a new tenant at a higher rent but it seems that I can't even get market rate for a new tenant? Seems crazy? Any ideas? How can I achieve current market rent on my property?

 

[Sarenco]

Is there anything I can do?

Not really, no.

Even if you get a new tenant you will still be stuck with the 4% cap.

You should certainly make sure Minister Coveney and your local TDs are aware of the fact that you are not happy.

 

[7 of 9]

I've rented one of my rental properties out to my son at half the market value, to enable him to save for a house. He is paying €800 per month rent, in the area are about €1,600 - €1700. My other properties are a 300 hundred below market rents. If any of my tenants leave I'm considering AirBnb rather then pass on the discounted rent to new tenant. I'm defiantly moving to AirBnB for my sons rental. I think I have no choice.

 

[drunat]

I think new "black" market will develop because of this legislation. Properties are very scarce to come by and I've experienced people offering above asking price just to get somewhere to live so I suspect tehr swill be private negotiations between landlords and tenants which is obviously not ideal but seems where its going

 

[Bronte]

Drunat do you really think your current tenant can sustain a whopping 20% increase. Did the tenant's income increase dramatically, to the order of 20%. Have you thought about the benefits of a long term excellent tenant to you.

I can't believe you are considering giving the tenant notice to quit.

And I wouldn't worry, I have a feeling these rental measures might be unconstitutional and no doubt a test case will be brought.

 

[valery]

7 of 9, when you rent to a relative, you do not have to register the tenancy with PRTB.
Perhaps, the new regulations only apply to a registered tenancy.

 

[drunat]

Drunat do you really think your current tenant can sustain a whopping 20% increase. Did the tenant's income increase dramatically, to the order of 20%. Have you thought about the benefits of a long term excellent tenant to you.
I can't believe you are considering giving the tenant notice to quit.
And I wouldn't worry, I have a feeling these rental measures might be unconstitutional and no doubt a test case will be brought.

Bronte, this is a business for me and I will try to get the market rate. I am willing to have a slightly lower rent for the good tenant that I have but not to the tune of 3,600 a year. Yes if I have to change the tenant, I would reluctantly do it. Imagine a situation where someone renting their house out but lives himself/herself in a different area and also rents. With the new measures they might be in a situation where they themselves have to pay high market rent whereas they are forced to rent out their own house at a much lower rate. Seems crazy.
I do hope unconstitutional case will be brought against this measure soon.

 

[Gordon Gekko]

These new rules potentially devastate generous landlords.

The name of the game now is to maximise one's rental income.

Private landlords are not operating social housing; rental rules and tax rules are stacked against them, so they should simply make hay.

 

[Sarenco]

Yes if I have to change the tenant, I would reluctantly do it.

I'm afraid changing tenant doesn't achieve anything - you are still stuck with the 4% cap.

Of course there is nothing to stop a landlord classifying an element of the rent as a service charge.

 

[rob oyle]

I don't understand the level of chagrin with the new measures brought through in December. Presumably landlords were happy with their rent before the change, they had the opportunity to increase it at least once since the start of Q4 2015. Therefore, if they were renting to good tenants, they are/were happy with their 'below market' rents at that point?

Fast forward to today and no landlord will be further behind the market now than they were before, assuming everyone tops up the rent by 4%. In fact, if you increased the rent in (say) October 2015 and your fellow landlord did so in January 2015, he won't be any more than 4% better off than you for most of this year (whereas before, the market could be 10-20% better off than you while you're held back by the 'no increases in 2 years rules'). What else has changed? Are their tenants with the lower rent no longer worthy of this rent?
No one else is putting their rent up by more than 4% either, so your compassion for your tenant isn't any more materially impacted since the new rules came in. As I see it, the only situation this doesn't work for is where the tenants themselves want to move out and there's a risk that new tenants won't be as good... in this case, the landlord should try to accommodate (excuse the pun!) the tenants that he/she is happy to have.

 

[odyssey06]

Of course there is nothing to stop a landlord classifying an element of the rent as a service charge.

Would there not be tax implications? Would the service charges have to be fully offset against specific expenses and therefore could not just be banked as rental income? And the expense could no longer be used as a deductible against rental income for taxation? Maybe I'm over thinking it...

 

[T McGibney]

Would there not be tax implications? Would the service charges have to be fully offset against specific expenses and therefore could not just be banked as rental income? And the expense could no longer be used as a deductible against rental income for taxation? Maybe I'm over thinking it...

You are overthinking it. Any and all receipts for incidental charges are and always have been taxable as rental income. And corresponding qualifying expenses are similarly deductible.

 

[drunat]

I don't understand the level of chagrin with the new measures brought through in December. Presumably landlords were happy with their rent before the change, they had the opportunity to increase it at least once since the start of Q4 2015. Therefore, if they were renting to good tenants, they are/were happy with their 'below market' rents at that point
Fast forward to today and no landlord will be further behind the market now than they were before, assuming everyone tops up the rent by 4%. In fact, if you increased the rent in (say) October 2015 and your fellow landlord did so in January 2015, he won't be any more than 4% better off than you for most of this year (whereas before, the market could be 10-20% better off than you while you're held back by the 'no increases in 2 years rules'). What else has changed? Are their tenants with the lower rent no longer worthy of this rent?
No one else is putting their rent up by more than 4% either, so your compassion for your tenant isn't any more materially impacted since the new rules came in. As I see it, the only situation this doesn't work for is where the tenants themselves want to move out and there's a risk that new tenants won't be as good... in this case, the landlord should try to accommodate (excuse the pun!) the tenants that he/she is happy to have.

Rob, you are simply wrong in your assessment. I increased the rent in July 2015 and next review was due in July 2017. Since that time the market rents have gone up by a lot more than 4%. In my situation, market rents have gone up by over 25%. In fact, the legislators are well aware of it and define the rent pressure zones as "zones where the annual rate of rent inflation in the area is 7% or more in four of the last six quarters" so it is clearly a lot more than 4% and they are screwing the landlords who up to now followed the rules.

 

[odyssey06]

You are overthinking it. Any and all receipts for incidental charges are and always have been taxable as rental income. And corresponding qualifying expenses are similarly deductible.

So you have to have a receipt for the expense to tie the service charge to?
Would Revenue not take a dim view if someone assigned 50% of the rent against various "service charges" but have no receipts for same?

 

[T McGibney]

So you have to have a receipt for the expense to tie the service charge to?
Would Revenue not take a dim view if someone assigned 50% of the rent against various "service charges" but have no receipts for same?

I don't understand your questions. Why should Revenue care what you call your rental income, once you fully and correctly disclose it?

 

[odyssey06]

I don't understand your questions. Why should Revenue care what you call your rental income, once you fully and correctly disclose it?

Let's say the rent is €1000, you charge a service charge of €100 for X but you have no receipt for this service.
You declare to the Revenue that your rental income is €1100 but you are declaring to the PRTB that your rent is €1000.
Ok so maybe the Revenue won't care but won't the PRTB?
How strong is the paper wall between those two bodies?

 

[T McGibney]

Ok so maybe the Revenue won't care but won't the PRTB?

You'll have to ask the PRTB that. It's not illegal for an accommodation provider to charge for extras separately to the rent charge so I'm not sure what they could do about it even if they don't like it. Your earlier questions, which I answered, concerned what Revenue would think of it.

 

[Bronte]

Let's say the rent is €1000, you charge a service charge of €100 for X but you have no receipt for this service.
You declare to the Revenue that your rental income is €1100 but you are declaring to the PRTB that your rent is €1000.
Ok so maybe the Revenue won't care but won't the PRTB?
How strong is the paper wall between those two bodies?

Ah com'on now. Revenue just want to know your'e registered with the PRTB, because otherwise you're not entitled to mortgage interest relief. That's the sum total of their interest in the RTB. As for rent, as long as you declare to revenue how much you are actually receiving, than that's ok. Personally I have no interest in the RTB other than to give out about them as being useless for landlords. And their website I doubt very much has actual rents because how many landlords can be bothered to update rent increases on their impossible to navitage unusable website. I had to contact them recently to try and figure out how to print out my actual tenancies. They told me it couldn't be done, I needed it for HAB and that they had to send it to be by post.

I'm just dying to know how the RTB are going to have the manpower to deal with these rent caps.

 

[odyssey06]

Personally I have no interest in the RTB other than to give out about them as being useless for landlords. And their website I doubt very much has actual rents because how many landlords can be bothered to update rent increases on their impossible to navitage unusable website. I had to contact them recently to try and figure out how to print out my actual tenancies. They told me it couldn't be done, I needed it for HAB and that they had to send it to be by post. I'm just dying to know how the RTB are going to have the manpower to deal with these rent caps.

I guess I forgot to account for the Irish factor of willing the ends (written legislation) but not the means (resources to implement and enforce the legislation) ... it sounds like unless a tenant spots a > 4% increase there's not much chance of a landlord being detected.

 

[Sarenco]

@odyssey06

I would suggest that most tenants would spot an increase of more than 4% in their rent!

Bear in mind that tenants can dispute any rent increase before it takes effect or before the expiry of 28 days from the tenant receiving a rent increase notice, whichever is the later.

As regards any new tenancy in a rent pressure zone, the legislation now provides that a landlord is required to furnish the tenant, in writing, with the following information at the commencement of the tenancy:

(i) The amount of rent that was last set under a tenancy for the dwelling;
(ii) The date the rent was last set under a tenancy for the dwelling; and
(iii) A statement as to how the rent set under the tenancy of the dwelling has been calculated having regard to the rent pressure zone formula.

I suspect that the level of compliance with this particular provision will fall far short of 100%.

But there it is.