Where a lease is terminated to sell the property, can the new owner reset the rent to market?

[Metafora]

Hi,
No doubt this has been answered somewhere so apologies but i cant see it.
What is the rule if a property is purchased ( say in Nov 26) where previous owners had it as a rental but the last tenants vacated before 1st march under a no fault eviction.
Can new owner set rent to Market. Estate Agent says it can - im thinking you cant?
Thanks

 

[Greenbook]

Can new owner set rent to Market. Estate Agent says it can - im thinking you cant?

I think you are correct, you can't.

When you purchase a property, you can only re-set to market rent if the tenants left voluntarily or were evicted for fault.

I'd be very wary of agents. He either doesn't know the rules, that's quite common, or he does and wants you to rent at market so his managing fee is higher. Ultimately though if your new tenant or the RTB spot what has happened you're the one paying the compensation and being criminally prosecuted.

 

[Yelena]

Hi there,
Definitely not - you cannot reset to market rent if the previous tenancy ended by landlord serving an NOT, even the no-fault one.

The only way you would be exempt is if the property was vacant for 2 years (1 year if it's a protected structure) or if substantial refurbishment was done.

 

[LarryScott]

Can new owner set rent to Market. Estate Agent says it can - im thinking you cant?

Personally, for a BTL, I would recommend that you restrict your purchases to owner occupied houses.

Even if the seller claimed that it was a for-fault eviction, you would still be depending on the seller providing all the required documentation. It is much safer to just not have to deal with that. If there was a problem with the process for the for-fault eviction, you would be hit with the consequences.

Though, even for an owner occupied house, there is a risk that they had a rental within the previous 2 years, so nothing is totally safe. You could check the register and avoid any "owner occupied" that have a registration (not sure how long the registration remains after the tenancy though).

The only truly safe way is to wait 2 years after purchase before renting.

 

[Greenbook]

The only truly safe way is to wait 2 years after purchase before renting.

Unfortunately, 100% correct.

Keep in mind if the house was rented at €1,000 and you, believing incorrectly that you can re-set, rent it out at €2,000 per month, if this goes on for two years before the error is discovered, you now have to repay your tenant €24,000 and they can remain in situ for the next four years at the €1,000 per month rent.

It is a complete financial disaster and that is before other compensation for stress etc., fines and possible criminal prosecution are taken into account.

 

[stormy]

Can new owner set rent to Market. Estate Agent says it can - im thinking you cant?

That's extraordinary — an estate agent should know this. When a new tenant moves in, a Notice of Rent Setting has to be served on both the tenant and the RTB. It's a prescribed form. Rent is not valid unless it has been completed and served properly. The basis on which the rent is being reset must be declared explicitly in Part D, with the supporting documents in Part E. How were they planning to complete this? Declare a reset you're not entitled to and you've made a false statement on a statutory form, which is where the criminal exposure comes in. That agent would be leading his client into a real mess.

And Greenbook's €24,000 example isn't hypothetical. Incorrect rent settings and reviews come up at the RTB all the time, and when one is overturned the rent goes back to the start and the landlord refunds everything:

• TR0522-005471 (Blackrock, Cork) — rent reviewed from €850 to €1,150. The tenant paid it for years. Six years later the landlord brought an arrears case and the review was held invalid, because his only evidence of market rent was an estate agent's letter written after the event — "a form of retrospective rent review." Rent reset to €850, €5,150 refunded, and a landlord who'd claimed €22,100 was due to him ended up paying it back to the tenant.
• TR0001404 (Tramore) — rent increased from €800 to €925 by a new lease both parties signed, which the tenant drafted herself after agreeing the increase by email. No rent review notice, so the increase never took effect. Sixteen months clawed back; he claimed €11,300 and got €7,725.
• TR0001584 (Harold's Cross) — review served by email when email wasn't a permitted method. Eighteen months of the increase refunded and the old rent fixed as the base for every future review. The tenants had paid the new rent throughout; payment "does not validate a notice that was not validly served, nor does it amount to an agreement to a new rent."

Tenant agreement doesn't cure it, payment doesn't cure it, time doesn't cure it, and an agent's letter isn't evidence. The rent follows the dwelling, not the owner.

So before you exchange, get the vendor's RTB registration history and the notice of termination, and assume you're bound by the last registered rent unless you can document one of the exemptions Yelena mentions. If you can't prove it, you can't declare it.

 

[Greenbook]

So before you exchange, get the vendor's RTB registration history and the notice of termination, and assume you're bound by the last registered rent unless you can document one of the exemptions Yelena mentions. If you can't prove it, you can't declare it.

100% correct