The Residential Tenancies (Amendment) Act 2021
The Residential Tenancies (Amendment) Act 2021 was enacted by President Higgins on 11 December 2021. This important piece of legislation will see rent increases capped at 2% in designated rent pressure zones and it extends security of tenure for tenancies created on or after 11 June 2022.
Rent Calculation
The Residential Tenancies (Amendment) Act 2021 prohibits the following:
- Rent increases where the rent exceeds the old rent by more than 2% of the old rent in respect of each year since the previous setting of rent and
- Rent increases where the ratio of new rent to old rent exceeds the ratio of current inflation, as measured by the Harmonised Index of Consumer Prices (HICP), to the previous HICP value. The HICP values are to be published each month by the Residential Tenancies Board (RTB)
There have been no changes made to the exemptions from rent caps. For instance, a new property to the rental market which has not been let in the previous two years, may seek a rental return at the market rate and the caps do not apply. Furthermore, properties that have been substantially refurbished are exempt from rent caps.
The 2% cap is subject to review and there are plans in place to revisit this issue between 12 and 15 months after its commencement and for a report to be prepared within 3 months of the commencement of the review, with that report to be furnished to the Houses of the Oireachtas.
Security of Tenure Extended: Tenancies of Unlimited Duration
The Act has amended Part 4 of the 2004 Act and provides for tenancies of unlimited duration. The move aims to strengthen long-term security of tenure, but landlords will continue to have discretion to end such leases.
A new tenancy which is created on or after 11 June 2022 will become tenancies of unlimited duration once the tenancy has lasted more than six months and no notice of termination has been validly served on the tenant. However, this does not prohibit a landlord from terminating a tenancy on the grounds provided in the Residential Tenancies Act 2004. Landlords may consent to treating existing tenancies as tenancies of unlimited duration effective on written notice served on the tenant.
The Amendment Act makes no change to the tenant’s statutory rights to terminate a tenancy.
Temporary Registration Fee Waiver
Section 7 of the Act amends Section 134 of the 2004 Act and provides that the annual registration fee associated with the obligation to register a tenancy will be temporarily waived when landlords apply to register a further Part 4 tenancy before the requirement for annual registration commences, expected to be in Q1 of 2022. In order for the waiver to apply, any outstanding fees with respect to the application must be paid within one month of the commencement of Section 7.
Impact on Landlords and Tenants
These provisions will stop landlords from increasing rents by up to 4% in rent pressure zones, but the Act will provide better clarity on their assets than if rent caps were simply to follow the inflationary rate. Importantly, landlords who have not increased the rent in the previous two years will be able to combine the rent increase cap, as it will be legislated for on a per annum basis.
Tenants have greater peace of mind in the form of the 2% cap as it too offers a greater sense of security knowing that the cap shall not be influenced by inflation.
Conclusion
This act is a culmination of some of the reforms the Government pledged under its Housing for All scheme. It will provide greater control of rent increases and security for tenants and with the uncertainty of inflation rates, measures such as the 2% cap are important for landlords and tenants alike.
Mike Collum & Anne Marie Glynn
Meagher Solicitors
Disclaimer
This article contains general information based on Irish law and does not constitute legal advice nor is it intended to provide a comprehensive or detailed statement of the law.