We Need Regular Testing of Electrical Equipment to Help Avoid More Fire Tragedies

After the awful tragedy that took place in Clondalkin, Dublin recently, in which a woman and three young children died, the issue of fire safety is quite understandably in the spotlight. While fires which cause such loss of life are rare, it is important to recognise the dangers and also discuss how the government can help to improve an inadequate situation.

Many causes of fires cannot be regulated – for example, arson attacks – but safety guidelines do exist and are circulated to deter avoidable accidents e.g. leaving smoking or lit materials unattended. For the purposes of this article, we will focus on electrical and other equipment and wiring, as these are causes of potentially lethal fires which could be avoidable if the right regulations were in place.

According to the Department of Housing, Planning, Community and Local Government, there were 41 fatalities as a result of fires in 2015. Of the 14,233 fires that were reported around the country that year, 875 of them (roughly 6%) were the result of the failure of electrical or other equipment, or faulty electrical wiring installations. This may not seem like a particularly significant number; however, given that 56% of these fires had an unknown cause, we can safely assume that electrical faults represented a higher figure of the total cases.

So what is being done about it? In the United Kingdom, for example, periodic inspections of properties result in the issuing of an Electrical Installation Condition Report detailing any damage or issues that may compromise safety in a property. If a landlord in the UK owns a house in multiple occupation, they have a legal obligation to have a periodic inspection carried out every five years. Failure to do so, or indeed to have experienced a fire that could have been avoided with a periodic inspection in any other property, will result in prosecution.

None of these words suggests any kind of urgency or compulsion to obtain this report and carry out any recommended upgrades.

Contrast that situation with the one in Ireland. Here, a periodic inspection report may be required by an insurance company or fire officer to give a current indication of the status of the property. It is good practice to have completed this report. This report contains a list of recommended actions should a property need them. The suggested period of inspection in a rented property is every five years. Now, consider the language that we see here. “May be required”; “good practice”; “recommended”; “suggested”. None of these words suggests any kind of urgency or compulsion to obtain this report and carry out any recommended upgrades.

Also, note that this Irish inspection report does not include alarm systems, burglar alarms, emergency lights and appliances, or indeed any upgrades or installations unless they are deemed an immediate threat to life or the property.

Here, a homeowner receives certification from an electrician after the house has been built. After that… nothing. There is no re-certification process or compulsory inspections despite suggested safety guidelines being in place. Meanwhile countless fires are occurring due to faulty electrical equipment and wiring. It is entirely feasible –  and very worrying to consider – that thousands of houses in Ireland have electrical equipment and wiring that haven’t been checked by a certified professional in decades.

It is entirely feasible –  and very worrying to consider – that thousands of houses in Ireland have electrical equipment and wiring that haven’t been checked by a certified professional in decades.

It is clear what needs to be done. We need the government to introduce a re-certification process for electrical equipment and wiring for residential properties around the country, as well as regulation of this sector so that lives can be saved in future. Not to do so is to neglect one of the main causes of house fires in this country and to put further lives at risk.

This is the latest in a bi-monthly blog series by Dublinlettings.com, focusing on the rental, housing and property markets in Dublin and Ireland. To read previous blog posts, see dublinlettings.com/blog

Thanks to Ian Walsh of Glow Energy who contributed to this article

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Safe as Houses: Why Prospective Landlords Should Forget about Dublin Apartments

In our last blog post, we discussed investment tips – asking whether prospective landlords were better off investing in houses or apartments in general in the marketplace today. This week, we’ll drill down further into that subject, examining potential yields of a similarly priced apartment and house in the same area of Dublin, and comparing the two to see which will be more profitable for an investor.

Take, for instance, two properties for sale in Dublin city. Both are in the same postal code district of Dublin 1, both have one bedroom and one bathroom, both are asking in the region of €225,000-€230,000, and for the purposes of this article we can assume that both will command the same rent. The only difference is that one is an apartment; the other a house.

First, let’s examine the apartment. With a market rent of €1,400 per month, assuming there was no tenancy in place before or the property was owner-occupied, the annual rent will work out at €16,800. (If there was a tenant in situ at the time of sale, the rent can only be increased by a maximum 4%, but let’s come back to that later in the piece.) With an asking price of €230,000, we will assume the apartment sold at €250,000 and, including costs, this equates to a gross yield of 6.72% and a net yield of 3.72%.

Yearly fees (averaged over five years) will include:
Average maintenance at 6% of the annual gross rent (to cover sinking fund for redecoration expenses): €1,000
Property management and letting fees in the region of 7.5% gross rent: €1,260
Owners’ management company fee: approximately €1,600
Tax @ 20% of gross rent less reliefs: €3,360
Vacant period (on average, one month every five years) = €280

The average total fees per annum will be €7,500, leaving an annual profit of €9,300.

Now, let’s take a look at the house. Just like the apartment, with a market rent of €1,400 per month, assuming there was no tenancy in place before or the property was owner-occupied, the annual rent will work out at €16,800. With an asking price of €225,000, we will assume the house sold at €240,000 and, including costs, this equates to a gross yield of 7% and a net yield of 4.54%. Let’s take a look at the costs of the house.

Yearly fees (averaged over five years) will include:
Average maintenance at 6% of the annual gross rent (to cover sinking fund for redecoration expenses): €1,000
Property management and letting fees in the region of 7.5% gross rent: €1,260
Tax @ 20% of gross rent less reliefs: €3,360
Vacant period (on average, one month every five years) = €280

The average total fees per annum will be €5,900, leaving an annual profit of €10,900.

This means that the owners’ management company fees with the apartment, while they look relatively inconsequential given the overall cost of the property, will lead to a difference in net yield of 22%, despite all other factors (location, size, rent) being the same. The hard truth is that houses are far more profitable in today’s market with apartment management fees being as prohibitive as they are.

Incidentally, if there was a tenant living in both properties at the time of sale, according to recent legislation the rent in both the house and the apartment could only be increased by 4%.

This would lead to a net yield of 2.49% for the apartment, and 2.74% for the house – representing a far better comparison for the apartment-owner, but still a huge drop in yields for both owners at rent-controlled rates compared with true market rates.

This is the latest in a bi-monthly blog series by Dublinlettings.com, focusing on the rental, housing and property markets in Dublin and Ireland. To read previous blog posts, see dublinlettings.com/blog

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OPINION: What property investment should you make?

To say that it has been a rollercoaster decade for Irish property is the understatement of, well, the decade. From the soaring highs of 2006 to the crashing lows of the recession and a surging market once more, it’s difficult to identify a middle ground amidst the market volatility. However, throughout all the flux, property has always been an option for investment. But the real question is: if you’re interested in this market, what property should you invest in?

First of all, you have to consider whether you want to invest in residential or commercial property. Generally speaking, commercial property will be more expensive to purchase (even though a small unit in Dublin city could be as low as €150,000 to €200,000) but will cause you less trouble in the long run – your stable tenant will be on a long-term lease, so don’t expect your rent to fluctuate wildly. Maintenance for commercial units is generally covered by the tenant as part of the lease.

Another factor to consider in your decision to purchase commercial property is the Brexit effect, as the weakening of sterling will see fewer UK investors snapping up Irish units. However, it is possible that many European and American firms could move their UK operations to Dublin after Article 50 is triggered given our attractive corporation tax rate of 12.5%, so timing is of key importance here.

Another factor to consider in your decision to purchase commercial property is the Brexit effect, so timing is of key importance here

But for the purposes of this blog post, let’s switch the focus to residential property. With regard to an initial outlay, a residential investment will probably be more attractive than commercial, but you’ll have to consider the longer-term management it will undoubtedly need, as the tenant turnover – and subsequent need to monitor developments – will be greater than that of a commercial property.

Of course, when we think about a residential investment, this can either be an apartment or a house. As with all business decisions, it’s best to have a plan before acting. What are you looking for? Is it an initial yield, capital growth or a combination of both? What is your timeframe for these? What costs are you prepared to pay in order to realise these targets?

Many factors will influence the costs you will incur. How old is the property? What condition is it in at the time of purchase? If you’re thinking of purchasing an apartment, what is the condition of the common area and how well has it been maintained over the lifetime of the development? For example, we have seen apartment owners stuck with the costs of substantial repairs and upgrades because building standards were not met during construction.

Also, where is the property located, and will another development add significantly to its resale value? A good positive example of this is the extended Luas line in Dublin, which will open in December this year. This will link the existing Green Line from Bride’s Glen to the north side of the city and beyond to Broombridge, taking in Cabra and Phibsborough.

Of course, this Luas extension will have a big effect on rental values, which could jump by as much as 15-20% once the line opens.

However, in our experience, one of the greatest costs that apartment landlords are generally not taking account of when they are considering investment is the charge that must be paid to the owners’ management company. This is used to take care of the common areas of the development, including lighting, waste disposal, life maintenance, insurance, legal issues, parking, etc. It is important to remember that this charge can equal up to two months’ rent per year.

It is not uncommon to hear landlords complaining that their sales agents have misinformed them about these service charges, so if you’re planning on investing in an apartment, be sure to go through all charges with a fine toothcomb with your solicitor, and read the small print. Of course, these charges will generally never incur as a house owner as houses will be bought freehold.

To summarise, if you have the capital to spend and aren’t looking to make an immediate return, then a commercial investment is your best bet. If you’re targeting residential property for a quicker return, be sure to factor in all charges before making the choice between a house or an apartment, and know the area in which you’re buying!

This is the latest in a bi-monthly blog series by Dublinlettings.com, focusing on the rental, housing and property markets in Dublin and Ireland. To read previous blog posts, see dublinlettings.com/blog

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OPINION: Rent review legislation is as clear as mud and must be clarified

The subject of rent reviews has been a topical one in the Irish property market for the past number of years, and for good reason. Before the Residential Tenancies Act 2004 prohibited landlords from setting a rent that is in excess of market rent, unscrupulous landlords who cared little for the welfare of their tenants could hike rents at will – clearly, this was an unsustainable situation.

The latest amendment to the Residential Tenancies Act identifies four “rent pressure zones” in Dublin, one in Cork and up to 23 more in areas around the country such as Galway, Meath, Kildare and Wicklow.

As described in our last blog post, the Act stipulates that, among other changes, landlords owning property in these zones can only increase rent by a maximum of 4% after an initial 24-month rent-freeze period has expired, allowing for a further 4% per annum for three years after that.

So far, so predictable. However, where this arrangement becomes tricky is when we consider the notice period a landlord must give before changing the rent.

The law states that 90 days’ notice must be given to change rent after a 24-month rent-freeze period, yet there has been absolutely no direction given by state agencies as to whether these notices can be served in advance of the two-year period ending.

For example, say a landlord rents a property to a tenant on January 1st, 2016. If they want to raise the rent by 4% after the two-year period has ended (coming into effect on January 1st, 2018), then one would assume the landlord could serve notice on October 3rd, 2017, or 90 days before the rent could legally be increased.

But because the government has seemingly not even considered this factor, we are seeing tenants, housing groups and others contesting the notice of a rent increase in the 24-month rent-freeze period itself (as seen in the example below). They contend that no notice can or should be given during the period. So, in practice, what we are seeing is landlords not being able to even give notice of a rent increase until after the 24-month rent-freeze period has ended, making this in essence a 27-month period.

A letter from Citizens' Information regarding the notice period of a rent review

This would mean that a landlord who had rented a property on January 1st, 2016 would only be able to give notice of an increase in rent after two years had elapsed (i.e. on January 1st, 2018), with the rent increase coming into effect on March 1st, 2018.

A 12 or 24-month rent-freeze period should mean exactly that – not 27 months, or 15 months, or any other period of time.

The government has dropped the ball on this glaring issue, which is causing huge consternation for landlords, tenants and agencies in the rent pressure zones. Of course, this problem will be exacerbated even further if nothing is done as more rent pressure zones are added around the country.

It is time for the government to make a clear and firm decision on the notice period for rent reviews. This grey area is a problem for all parties concerned, so the sooner this is resolved, the better.

This is the latest in a bi-monthly blog series by Dublinlettings.com, focusing on the rental, housing and property markets in Dublin and Ireland. To read previous blog posts, see dublinlettings.com/blog

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OPINION: Why is the Government Killing the Dublin Rental Market?

It’s no secret that the housing and rental markets in Dublin are in a shocking state. According to daft.ie’s Rental Report from Q3 of last year, there has been an average increase of 57% in Dublin city rents since the market bottomed out in late 2011. Overall, rents throughout the capital are 10% higher than their previous peak of early 2008. Clearly, this is an unsustainable situation.

There are a number of factors that drive up rental prices, and chief among them is supply. Since the crash, new build statistics have fallen off a cliff, leading to a steady decline in supply at a time when the market is expanding. Simply put, people are snapping up rental properties all the time, and there are fewer and fewer to take their place.

Added to this, government restrictions on traditional flats and studio apartments have affected the lower end of the market, and there is a complete absence of any regulation of the short-term letting market, of which the likes of Airbnb are taking full advantage. We’re already seeing the devastating effects of this supply problem, as the homelessness crisis takes hold across the city.

What is the government doing about this? The short answer is: its policies are making things far worse. Just before Christmas, it published a second amendment to the Residential Tenancies Act 2004, stipulating among other changes that rents could only be raised by a maximum of 4% after existing two-year rent-free periods had expired, allowing for a further 4% per annum for three years after that.

At first glance, that appears to be a good solution for tenants who are being hammered by huge rents.

The government has seen a problem and has moved to fix it. People won’t have to pay as much rent, so things will get better, right? Wrong. This is nothing but a short-sighted fix to a much larger issue, and will have seriously negative repercussions unless something is done.

This move is a significant problem for many landlords. The vast majority in Ireland own one property, and many have become landlords by accident over the past decade. Their family or financial circumstances changed, which meant they could not afford to sell their home and, in a large number of cases, are themselves renting another property. Adding to their financial burden will only make more landlords exit the market as property prices rise.

The simple fact is, these inevitable property sales will do nothing but drive demand up even higher as supply is further curtailed, leading to more misery for tenants (and people trying to get on the rental ladder in the first place).

By focusing on a short-term populist issue (rent prices) and ignoring the elephant in the room (supply), the government has succeeded in making a bad situation even worse.

What we need now are serious incentives for the construction industry, and well as for landlords – throughout the country but particularly in Dublin. For landlords, this could include better tax breaks for allowing long-term tenancies; the removal or amendment of the unearned income clause to the tax code; and a change in the tax code to allow for relief against capital costs. Of course, local government could also build far more properties to complement these measures.

Landlords are getting far too much stick from the government, and no carrot to speak of. This might play well in the polls for now, but it will tighten the market even more, leading to further mayhem. The government is at a crossroads here, and needs to act with a clear long-term vision if it wants to reverse the terrible situation in which the rental market has found itself.

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www.psr.ie

Delighted to announce receipt of our new licence number. #psr.ie

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Christmas 2011 Important Notice – all tenants

IMPORTANT NOTICE
Dear Tenants

Every Christmas holiday period, problems arise which can be avoided. Emergency call outs are expensive and where the fault lies with the occupier so does the cost.

IF YOU ARE LEAVING YOUR PROPERTY FOR A FEW DAYS/ PERIOD OF TIME:

1. Turn off the water at the mains/stop cock, even if you are away for 2 days, AS PIPES CAN FREEZE, ESPECIALLY IN RECENT WEATHER CONDITIONS.
2. Ensure all windows and doors are shut correctly.
3. Set your alarm (where applicable), and wait to confirm it is set up correctly. If there are any power faults over the period, your alarm may go off. It is imperative that you have arranged either a neighbour or someone you trust what to do in that event.
4. Leave a key with a neighbour/or friend, or at least a contact No. Of a key holder who is available while you are away.
5. Unplug all necessary appliances, timers etc.
6. If you are travelling a long distance and have no one to leave a key with, please inform our office in writing.

OUR OFFICE WILL CLOSE FRIDAY 23rd DECEMBER 2011 UNTIL TUESDAY 3rd JANUARY 2012:

IF AN EMERGENCY ARISES DURING THE HOLIDAY PERIOD [USUALLY PLUMBING OR ELECTRICAL]
CALL THE MAIN OFFICE LINE AT 01 402 0066, SELECT OPTION NO: 3 , THEN REPORT YOUR PROBLEM

PLEASE DO NOT E-MAIL ANY EMERGENCY
We would like to take this opportunity to wish you a very Merry Christmas and a Happy New Year from all our staff at dublinlettings.com.

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Upward-only rent ban ‘would wipe €14bn from property value’

Author Gavin Daly. The Sunday Business Post. 3rd July 2011.

The state would have to pump another €5 billion into the banks and pay out €1.8 billion in compensation to landlords if it banned upward-only rent review clauses, according to new research.

A study prepared by DKM Economic Consultants for the Irish Association of Investment Managers (IAIM) estimates that up to €14 billion would be wiped off the value of commercial property by a complete ban on upward-only clauses. Landlords would be likely to sue the state for ‘‘state interference in private contacts’’, DKM found.

Even if a legal challenge failed and the clauses were banned, the state would still face a massive bill.

‘‘The additional losses (over any existing provision) to lenders are at a minimum €6 billion, of which circa €5 billion would be incurred by banks or institutions owned or funded by the exchequer,” said DKM.

That includes a hit that would have to be taken by the National Asset Management Agency (Nama),which has taken over the loans of the Irish banks on terms that suppose upward-only reviews would remain in place.

The upward-only reviews have become a major issue, with retailers claiming they are putting shops out of business.

However, the DKM research said that rents would be higher if upward-only clauses were not allowed in lease agreements. It said that a call for the clauses to be banned failed to recognise that many landlords gave tenants other inducements – including rent free periods and fit-out expenses – to accept longer leases with upward-only clauses.

DKM’s research also found that 76 per cent of all retailers who sought rent relief from their landlords had been successful, after providing accounts based evidence that rents were a major factor in their situation.

DKM said that jobs in the retail sector ‘‘would not be revived solely by a change in the terms of lease agreements’’.

It described as ‘‘implausible’’ a claim that 30,000 jobs could be saved by banning upward only rent reviews, and ‘‘highly implausible’’ that 20,000 extra jobs could be created if they were banned.

It said that the potential benefit of saving jobs set against the risk of banning the clauses and facing billions of euro in costs ‘‘makes no economic sense’’.

Frank O’Dwyer, chief executive of IAIM, said the association would welcome a quick resolution of the issue, as uncertainty was deterring investment in Irish property.

‘‘At its peak, there were €3 billion-worth of commercial property transactions a year,” O’Dwyer said.

‘‘In the first half of 2011, it looks like it was under €10 million. ‘‘There are virtually no transactions taking place. It is a very complex issue and we would welcome certainty.”

Frank Daly, chairman of Nama, also said last week that uncertainty was deterring potential investors in Ireland. Alan Shatter, the Minister for Justice, is expected to bring the heads of a bill abolishing upward-only rent review clauses to the cabinet in the coming fortnight. It will then be referred back to the attorney general, Máire Whelan.

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Landlords to be persued for not registering property with PRTB

Author Jamie Smyth. The Irish Times. Monday 4th July 2011.

THE GOVERNMENT will today announce a crackdown on landlords who are not keeping their properties up to standard or registering with the authorities.

The Private Residential Tenancies Board – the State body set up to regulate the rental sector – wrote to 1,400 non-compliant landlords last Friday threatening them with prosecution for not registering with its register of tenancies.

The board will brief its solicitors tomorrow with a view to bringing criminal prosecutions against landlords, who despite being notified, fail to register.

As part of the Government’s strategy, Minister for Housing Willie Penrose will also allocate €4 million today to local authorities to enable them to conduct inspections of private rented accommodation.

It is estimated about 20,000 local authority inspections will be conducted in 2011. They will check that all rented houses, apartments and flats comply with the national standards such as being in a good state of structural repair, absent from damp and have safe ventilation, heating and gas supplies.

Last year the State allocated €5.6 million to local authorities, which enabled them to conduct 21,614 inspections of private rented dwellings. Financial pressures mean this year’s allocation to fund inspections is less.

Almost 20,000 rented properties were inspected in 2009, and one in five of those did not meet the statutory minimum standards.

The Government, together with the tenancies board, is undertaking a major initiative to ensure that landlords are signed up to the register to make it easier to inspect and regulate properties.

It is prioritising an investigation into unregistered landlords, who have tenants that claim about €500 million in rent supplement from the State every year.

Using a new information technology system the board is cross-checking its records with those of the Department of Social Protection to ensure welfare payments are not going to unregistered landlords. The investigation has so far found that up to 40 per cent of landlords in receipt of rent supplement may not be registered with the board’s register of tenancies.

Minister for Housing Willie Penrose told The Irish Times yesterday it was “highly unfair” to all good and responsible landlords that a large minority of landlords are flouting their legal obligation to register with the board. He said he was committed to ensuring the money is only paid in respect of good quality accommodation and legally compliant landlords.

“I will be encouraging the board to use the full extent of their legal powers to pursue those landlords that persist in not registering, via legal proceedings and prosecution if necessary,” he said.

The board has issued eight summons for landlords to appear in court later this month for non registration, which is punishable with a criminal conviction of up to six months in prison or a hefty fine.

In the past six months, the tenancies board has secured seven criminal convictions against landlords who failed to register. The court imposed fines of up to the maximum of €3,000, costs of up to €2,100 and up to 35 days imprisonment in the event of default in relation to the offence of not registering with the board.

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