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.
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.