Could the ever changing legislative framework be contributing to landlords leaving the residential market

The number of residential properties available for rent is rapidly shrinking as more of the small private landlords have decided to sell up and leave the rental market. Various reasons are being cited for such a mass exodus with explanations ranging from not enough profit, high taxes, too much administrative burdens and the constantly changing legislative framework being difficult to navigate.

It is not difficult to see why the high volume of legislation in this area has contributed to the number of landlords leaving the rental market. The Residential Tenancies Act 2004 (the “2004 Act”) was the first piece of legislation to be enacted in the area. Since then, there has been a number of specific pieces of legislation enacted as well as other enactments which touch on the area but are not entirely dedicated to the area. Most of the legislation enacted was in response to the current and prevailing market conditions in the residential sector and an attempt by the government of the day to control the residential rental sector in one form or another.

A detailed synopsis of each of these enactments is too lengthy to explore in the context of this article, which will concentrate instead on recent legislation. The various pieces of legislation enacted over the years have seen the introduction of rent pressure zones, the control of rent increases, citing of specific reasons of when landlords can terminate a tenancy, a ban on evictions during the COVID-19 period, the recent ban on eviction during the winter months and tenancies of unlimited duration.
A quick Google search of the legislation is telling in that most of the content is largely out of date having been replaced by a further enactment. There were calls on the government to tidy up the legislation in this area and indeed the Law Reform Commission has published what is known as a revised version of the 2004 Act which consolidates all the landlord and tenant legislation since that legislation was enacted. Legislation enacted up to 26 July 2022 is included in the consolidated version. As such, it does not include the most recent Residential Tenancies (Deferment of Termination Dates of Certain Tenancies) Act 2022 which came into effect on 22 October 2022 and is dealt with below. Such is the ever-changing landscape of the residential tenancies market and the volume of legislation, that the legislature cannot keep up with its own enactments.

This article focuses on the two most recent enactments while giving an overview of where legislation is currently at in the residential rental sector.

Tenancies of Unlimited Duration – Residential Tenancies (Amendment) Act 2021

All new tenancies created on or after the 11 June 2022 now enjoy security of tenure following the coming into effect of the Residential Tenancies (Amendment) Act 2021 (the “2021 Act”). A tenant will be entitled to remain on in a premises after 6 months of residing there and provided a valid notice of termination has not been served by the landlord prior to the expiration of the 6-month period. After 6 months, the tenancy becomes one of unlimited duration and a landlord is only entitled to terminate the tenancy for reasons cited under section 34 of the 2004 Act, which is discussed in further detail below.

Is it the end of Part 4 Tenancies?

For tenancies created prior to 11 June 2022, what are known as ‘Part 4’ tenancies still apply. Under the 2004 Act, after 6 months of residing in a dwelling and provided a valid notice of termination has not been served, a tenant is entitled to remain on in the premises for a further 5 years and 6 months. A landlord is still entitled to terminate the ‘Part 4’ tenancy at the end of the 6-year period by serving a valid notice of termination, which should cite the reason for termination. It can be for any reason and does not need to be one of the reasons cited under section 34 of the 2004 Act. The notice period must expire on or after the end of the ‘Part 4’ tenancy i.e. the 6-year term. If a termination notice is not served, once the 6 years has passed the ‘Part 4’ tenancy will automatically become a tenancy of indefinite duration. The new rules then apply and a landlord is only entitled to terminate the lease for reasons cited under section 34 of the 2004 Act. It should be noted that the 2021 Act allows the landlord of a pre-11 June 2022 lease to opt in at any time to a tenancy of unlimited duration.

Grounds for Termination by Landlord as set out in section 34 of the 2004 Act

It should be noted the landlord is still entitled to terminate the tenancy on grounds set out in section 34 of the 2004 Act namely:

1. The tenant has failed to comply with his or her obligations under the lease, having been notified by the landlord in writing of the failure and afforded an opportunity to remedy it
2. The tenant has not paid their rent and the landlord has notified the tenant and the Residential Tenancies Board (‘RTB’) of the rent outstanding and the rent has not been paid within 28 days of receipt by the tenant of the notice or receipt by the RTB of the notice whichever is the later
3. The dwelling is no longer suitable to accommodate the needs of the tenant
4. The landlord is intending on selling the dwelling
5. The landlord requires the dwelling for a member of his family to reside in
6. The landlord is intending to carry out refurbishment/ renovation work
7. The landlord is intending to change the use of the dwelling

Notice of Termination and Notice Periods

The notice of termination must give the required period of notice and, depending on the specific ground, may require a statement or statutory declaration to accompany the notice. The requisite notice periods initially set out in section 66 of the 2004 have been amended and Part 2, Section 16(1)(d) of the Residential Tenancies (Amendment) Act 2019 (the “2019 Act”) sets out the new notice periods which should be referred to. Cognisance should also be had of the recent Residential Tenancies (Deferment of Termination Dates of Certain Tenancies) Act 2022 which is dealt with in more detail below and temporarily defers the date of the termination.

Where a landlord was intending to change the use or where it was required for a family member, if the property becomes available for reletting again within 12 months of the expiry of the notice period, then the landlord is required to offer the property back to the tenant again for rent. The landlord is also required to offer it back to the tenant on the completion of works and/or if they do not sell the property within 9 months from the expiry of the notice. Importantly from 6 July 2022, the obligation is on the Landlord to make reasonable efforts to obtain the tenant’s contact details and offer the property back to the tenant where applicable. The landlord must also contact the RTB where they are unsuccessful in contacting the tenant who may be in a position to disclose contact details for the tenant.

The Residential Tenancies (Deferment of Termination Dates of Certain Tenancies) Act 2022

The Residential Tenancies (Deferment of Termination Dates of Certain Tenancies) Act 2022 (the “2022 Act”) came into effect on 22 October 2022. It introduced what is known as “the winter emergency period” which is the period between 30 October 2022 and 31 March 2023. It applies to residential tenancies and licences of student accommodation. The act contains a table of dates and defers the termination date where the termination falls between these dates. The deferred dates are dependent on the length of the tenancy and the specified termination date. Noteworthy is the 2022 Act specifically provides that tenancies that are less than 6 months shall have increased protection and a notice of termination cannot specify a date earlier than 18 June 2023 for termination. A Tenant will not acquire Part 4 Tenancy rights by virtue of the extended time being given.

Important to note is that the deferred date will not apply where the tenant is in breach of their obligations and where the termination notice cites grounds specified in paragraph 1,1A or 2 of the Table to Section 34 of the 2004 Act or where the tenant is in breach of their obligations under section 16 of the 2004 Act.

Paragraph 1,1A and 2 of the Table to Section 34 of the 2004 Act Section 34 grounds are:

1. The tenant has failed to comply with his or her obligations under the lease, having been notified by the landlord in writing of the failure and afforded an opportunity to remedy it
2. The tenant has not paid their rent and the landlord has notified the tenant and the RTB of rent outstanding and the rent has not been paid within 28 days of receipt by the tenant of the notice or receipt by the RTB of the notice whichever is the later
3. The dwelling is no longer suitable to accommodate the needs of the tenant having regard to bed spaces and size and composition of the occupying household

Section 16 of the 2004 Act sets out what a tenant’s obligations are and are listed below. A tenant must not be in breach of any of these obligations if they are to benefit from the deferred date:

1. To pay rent, to pay taxes or charges as applicable under the tenancy agreement
2. Not to cause the landlord to be in breach of their obligations under legislation relating to the tenancy/dwelling by reason of an act or omission of the tenant
3. Allow landlord at reasonable times access for inspection of the dwelling
4. To notify the landlord of any defects or deterioration in the condition of the dwelling requiring repair
5. Allow landlord at reasonable times access for carrying out works which landlord is responsible for
6. Not to cause deterioration in dwelling (normal wear and tear excepted)
7.  To take such steps as landlord may require to restore the dwelling to its original condition or pay the cost of such steps to be taken by the landlord
8. Tenant or visitor(s) not to act in such manner which would invalidate insurance
9. To pay the landlord such increase in the premium where the increase is caused by the act of the tenant or visitor
10. Not to assign or sub-let the dwelling without landlord’s written consent
11. Not to alter or improve the dwelling without landlord’s written consent
12. Not to use the dwelling for another purpose without landlord’s written consent
13. To notify the landlord of the identity of each person residing in the dwelling

What constitutes ‘Improper Conduct’ of the Landlord

Since 1 July 2019 the RTB have been given powers to investigate ‘Improper Conduct’ of the Landlord. These can be categorised as follows:

1. Failure to comply with Rent Pressure Zones (RPZs). Since 11 December 2021 annual increases in rent for dwellings in RPZ’s are capped in line with general inflation or 2% a year, whichever is lower.
2. Seeking to falsely rely on RPZ exemptions. Exemptions can include the dwelling not having been let in the previous 2 years or a substantial refurbishment of the dwelling. There are strict criteria to be met in order to rely on refurbishment as an exemption.
3. Failure to notify the RTB on the reliance on the exemptions within 1 month of setting the rent.
4. Failure to register a tenancy within 1 months of the tenancy commencing and since 4 April 2022 annual registration is required within 1 month of anniversary of the tenancy commencement date.
5. Citing false and misleading misinformation in a Notice of Termination which the Landlord knows is untrue.
6. Failure to offer a tenancy back to the Tenant in circumstances where it becomes available for re-let.
7. Failure to notify the RTB within 1 months of changes of rent for the dwelling.
8. Seeking a deposit in excess of one month’s rent.
9. Seeking an advance payment of rent in excess of one month’s rent.

Sanctions Imposed on the Landlord

The complaint is investigated by the RTB and where it is held that ‘Improper Conduct’ by the Landlord occurred, the appointed Decision Maker will then consider whether or not to impose a sanction as well as the level and nature of the sanction. The Decision Maker can caution a landlord and/or impose a sanction up to a maximum of €15,000. The Landlord may also be directed to pay the costs of the RTB for investigating the matter of up to €15,000. All sanctions imposed must be approved by the Circuit Court. A Landlord has 21 days to appeal the sanction to the Circuit Court. The RTB or Landlord can appeal a Circuit Court decision to the High Court on a point of law.

Other Responsibilities of the Landlord

As well as adhering to the legislation in this area, the Landlord is also obliged to carry out the following when renting a residential property:

• Ensure minimum standards are met in relation to the dwelling as set out under the Housing (Standards for Rent Houses) Regulations 2019
• Register the tenancy every year with the RTB and notify the RTB of any changes in relation to the tenancy
• Provide a Building Energy Rating (BER) certificate for the dwelling
• Provide the Tenant with a rental book or a statement of rent paid
• Insure the dwelling (this does not include tenant’s contents)
• Follow the rules around increasing of rent
• Ensure a valid notice of termination is served and follow the rules around this and
• Submit an annual tax return to revenue

Gain versus the Responsibility

There are varying reasons as to why landlords are selling up. Perhaps some value has now returned to their rental property or indeed the passing of time has allowed for the high mortgages to be paid off. It is only now that these landlords are in a position to see some of the value back and are taking the opportunity to leave the market.

Against the backdrop of having to keep up to date with the many changes in the landlord and tenant legislation, the impossibility of being able to forecast the income generated from residential properties owing to the constant changing legislation, dealing with the RTB on an annual basis, the expense involved in maintaining the property, making annual tax returns, the severe sanctions that could potentially be imposed on the landlord. The list goes on!

It is certainly not difficult to see why so many small private landlords are selling up and leaving the rental market behind. If legislative certainty does not come about in this area, it may well be the case that the larger institutional investors may consider leaving the Irish market too. The apparent gain versus the responsibility on the landlord may not be attractive enough to make the landlord want to stay.

How we can help

If you have any queries or concerns, or would like to discuss the above in further detail, please feel free to contact Siobhán Whelan in our Real Estate Department (swhelan@bhsm.ie / +353 (0)1 440 8339).

This article is for general information purposes. Legal advice must be obtained for individual circumstances. Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.