Ireland: Real Estate Update: The Residential Tenancies (Amendment) Act 2015

1 Introduction

The Residential Tenancies (Amendment) Act 2015 (the "Act") was signed into law by the President on 4 December 2015. The Act introduces a number of provisions affecting residential tenancies that will have a direct and significant impact on landlords and tenants.

Some of the substantial changes brought about by the Act have commenced immediately. In particular, the restriction on rent reviews to once every two years and the changes to the notice periods for termination of tenancies now apply.

Other provisions will require a Ministerial order before they come into operation. The security deposit retention scheme has not yet commenced.

This memorandum describes some of the principal changes brought about by the Act.

2 Background

The Act amends the Residential Tenancies Act 2004 (the "2004 Act") in a number of significant respects. Its aim is to assist in bringing stability to the rental sector and to combat the increasing level of homelessness.

3 Principal amendments

The main changes brought about by the Act are:

1. the restriction on rent reviews to once every 24 months (instead of 12 months);

2. the changes to the notice periods required to be given by landlords and tenants when terminating tenancies and to the documentary requirements;

3. the introduction of a security deposit retention scheme, requiring tenants' security deposits to be transmitted by landlords to the Residential Tenancies Board (formerly called the Private Residential Tenancies Board)(the "Board"); And

4. the expansion of the 2004 Act to include tenancies by approved housing bodies.

3.1 Restriction on rent reviews

The new rent review provisions came into operation on 4 December 2015.

The principal aspects of the new provisions are:

1. rent reviews may only take place once every 24 months and cannot take place within the first two years of a tenancy (section 25(1) of the Act). This restriction will not apply where there is a substantial change in the nature of the accommodation provided which affects the market rent (section 20(3) of the 2004 Act);

2. if a tenancy commenced before this section came into force and where:

(a) less than 12 months has elapsed of the tenancy, there may not be a review of the rent for a period of 24 months from the start of the tenancy;

(b) a period of 12 months has elapsed and no rent review has been carried out, a rent review may not occur any earlier than 24 months from the start of the tenancy;

(c) a review of rent was carried out pursuant to section 20(3) of the 2004 Act (where the nature of the accommodation changed to the extent that the market rent was affected) and that was the most recent rent review, a rent review may not take place any earlier than 24 months from that last review; and

(d) one or more rent reviews have been carried out, a review of the rent may not occur any earlier than 24 months beginning on the date of the last rent review;

3. the two year restriction will not apply where:

(a) a review of rent was "being carried out" in accordance with section 20 of the 2004 Act before the section came into operation (before 4 December 2015). There is no description in the Act of what constitutes "being carried out"; or

(b) where a review of rent has been carried out and a notice of the reviewed rent was served on the tenant (under section 22(2) of the 2004 Act) prior to 4 December 2015. This notice is the notice required to be served by a landlord on a tenant before the new rent is to have effect.

4. the restriction on rent reviews to once every 24 months will only apply for a period of four years from the commencement of the section (from 4 December 2015). After this time, the restriction on rent reviews will revert back to once every 12 months;

5. the notice period before a rent review comes into effect has been extended from 28 days to 90 days (section 26(1)(a)(i) of the Act, which has come into force immediately). For any notices already served, the 28 day period will still apply. The Act has also made changes to the required content of the notice to be served on tenants (section 26(1)(b), which is not yet in force); and

6. the content of the notice that has to be provided to the Board after a rent review has changed and the notice must be signed by both the landlord and the tenant (section 63, amending section 139 of the 2004 Act). This section has not yet come into force.

3.2 Termination of a tenancy

(A) Part 4 tenancy

A tenancy is deemed to be a Part 4 tenancy if the tenant has been in continuous occupation of a dwelling for longer than six months. Tenancies work on 4 year cycles so that once a tenant has been living in a property for more than 6 months, the landlord may only end the tenancy on certain restricted grounds during the next 3 ½ years. At the end of the four years, the tenancy is deemed to start again and there is a window of six months within which the landlord can terminate the tenancy without specifying a reason. This is subject to the provisions of any fixed term tenancy agreement.

(B) Grounds for termination

The grounds for termination by a landlord of a tenancy have not changed. These are set out in the Table to section 34 of the 2004 Act. They are (i) the tenant has failed to comply with any of its obligations, (ii) the dwelling is no longer suitable to the accommodation needs of the tenant, for example, it has become too small, (iii) the landlord intends to sell the property, (iv) the landlord requires the dwelling for their own occupation or for that of a family member and (v) the landlord intends to substantially refurbish or renovate the property.

(C) Changes in termination requirements and notice periods

There have been a number of changes made to the termination provisions.

1. The notice periods have changed with immediate effect (section 31 of the Act). Below are two tables showing the old and new termination periods which apply when a tenancy is being terminated (on grounds other than for a breach of a tenant's obligations). The new termination periods will not apply to any termination notices that have already been served.

2. Where a tenancy is being terminated by a landlord because a tenant has breached its obligations, the following notice periods apply:

(a) in the case of anti-social behaviour or behaviour threatening the fabric of the property – 7 days; and

(b) in the case of all other breaches – 28 days. Where the breach is the non-payment of rent, the landlord must have served a notice advising the tenant that the rent due has not been paid and 14 days must have elapsed without the arrears having been paid.

3. Where a landlord wishes to terminate a Part 4 tenancy because they are selling the property, they require the property for their own occupation or for that of a family member, or where they intend to renovate the property, the notice to the tenant must be accompanied by a statutory declaration. Sections 28 and 29 of the Act set out the detail required to be contained in the statutory declarations and some additional detail required to be contained in the statements accompanying the notices. These sections have not yet come into force.

3.3 Security deposits to be paid over to the Board

The Act provides for a security deposit retention scheme, requiring security deposits to be paid over by landlords to the Board. These provisions have not yet come into force. We anticipate that they will come into force in early 2016.

There are a number of sections in the Act dealing with security deposits. The main provisions are highlighted below.

(A) Obligation to transmit deposits to the Board when registering tenancies

Landlords must transmit deposits to the Board when registering tenancies or provide a statement, in a prescribed form, confirming that no deposit was paid by the tenant to their landlord on entering into the agreement for the tenancy or lease. Sections 16(d) and 61 of the Act set out the requirements in this regard.

(B) Obligation to transmit deposits where tenancies are already registered

For tenancies already registered, landlords will be obliged to either remit the deposit paid by a tenant to the landlord on entering into the agreement for tenancy or lease or provide the statement described in paragraph 3.3(A) above to the Board within six months of sections 23 and 64 of the Act coming into force. These transitional provisions are set out in section 64 of the Act, inserting section 148P into the 2004 Act. If the tenancy has already been terminated or there has been a termination notice served in respect of the tenancy, there will be no requirement to transmit the deposit or provide a statement to the Board.

(C) Notification requirements – section 23 of the Act

For the purposes of returning the deposit to the tenant and ascertaining if there has been any breach of a tenant's obligations under section 12(4) of the 2004 Act (payment of rent and repair obligations), landlords must:

1. respond to the notification of the Board relating to the return of the deposit;

2. provide information to the Board of any default specified in section 12(4) (rental arrears or any costs of restoring the dwelling to its original condition - normal wear and tear excluded);

3. notify the Board of any change in their address for correspondence; and

4. notify the Board "on or as soon as practicable" after the end of the tenancy with a statement that they require a default referred to in section 12(4) to be taken into account by the Board. This notification must be sent to the tenant at the same time that it is sent to the Board.

(D) Procedural rules relating to the return of deposits by the Board

Section 64 of the Act, introducing new sections 148A to 148Q into the 2004 Act, sets out the various procedural rules relating to the return of deposits. These sections set out the circumstances in which the Board will return deposits, how applications for return of deposits are made, what happens when the parties are in disagreement over the return of a deposit etc. These provisions would have to be considered in detail when dealing with an application for the return of a deposit.

(E) Failure to transmit the deposit to the Board

Where a landlord fails to transmit the deposit or provide the statement confirming no deposit was paid (as mentioned in paragraph 3.3(A) above) and then fails to comply with the notice that the Board issues, they are guilty of an offence (sections 61 and 64). There is no penalty specified in the Act.

(F) Method of payment of deposits to the Board

The method of payment of deposits to the Board has not been stipulated in the Act. The Act provides that the Minister may make regulations relating to the manner in which deposits are to be paid.

(G) Timelines

The Act does not prescribe the time periods within which the landlord and the tenant must respond to the notification about the deposit or provide required information to the Board etc. The time periods will be prescribed in regulations to be introduced by the Minister.

The Act provides that the Board will return the deposit "as soon as practicable". There is no fixed time limit for the return of deposits by the Board.

(H) Interest accruing on deposits

The Board will be retaining any interest earned on deposits and using it to "meet the costs of the performance by it of its functions under this Act" (section 65).

3.4 Tenancies by approved housing bodies

The Act broadens the application of the 2004 Act to tenancies granted by approved housing bodies to households qualifying for social housing support. Such tenants will now have the security of tenure and rights afforded to them under the 2004 Act, subject to certain restrictions. The approved housing body, as landlord, will be subject to the obligations of landlords arising under the 2004 Act. The Act sets out specific rent review provisions for these types of tenancies (sections 6, 7 and 8 of the Act).

3.5 Conclusion

The Act has introduced substantial changes to the law governing residential tenancies. In particular, landlords will feel the financial impact of the restrictions on rent reviews in a market where rents are still on the rise. The new restrictions on rent reviews are intended to be in place for a period of four years only. Interestingly, the Act does not provide any right for tenants to call for earlier rent reviews in the event that market rents decline during this period.

It will remain to be seen how the security deposit retention scheme will work in practice. It introduces a whole new layer of bureaucracy and paperwork for landlords. Instead of speeding up the return of deposits, it may, in some cases, lead to additional delays. This is particularly given the lack of a set time frame within which the Board must return deposits. It may also cause cashflow issues for landlords with multiple tenancies, with security deposits having to be paid over to the Board within six months of the relevant provisions coming into force.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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