Ireland: Real Estate Update: Planning And Development (Housing) And Residential Tenancies Act 2016 Introduced

The Planning and Development (Housing) and Residential Tenancies Act 2016 (the “Act”) has been introduced to deal primarily with the current housing supply shortage and to tackle issues in the rental sector. We examine the key provisions of the Act. 

The key provisions of the Act include:

  • the introduction of a fast-track planning process for developments consisting of 100 or more houses and for student accommodation of 200 or more bed spaces;
  • the potential for a second extension of already extended planning permissions for developments comprising 20 or more houses;
  • the introduction of Rent Pressure Zones (“RPZs”) and rent caps;
  • the extension of Part 4 tenancies from four years to six years;
  • the restriction on landlords terminating tenancies of 10 or more units within the same development within a specified six month period where they intend to sell the properties; and
  • the repeal of the right of landlords to terminate a ‘further’ Part 4 tenancy within the first six months on no stated grounds.

Strategic housing developments

The Act introduces a fast-track planning process for large strategic housing developments. A ‘strategic housing development’ includes the development of 100 or more houses and the development of student accommodation units containing 200 or more bed spaces. An application for the alteration of an existing planning permission where the alteration relates to these types of developments would also qualify for the fast-track planning process. Once the relevant provisions of the Act have commenced, applications for these developments are to be made directly to An Bord Pleanála. For developments located in strategic development zones, applicants may instead choose to make the application to the planning authority.

Rental sector

RPZs and rent cap

Dublin and Cork City have been designated RPZs for a period of three years from 24 December 2016. Additional locations can be recommended as RPZs to the Minister for approval.  All rental increases will be limited in RPZs by reference to a formula set out in the Act.

Whilst the rent cap is described in the Minister’s Rental Strategy as a 4% cap, the exact percentage by which rent can be increased will depend on:

  1. the timing of the rent review; and
  2. the time period between the commencement date of the existing rent or, where it is a new tenancy, the rent that was last set under a tenancy for the property and when the new rent will come into effect.

The cap on rental increases applies to existing tenancies in RPZs when the next rent reviews fall due and to new tenancies in RPZs. Where the property is newly let and has not been let at any time during the two years before the date the area is designated an RPZ (24 December 2016 in the case of Dublin and Cork City), the cap on rental increases does not apply. However, where the property is vacant but has been let at any time in the 24 months before the area is designated an RPZ, the cap on rental increases does apply. On a practical level, particularly where a property has been sold since last occupied, it may prove extremely difficult to establish the last rent paid. It may be the case that market rent will be considered in these circumstances.

The cap on rent increases will not apply where there has been a ‘substantial change in the nature of the accommodation’ since the period the rent was last set such that there would be a change in the market rent for the property. This might include major refurbishments works, for example.

The restriction on the rent not exceeding the market rent still continues to apply.

Frequency of rent reviews

For existing tenancies in RPZs, the previous limit on rent reviews to every two years will cease to apply when the next two year review takes place. After that, annual rent reviews will be permitted. For new tenancies in RPZs, specifically those commencing on or after 24 December 2016, the two year rent review restriction will not apply – rent reviews can take place annually. The two year rent review restriction continues to apply to tenancies located outside RPZs.     

Where a notice has already been served

The rental cap provisions will not retrospectively affect any notice of new rent served on a tenant before 24 December 2016 or where the rent review concerned had commenced before that date.

New information requirements where a new tenancy is being granted in an RPZ

In the case of new tenancies being granted in RPZs, landlords must furnish the following information to the tenant at the start of the new tenancy:

  • the amount of rent that was last set under a tenancy;
  • the date the rent was last set; and
  • a statement as to how the rent set under the tenancy with the new tenant has been calculated having regard to the rental cap formula.

New notice requirements where rent of a property in an RPZ is reviewed

Landlords must include in the new rent notice a statement as to how the rent set under the tenancy was calculated having regard to the rent cap formula.

Extension of Part 4 tenancies

Tenancies have been increased from four years to six years, so that if a tenant has been in occupation of a property for six months, the tenant is entitled to remain in the property for a further five and a half years. This applies to new tenancies created on or after 24 December 2016, including what are called “further” Part 4 tenancies coming into existence on or after that date. A further Part 4 tenancy comes into being when a Part 4 tenancy continues to the expiry of the four year period (for new tenancies this will be a six year period) without being terminated.

Restriction on landlords terminating multiple tenancies in the one development

Where the landlord proposes to sell 10 or more units within a multi-unit development at the same time or within a six-month period, the landlord will not be entitled to terminate the tenancies on the grounds of intending to sell the properties.

This restriction will not apply where the landlord can show that the price to be obtained by selling the property subject to the tenancy is:

  • more than 20 per cent below the market value that could be obtained for the dwelling with vacant possession; and
  • that it would be unduly onerous or would cause undue hardship on the landlord.

This section of the Act has not yet commenced. No termination notices served before the commencement of this section of the Act will be affected.  

Repeal of the right of landlords to terminate a ‘further’ Part 4 tenancy within the first six months

Once a further Part 4 tenancy commences, a landlord will only be entitled to terminate the tenancy on one of the termination grounds. A landlord’s entitlement to terminate a tenancy at the end of each four year (for new tenancies - six year) cycle (before a further Part 4 tenancy commences) will not be affected.

Termination notices served and further Part 4 tenancies commenced on or before the commencement of the relevant section of the Act will not be affected. This section has not yet come into force.

Conclusion

While developers welcome the Government’s steps to fast track the planning system, it will take cooperation by a number of parties, most notably the local authorities and An Bord Pleanála, to ensure that efficient procedures are implemented to complement the provisions in the Act. 

Residential tenants should benefit from the new provisions, particularly the rental increase limits in RPZs and the additional security of tenure they will enjoy. Landlords, on the other hand, having benefitted from unprecedented rises in rents in recent times may see their income curtailed by the new rent cap provisions.

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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