The Minister introduced a number of changes affecting both landlords and tenants as part of a rental strategy and these measures came into law on 24th December 2016. The Rent Predictability Measure is intended to moderate the rise in rents where rents are highest and rising. The entire of Co. Dublin is included in this and as of 24.12.2016 rents will only be able to rise by a maximum of 4% annually.
The only exception to these measures is properties that are new to the rental market and properties that have been substantially refurbished.
New to the rental market: Properties that have not been rented in the past 24 months.
Substantial Refurbishment: Major building works or works requiring planning permission. For example, simple repainting or replacement of white goods would not be sufficient.
As we primarily deal with Co. Dublin, I am not going to discuss other counties.
Going forward, how will we calculate rental increases?
When a rent review is due, the amount cannot be greater than the amount determined by the below formula, the existing requirement that the rent set is not above the local market rents for similar properties still applies and three examples of rents for similar properties in the locality must be presented to demonstrate this.
R x (1 + 0.04 x t/m)
*please note that you should do your calculations working from right to left
R = The amount of rent last set under a tenancy for the dwelling (the current rent amount)
t = The number of months between the date the current rent came in to effect and the date the new rent amount will come in to effect.
m = you must enter 24 OR 12 depending on the duration since the last review.
What if your tenant’s rent has not been reviewed in the past 24 months?
For tenancies that are already in existence, a review is only permitted 24 months after the tenancy came in to existence or 24 months from the date the rent was last set. In this instance m = 24. For this initial rent review after the 24 month period as specified above a maximum rent increase of 4% will apply. (This amounts to 2% per annum applied pro-rata for the period since the rent was last increased).
Following on from this initial review after 24 months, a landlord is now entitled to review the rent every 12 months.
What about new tenancies beginning after 24th December 2016?
Landlords of all new tenancies commencing on or after 24th December 2016 are entitled to review the rent annually. In this instance m = 12. If rent reviews take place annually the permissible rent increase in each case will be 4%. If, for example, a landlord opts to review the rent after 18 months (instead of one year) the allowable increase will be 6% (4 % per annum pro-rata for 1 ½ years).
Can we review the rent to market rent when looking for a new tenant?
No, the above formula must be used when calculating the new tenants rent and the new tenant must be given the following, in writing, when entering the tenancy:
(i) The amount of rent that was last set under a tenancy for the dwelling;
(ii)The date the rent was last set under a tenancy for the dwelling;
(iii) A statement as to how the rent set under the tenancy of the dwelling has been calculated having regard to the rent pressure zone formula.
The only exception to these measures is properties that are new to the rental market and properties that have been substantially refurbished.
Below are examples of how the formula applies in different situations:
Example 1:
Tenancy commenced 1 November 2014, over 24 months ago. The landlord intends to serve a rent review notice on 1 January 2017, providing a minimum of 90 days notice and indicating that the change will take effect from the 3 April 2017.
The following formula is used to ascertain the permitted increase:
R = €1,200.00 (the current rent amount)
t = 29 months (period between 1/11/14 to 3/04/2017)
m = 24 months (as a review of the rent has not occurred for a min. of 24 months)
Therefore:
1200 x (1 + 0.04 x 29/24)
29/24 = 1.21 then
x 0.04 = 0.05 then
+ 1 = 1.05 then
x 1200 = 1258
1,200 x (1 + 0.04 x 29/24) = €1,258 is the new rent amount permitted
*please note that you complete your calculations working from right to left
Example 2:
Tenancy commenced 1 January 2015; landlord served a rent review notice on 1st January 2017 following the 24 month minimum rule, with the new rent coming into effect on 3 April 2017. The landlord will now be entitled to serve a new rent review notice on 1 January 2018 by serving a minimum 90 days notice of rent review indicating that the change will take effect from the 3 April.
R = €1050, the current rent amount
t = 12 months (3/04/17 to 3/04/2018)
m = 12 months
Therefore:
1050 x (1 + 0.04 x 12/12)
12/12 = 1 then
x 0.04 = 0.04 then
+ 1 = 1.04 then
x 1050 = 1092
1050 x (1 + 0.04 x 12/12) = €1092 is the new rent amount permitted
*please note that you should do your calculations working from right to left
Example 3:
Tenancy commenced 1 January 2015; landlord served a rent review notice on 1st January 2017 following the 24 month minimum rule, with the new rent coming into effect on 3 April 2017. The landlord will now be entitled to serve a new rent review notice on 1 January 2018 by serving a minimum 90 day notice of rent review. The landlord does not serve the rent review notice until 1 June 2018 indicating that the change will take effect from the 3 October 2018.
R = €1100, the current rent amount
t = 18 months (3/04/17 to 3/10/2018)
m = 12 months
Therefore:
1100 x (1 + 0.04 x 18/12)
18/12 = 1.5 then
x 0.04 = 0.06 then
+ 1 = 1.06 then
x 1100 = 1166
1100 x (1 + 0.04 x 18/12) = €1166 is the new rent amount permitted
*please note that you should do your calculations working from right to left
Example 4.
Tenancy commenced 29th December 2016; landlord is entitled to serve a rent review notice on 29th December 2017 providing a minimum of 90 days notice. The new rent will come into effect on 5th April 2018.
R = €1300, the current rent amount
t = 12 months (29/12/16 to 5/04/2018)
m = 12 months
Therefore:
1300 x (1 + 0.04 x 12/12)
12/12 = 1 then
x 0.04 = 0.04 then
+ 1 = 1.04 then
x 1300 = 1352
1300 x (1 + 0.04 x 12/12) = €1352 is the new rent amount permitted
*please note that you should do your calculations working from right to left