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Substantial Refurbishment Explained

Can Substantial Refurbishment or the Substantial Change Exemption be a practical way of increasing the rent that your investment property is achieving? Since our last blog on this topic there have been some big changes and so we will take a look at the regulations again.

We have spoken with the RTB, received legal advice and we have represented clients in many RTB adjudications and tribunals related to this topic. It is important to note that this is not an exact science. We have been successful and unsuccessful along the way and each time we learn something new.

NOTE – In this blog we are looking the Substantial Change Exemption only, the blog does not related to terminating a tenancy. 

The following is grounds for reviewing the rent under the act: “a substantial change in the nature of the accommodation provided under the tenancy occurs, and the rent under the tenancy, were it to be set immediately after that change, would, by virtue of that change, be different to what was the market rent for the tenancy at the time the rent was last set under a tenancy for the dwelling.”

Simply put, the works must be sizable or costly, they must change the features, character or quality of the property, and the works must increase the market value of the property.

In general, works that would be expected as part of ongoing maintenance will not constitute a substantial change in the nature of a property. Painting, replacing curtains, replacing appliances, replacing carpets etc all fall under the category of ongoing maintenance. However, they may suffice as a substantial change if used in conjunction with a number of improvements.

Below is a table provided by the RTB showing an outline of works that may be considered improvements. The RTB has grouped them into two categories “Likely” & “Unlikely” to constitute a substantial change.  It is  important to note that they also state on this table that a combination of a number of improvements from the “unlikely” section may suffice as a substantial change.

So as you can see the “guidelines” are not very concrete. However, from our experience there are a few things that you can do which will give you the best chance of meeting the criteria set out.

  1. Get a written rental valuation of the property.
  2. Take photographs of the property before and after works.
  3. We would recommend a minimum of three items from the above tables.

So let’s take a sample property and complete a substantial upgrade –

No. 1 Sample Street
The market rent for a property like this is €1800.00 per month and the current rent is set at €1250.00 per month.

The owner will complete a number of works at a cost of €11,000.00

  1. They will change the separated kitchen/dining room into one open plan space
  2. They will install a new modern kitchen, breakfast bar and eco friendly appliances.
  3. The change in layout will require new flooring so they will install new tiles and wooden flooring.
  4. They will redecorate the entire property.

The works take 2 months to complete at a cost of €2500.00, bringing the total cost of the works to €13,500.00

These works are costly, change the features and they would increase the rental value of the property. They would qualify for the Substantial Change Exemption. 

No. 2 Sample Street
The market rent for a property like this is €1800.00 per month and the current rent is set at €1250.00 per month.

The owner will complete a number of works at a cost of €10,000.00

  1. They install a new modern gas boiler and new radiators throughout the property.
  2. They retrofit insulated plasterboard on the exterior walls of the property.
  3. They will re-skim the exterior walls and redecorate the entire property.
  4. They insulate the attic space.
  5. They significantly improve the BER.

The works take 2 months to complete at a cost of €2500.00, bringing the total cost of the works to €12,500.00

These works are costly, improve the quality and they would increase the rental value of the property. They would qualify for the Substantial Change Exemption. 

No. 3 Sample Street
The market rent for a property like this is €1800.00 per month and the current rent is set at €1250.00 per month.

The owner will complete a number of works at a cost of €5,000.00

  1. They will upgrade the kitchen with new doors and a new worktop.
  2. They will replace the suite of furniture in the living room.
  3. They will redecorate the entire property.

These works are not substantial enough and do not change the nature of the property. They would NOT qualify for the Substantial Change Exemption. 

Give us a call if you’re considering a Substantial Refurbishment, not only can we advise on it but our maintenance team can quote for the works too.

Note: This guide is for information purposes only.  You should always seek legal advice and never execute any documents without having first having sought advice.

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