Real Estate Update: 2018 in Review – Focus on Housing
11 December 2018
2018 saw the continuation of a housing crisis in Ireland. The Irish government introduced several new initiatives designed to stimulate the residential sector. We take a look at some of these initiatives and look ahead to 2019.
Potential developments in tenant protections
In this section, we examine some of the proposed amendments to the Residential Tenancies Act 2004 as envisaged by:
- The Residential Tenancies (Greater Security of Tenure and Rent Certainty) Bill 2018
- The Residential Tenancies (Amendment) Bill 2018
- The Residential Tenancies (Student Rents, Rights and Protections Bill) 2018
The Bills are currently before the Second Stage of Dáil Eireann. If passed, they could have serious implications for landlords of residential properties including receivers.
Residential Tenancies (Greater Security of Tenure and Rent Certainty) Bill 2018
This Bill seeks to provide tenants with greater security of tenure and rent certainty. One of the most significant provisions is the proposed extension of the definition of “Landlord” to include receivers. The aim is to introduce certainty to the relationship between receivers and tenants. If this Bill is enacted, receivers would be obliged to comply with the terms of residential tenancy agreements to include maintenance of the premises and return of security deposits.
This Bill also proposes to amend section 34 of the Residential Tenancies Act 2004, which sets out the grounds under which a landlord can terminate a residential tenancy. Currently, a landlord can terminate a tenancy where it is intended to sell the property within three months of termination of the tenancy. The Bill deletes this provision with the result that, where a tenant has acquired a Part 4 tenancy, a landlord or receiver would be required to sell the property with the tenant in situ. The Bill also seeks to extend the Part 4 tenancy to one of indefinite duration unless there are permissible grounds for termination.
Residential Tenancies (Amendment) Bill 2018
The most important provision of this Bill is the proposed amendment to the minimum notice periods which landlords are obliged to give under the Residential Tenancies Act 2004. This Bill seeks to triple the existing notice periods. The Bill would also, if enacted, require that the Private Residential Tenancies Board to maintain and permit tenants to inspect records relating to all residential properties registered with the Board including the rent payable, the address of the property and the landlord’s PPS number.
Residential Tenancies (Student Rents, Rights and Protections Bill) 2018
The aim of this Bill is to allow students living in student-specific accommodation under a licence to avail of the rights and remedies set out in the Residential Tenancies Act 2004 including access to the Residential Tenancies Board and inclusion in rent pressure zones. The Bill seeks to broaden the definition of “tenancy” in the Residential Tenancies Act 2004 to include licenses for student-specific accommodation.
These Bills are ‘Private Members’ Bills’, namely bills that were initiated by individual lawmakers, not by the Government itself. It is therefore possible that they may not progress further without government support.
There is also a Government-sponsored Residential Tenancies (Amendment) Bill in the pipeline which is likely to address some government approved aspects of the current Private Members’ Bills. This bill was included as priority legislation in the Autumn Government Legislation Programme
You can view our article re the above Private Members’ Bills here.
Residential development in vacant commercial premises
The Planning and Development (Amendment) (No. 2) Regulations 2018 were introduced by the Irish Government as part of the Rebuilding Ireland Action Plan in February of this year. The Regulations were intended to provide a mechanism for fast and effective conversion of existing vacant commercial units to residential use.
For a property to qualify for the exemption, it must fall within a specified class of use and have been vacant for two years prior to the date of commencement of works. The acceptable classes of planning permission include use as a shop, as an office and as a guesthouse/ hostel. Warehouses and buildings for light industrial use were excluded.
There are certain other conditions which must be complied with. These include:
- Works should be to the interior only and not materially change the external appearance of the building
- Ground floor works must comply with the relevant local authority development plan
- There may be no more than 9 residential units per property
- Habitable rooms must have natural light
- The units must comply with minimum floor area and storage requirements
The relevant local authority must be notified in writing two weeks prior to the commencement of change of use and any related works. All works must be completed before 31 December 2021.
For more information on these regulations, see here.
Social Housing Leasing Scheme
The Enhanced Long Term Social Housing Leasing Scheme targets private sector investors holding a minimum of 20 houses or apartments (Units). Proposers may only put forward to the Housing Authority Units newly built or yet to be built and which have not been leased or rented within the previous 12 months.
Units built under the scheme will be according to an Agreement for Lease with the local authority, leaving little room for negotiation. Provisions of the Multi-Unit Development Act 2011 must be complied with in relation to the establishment of owners’ management companies. On practical completion of construction, the Proposer grants a Lease to the local authority for a term up to 25 years. The Proposer has no contractual relationship with the home occupier as the local authority is the Landlord for the occupier and pays rent directly to the Proposer. The maximum proposed rental yield is 95% of the current market value rent. Rent reviews occur every 3 years in line with CPI.
The local authority is liable for a contribution towards repair costs, which exceed a "Qualifying Threshold", incurred by a Proposer for damage caused willfully or intentionally by a home occupier. The repair costs must exceed a "Qualifying Threshold" proposed to be calculated as a percentage of annual rent. The local authority's contribution is capped in the Lease at 50%.
The Irish Government anticipates that this scheme will see the delivery of 10,000 social houses as part of its Rebuilding Ireland Action Plan. We discuss this scheme in greater detail here.
The key trend in 2018 has been the continued emphasis on the need for housing construction. The issues of supply and demand are so fundamental that the residential sector appears relatively immune to international market forces such as Brexit.
We see 2018 trends in the residential sector continue into 2019, namely:
Continued strong investment in the residential sector to include PRS, student accommodation and social housing and corresponding pressure on prices and rents
Further legislation and other government efforts to control prices and rents and increase supply
A continued resurgence in residential development as investors seek new opportunities in the residential sector
Government promotion of residential property development
2019 will also see the commencement of the vacant sites levy. A levy of 3% per cent of the value of the land will be charged by the local authorities on land that could be used for housing. This levy will increase to 7% in 2020.
The Department of Housing estimates that more than €27 million could be raised by the four Dublin local authorities in 2020. It remains to be seen how the levy will be charged and recovered and how it will affect investment and development.
For more information, please contact a member of our Real Estate team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.