The Planning and Development (Housing) and Residential Tenancies Act 2016 signed into law effective from the 24th of December 2016 regulates the frequency and the amount of rent set in rent reviews.
The concept of a rental pressure zone (RPZ) has been introduced for the first time. This allows the Minister for Housing to designate certain parts of the country as RPZ where the setting and review of rents in these areas is capped at a 4% increase per annum.
Newly built houses and substantially refurbished properties, and previously unlet properties are not covered by these new measures.
Rent Control Formula
In an RPZ the new rent to be set, whether in a rent review or on a new tenancy, cannot exceed the amount determined by the following formula
Rx (1=0.04 x t/m)
M is either
24 – where the tenancy is in existence prior to December 24th 2016 as a review is permitted only 24 months after it has been created.
12 – where the tenancy is new or was created after December 24th 2016.
T is the number of months between
- The date the current rent was set, or
- The date the last rent was set where there is no existing tenancy but there has been a tenancy in the two year period prior to December 24th 2016 and
- the date the new rent will come into effect.
R is the amount of the last rent set.
Any rents which are set are also subject to an overreaching principle in that the rents cannot exceed what would be the local market rent for similar properties. This restriction applies to all tenancies, whether or not they are situated within an RPZ.
Landlords are strongly advised to read the provisions of the Planning and Development (Housing) and Residential Tenancies Act 2016.
Commencement and Application of Rent Control
The new provisions will apply to:
1. Setting of rents after December 24th 2016 including new tenancies and rent reviews.
2. All tenancies or dwellings located in an RPZ from 24th December 2016.
The new provision will not apply to:
1. Where there is no tenancy in the two year period prior to designation as RBZ to the house has been vacant in the two year period prior to designation as an RPZ i.e. from the 24th of December 2014 to the 24th of December 2016.
2. If a new tenancy in an RPZ is entered into after the 24th of December 2016 but the dwelling was not let during the period from the 24th of December 2014 to the 23rd of December 2016.
3. Newly constructed properties are not subject to the rent control provisions.
4. Substantial refurbishment since the rent was last set, where the substantial refurbishment would result in an increase of the market rent of the house.
5. Rent review notice served prior to the 24th of December 2016.
Frequency of permitted rent reviews.
1. For existing tenancies in all areas the first rent review cannot take place only after the expiration of two years.
2. For subsequent rent review in RPZs the rent review can take place annually but a two year period continues to apply for tenancies outside RPZs. For the duration of the rent predictability measures introduced under the Residential Tenancies (Amendment) Act 2015 rents cannot be reviewed four years from the 24th of December 2015.
3. For tenancies created after the 24th of December 2016 rent reviews are permitted annually.
4. The notice to increase rent must be served after the expiration of the one or two year period.