Legal Briefs: Is It Time For One-Off Landlords To Bale Out?

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WITH house prices on the rise and stricter penalties on the way, Alex Hoffman of Pierse McCarthy Lucey Solicitors asks the question, is it time for one-off landlords to bale out?…

For generations, property was regarded as one of the soundest investments you could make – your money was literally “safe as houses”. Rent would provide a steady income, while the house itself gradually grew in value – at worst it held its own.

The property boom of the noughties brought a whole new dynamic however. Would-be landlords became property speculators.

Stories abounded of houses and apartments being bought off the plans and being flipped on at considerable profit, before they were even completed.

Then came the crash. People who had bought properties with the intention of holding them for a few months and then cashing in on their rise in value now found themselves stuck with properties which they couldn’t sell.

In many cases, people had borrowed heavily to fund their investments and when the market collapsed they had no option but to turn to the rental market. They became the “accidental landlords”.

They had to quickly get to grips with the “dos” and “don’ts” of being a landlord and the new era of regulation and scrutiny brought in by the Residential Tenancies Act 2004.

The Act was widely regarded as swinging the balance of legal favour towards the tenant, and amendments to the Act since then have done little to change that view.

With several, hastily introduced amendments over recent years, mostly designed to further strengthen tenant’s rights and security of tenure in the face of a growing housing crisis, landlords found themselves grappling with an often confusing and overly technical regime and a Residential Tenancies Board (RTB) which they feel is out to get them.

It is any wonder why so many properties have drifted into the world of Airbnb?

On the financial side, the increased rate of income tax, coupled with the introduction of various costs and expenses over the years such as the Non-Principal Private Residence Charge, Local Property Tax, RTB registration fees and Universal Service Charge etc. have all led to ever diminishing returns.

While rental values have certainly recovered in recent years, the fact of the matter remains that unless a person is operating at scale, managing the property themselves and with little or no borrowings to service it is becoming more and more difficult for landlords, particularly those with properties outside of the main urban areas, to justify staying in the game.

For those sitting at home, mulling over their options, they might consider the latest legislative amendment which was signed into law on the 31st of May.

The Residential Tenancies (Amendment) Act 2019 is intended to give effect to a number of objectives set out in the Government’s Strategy for the Rental Sector published in December 2016 and the review of Rebuilding Ireland conducted in late 2017. The Act’s key provisions include:

• increasing the amount of notice which a landlord is required to give when terminating a tenancy;

• increasing the instances where landlords are required to offer properties back to tenants if they become available for rent within certain periods of time;

• making it mandatory for landlords to register tenancies on an annual basis;

• extending the application of certain provisions of the Residential Tenancies Acts to purpose-built student accommodation. This type of accommodation has typically provided by way of licence rather than tenancy and has therefore fallen outside the scope of the legislation and the remit of the RTB;

• giving powers to the RTB to carry out investigations against landlords, even without the need for a complaint from the public, and to impose administrative sanctions;

• the creation of criminal offences for landlords in relation to non-compliance with rent increase restrictions in rent pressure zones and tenancy registration requirements, and non-cooperation with investigations; and

• providing for the mandatory publication of determination orders by the RTB.

While the publication of determination orders is to be welcomed in the sense that it may help to provide clarity and precedent in terms of the RTB’s position on certain matters, it may chill the hearts of many landlords to think that if they step out of line their names could soon be up in lights for all the world to see.

A sobering thought, particularly for those who never wanted to be landlords in the first place.

With property values in certain parts of the country approaching their pre-crash levels, and those who were in negative equity beginning to see some light at the end of the tunnel, how long more before one-off landlords decide that enough is enough and decide to cut their losses and sell up? Who knows, maybe that’s what the Government wants.

• The material contained in this article is for general information purposes only and does not constitute legal or other professional advice. No liability whatsoever is accepted by Pierse McCarthy Lucey for any action taken in reliance on the information contained in this article.