The Residential Tenancies (Amendment) (No.2) Bill was signed into law on 11 December 2021. Its main provisions are summarised in this post.
What is the Bill seeking to achieve?
This Bill has 3 primary purposes, as follows:
- An amendment to the current provisions around rent increases in RPZs, so that those increases will now be to the rate of general inflation evidenced by the Harmonised Index of Consumer Prices (HICP) or 2%, whichever is the lower – in other words, rent increases track inflation, subject to a cap of 2% per annum;
- The introduction of what the Government refers to as “tenancies of indefinite duration” by removing the landlord’s ability to terminate a Part 4 tenancy on a no fault basis at the end of the 6 year period;
- A temporary waiver in respect of annual registration fees in respect of each further Part 4 tenancy that exists on the commencement of the requirement for the annual registration of tenancies with the RTB (expected in Q1 2022).
Rent increase provisions
These provisions amend the current prohibition on any rent increase in an RPZ from exceeding general inflation (as recorded by HICP) to insert a new condition that the rent last set cannot increase by more than 2% per annum pro rata.
A review of this provision is to be carried out between 12 and 15 months after it comes into operation with a report on that review to follow within 3 months.
As was the case previously, the rent-setting restrictions do not apply where a there has been no tenancy of the property for the immediately preceding 2 year period (or 1 year for protected structures). There are no other changes with regard to the setting of rent / RPZ, exceptions, notice provisions etc..
The section also provides for the deletion of the Minister’s power to prescribe an index other than the HICP for the purposes of restricting rent increases in RPZs. The view of Government is that this power is no longer necessary, given the new provisions.
The provisions around rent review commenced upon enactment.
Tenancies of unlimited duration
The Government made a commitment in the Housing for All plan to introduce what it refers to as tenancies of unlimited duration. Having taken the advice of the Attorney General and “taking account of constitutionally protected property rights”, it has introduced the provisions set out in section 5 of the Bill in order to achieve this aim.
Section 5 provides for enhanced tenancy protections on the basis that once a Part 4 tenancy is established it is for an unlimited duration, and not subject to expiry at the end of a six-year term should the landlord exercise their right to terminate the tenancy as currently provided for under section 34(b) of the 2004 Act.
The concept of “further Part 4 tenancies” is also to be removed, as these will no longer be of relevance – where any existing Part 4 tenancy is renewed, rather than commencing a further 6-year Part 4 tenancy it will now become a tenancy of unlimited duration.
As a result of these provisions all Part 4 tenancies will, over time, become of unlimited duration. As existing and further Part 4 tenancies terminate, expire over time or are renewed, this process will involve the creation of a new tenancy of unlimited duration in respect of a dwelling, should it remain in the rental sector.
Existing tenants may seek the consent of their landlord to have their current tenancy treated as a tenancy of unlimited duration. However, the landlord will not be compelled to grant their consent. Where consent is not granted, the existing protections of the Act will apply until the term of the Part 4 tenancy expires. The stated aim of Government is “to transition to tenancies of unlimited duration, while respecting the constitutionally protected rights under section 4 of the Residential Tenancies Acts, 2004 to 2021”.
There are no changes to the bases upon which a landlord can otherwise terminate a Part 4 tenancy – for example, the sale of the property, its substantial refurbishment etc.. The change that the Government has made is therefore a limited one, removing the landlord’s ability to terminate on a “no fault” basis at the end of the 6 year period.
Section 6 provides that the duration of tenancy under any tenancy of unlimited duration and under any preceding Part 4 tenancy and/or further Part 4 tenancy would be treated as one tenancy in calculating any termination notice to be given. This is intended to maximise the termination notice period to be given to a tenant.
Both provisions will apply prospectively in respect of tenancies commencing from 11 June 2022.
Waiver of annual registration fees
Section 7 amends section 134 of the 2004 Act, regarding the obligation to apply to register a tenancy. It provides that, subject to conditions, where a landlord applies to register a further Part 4 tenancy before the commencement date of the requirement for annual registration under sections 22 and 23 of the Residential Tenancies (Amendment) Act 2019 (expected in quarter 1 of 2022), and where that tenancy still exists on that date, no annual registration fee shall apply in respect of that further Part 4 tenancy only. Any new tenancy of unlimited duration that commences will be liable to an annual registration fee.
To be eligible for the temporary fee waiver, any outstanding registration fee associated with the relevant application to register a further Part 4 tenancy prior to the roll-out of the annual registration must be paid within one month of the commencement of the requirement to register tenancies annually. The temporary annual registration fee waiver is being provided for existing further Part 4 tenancies in recognition of the registration fee payments already made to date in respect of relevant tenancies.
The commencement of this provision requires ministerial order, with the Government’s stated intention being to commence it at the same time as the commencement of the requirement under the Residential Tenancies (Amendment) Act 2019 for annual registration of tenancies with the RTB. This is expected to take place in Q1 of 2022.
For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer or any member of A&L Goodbody’s Real Estate team.