The Residential Tenancies (Amendment) Act 2021 (the “Act”) was enacted by President Higgins on 11 December 2021, providing for an amended cap on rent increases in rent pressure zones (“RPZs”) and the introduction of tenancies of indefinite duration. New fee arrangements in respect of certain registrations were also introduced on a temporary basis.
Rent Calculation and Rent Increases
Following on from recent changes over a number of Acts in 2020 and 2021, the Residential Tenancies (Amendment) Act 2021 further amends Section 19 of the Residential Tenancies Act 2004 (the “2004 Act”) by replacing the cap on rent increases in RPZs so that increases are now limited to the rate of inflation or 2% per annum, whichever is lower.
The Act prohibits:-
- Rent increases where the new rent exceeds the old rent by more than 2% of the old rent in respect of each year since the previous setting of rent; and
- Rent increases where the ratio of new rent to old rent exceeds the ratio of current inflation, as measured by the Harmonised Index of Consumer Prices (“HICP”), to the previous HICP value. The HICP values are to be published each month by the Residential Tenancies Board (the “RTB”).
The RTB had previously been tasked with the implementation of a rent review calculator and it is expected that the new provisions will be incorporated into that online system to easily show the permitted rent increases that may apply on setting rent or on rent review.
These provisions came into effect on 11 December 2021, although they do not apply to properties which already qualified for exemptions; including properties which have not previously been rented, properties which have been substantially refurbished and properties which have not been rented for two years (reduced to one year in the case of protected structures) prior to the commencement of a tenancy. Where an exemption applies, market rent may be set notwithstanding that such rent will fall outside the limits placed by the Act.
Tenancies of Unlimited Duration
The Act also amends Part 4 of the 2004 Act and creates a new category of tenancy; tenancies of unlimited duration.
For any tenancy commencing after 11 June 2022, the tenant will have a right of occupation for an unlimited duration unless the tenancy is validly terminated for a reason governed by Section 34 of the 2004 Act. The effect of the amendment is therefore to end the current practice where Part 4 tenancies would end after six years and a new tenancy known as a Further Part 4 tenancy would arise if no steps were taken to end that tenancy.
Any tenancy existing prior to 11 June 2022 will continue to be be governed by the Part 4/Further Part 4 regime until the commencement of the new provision and landlords can legitimately terminate such tenancies by serving notice without any grounds necessary. Landlords may also consent to treating existing tenancies as tenancies of unlimited duration effective on written notice served on the tenant.
Temporary Registration Fee Waiver
Section 7 of the Act amends Section 134 of the 2004 Act to provide that the annual registration fee associated with the obligation to register a tenancy will temporarily be waived when landlords apply to register a Further Part 4 tenancy before the requirement for annual registration commences, expected to be in Q1 of 2022. In order for the waiver to apply, any outstanding fees associated with an application must be paid within one month of the commencement of Section 7. The temporary waiver applies only to Further Part 4 tenancies and all new tenancies of unlimited duration will be liable to pay the annual registration fees.
The Residential Tenancies (Amendment) Act 2021 is a further attempt by the Government to introduce a dampening effect on residential rents in RPZs. It also sees the introduction of the first statutory tenancies of indefinite duration. Despite recent changes attempting to curb annual rents, national rent levels had increased 6.8% year-on-year in Q3 of 2021, with some counties showing an average rent increase in double digits year-on-year in Q3. It remains to be seen what impact these new provisions will have on the rental market. Given that the introduction of tenancies of unlimited duration will not automatically arise until late Q2 of 2022, any impact on market rents is unlikely to occur for some time yet.