Adding to lease - Tenants liable for future taxes

need-it

Folks,
I would be interested in your opinion on the following:

1) Should a property tax be introduced, do you think it will be the norm that this cost will be passed on to the tenants? Or absorbed by the Landlord?

2) If passed onto the tenants, would it be the norm that a rent increase will be in introduced (and said so in the lease), or that the tenants will pay it directly?


I ask because i'm about to renew a lease for my tenants. It's only 6 months so not much to worry about, but i'm worried that if a new property tax is introduced in January (worst case scenario) and must be paid immediately (I know, I know... but think worst case scenario) that I could get stung for the tax as I did not state anywhere in the lease that tenants are liable for taxes

I would appreciate any feedback on the matter

kkelliher

need-it wrote: »

Folks,
I would be interested in your opinion on the following:

1) Should a property tax be introduced, do you think it will be the norm that this cost will be passed on to the tenants? Or absorbed by the Landlord?

2) If passed onto the tenants, would it be the norm that a rent increase will be in introduced (and said so in the lease), or that the tenants will pay it directly?


I ask because i'm about to renew a lease for my tenants. It's only 6 months so not much to worry about, but i'm worried that if a new property tax is introduced in January (worst case scenario) and must be paid immediately (I know, I know... but think worst case scenario) that I could get stung for the tax as I did not state anywhere in the lease that tenants are liable for taxes

I would appreciate any feedback on the matter

I personally would believe the occupier of the property should pay the tax as otherwise it goes in the face of the "equity" that everyone seems to hang their hat on.

In respect to your post I would believe however that whatever way it is introduced you will not be able to contract out of it or change the basis in that if it is owner who pays then like in other recent legislation (PRTB etc) you cannot contract responsibility to others. The market will also dictate this issue as if it is owner pays, not all lanlords will pass it on and the market as a result will dictate the price set.

Chazz Michael Michaels

It's a tax on an asset. The tenants are leasing the property, they don't own it. I don't see why they should pay anything towards the tax.

sarkozy

In principle, I would think property taxes (and the current household charge) should be paid out of the LL's income. In practice, I've always presumed that LL's will treat these taxes as part of overall expenses, which I believe is unfair.

It's unfair because the cost arising from the tax of owning a property will be borne overwhelmingly by those who do not. If the tax is about people who use services in a locality paying for them, then the case still holds as user charges (e.g. bin charges, as well as electricity, gas) are already paid for by the users. So it's a tax on infrastructure and wealth, not services.

Practically, though, without robust legislation preventing it, I simply see landlords using lease renewals and new tenancies as opportunities to inflate rental prices to cover their costs. In a technical sense, it could be that these rises would be 'out of line' with ordinarily occurring fluctuations in rental prices, which would be illegal, or the tax could be low enough to make those monthly increases to cover the tax marginal, therefore masking what's really going on - shifting the burden from owners to tenants.

My two cents.

I personally would believe the occupier of the property should pay the tax as otherwise it goes in the face of the "equity" that everyone seems to hang their hat on.

In respect to your post I would believe however that whatever way it is introduced you will not be able to contract out of it or change the basis in that if it is owner who pays then like in other recent legislation (PRTB etc) you cannot contract responsibility to others. The market will also dictate this issue as if it is owner pays, not all lanlords will pass it on and the market as a result will dictate the price set.

Are you a landlord? As Chazz says, it is and should be a tax on an asset for reasons I mentioned above. This does not imply 'equity' as you suggest, because an asset is a form of wealth, and those who do not own a house are less 'wealthy' as a result (all other things being equal). I would suggest it's more equitable for property owners to be liable and for it to be illegal to pass this 'cost' on to tenants.

Zamboni

The property charged is paid by the property owner.
Landlord operating costs increasing does not result in rent prices going up.
The market will decide rent prices.

sarkozy

Unless there are measures to prevent the tax from being folded in to 'market prices', I don't see how costs won't get passed on to tenants.

kkelliher

sarkozy wrote: »

Are you a landlord? As Chazz says, it is and should be a tax on an asset for reasons I mentioned above. This does not imply 'equity' as you suggest, because an asset is a form of wealth, and those who do not own a house are less 'wealthy' as a result (all other things being equal). I would suggest it's more equitable for property owners to be liable and for it to be illegal to pass this 'cost' on to tenants.

For the record I have been a Landlord and a Tenant.

I dont believe at any stage that any of the proposals have classed or proposed the tax as a "tax on an asset". This is still under discussion and no cofirmation on how they intend proceeding has been confirmed. There is plenty of discussion currently in government circles as to who should pay, owner or occupier. I welcome your opinion but to state that "It is and should be" is simply your opinion and does not state the current unconfirmed position of government.

The rational behind the need for the "property tax" is to provide for a regular sustainable income for Local Authorities. Therefore the rational behind the tax is in relation to covering the cost of the provision of services in the locality. I believe that this therefore is where the whole issue appears to be falling apart in terms of peoples impressions of a proposed tax as it should not have anything to do with the cost or value of a particular "asset".

"Equity" works both ways. Why should someone who lives in Galway but rents a property in Dublin pay for local authority services in Dublin when they dont use them? Yes I agree they get a benifit from them by been able to rent the property with the services available but I dont believe it is equitable in that instance to make them pay the full amount. It should also be noted that any proposed tax will not be applicable for tax deduction reasons therefore the full amount will be directly payable by the owner/occupier.

quozl

kkelliher, the reason that a property tax is being brought in is because it is part of our memorandum of understanding with the IMF.

That requires us to bring in an asset based property tax.

The reasoning, arguing and posturing coming from our government - that you have described above - is nothing more than politicing to try and offend as few people as possible while doing it.

For example, renaming the current property tax to 'household charge' even though the household does not pay it, the property owner does.

The property owner will be obliged to pay and they may try to pass this on to tenants IF the market will bear it.

sarkozy

Fine, the legislation hasn't been published, and the tax base hasn't been decided. This is nevertheless an important political issue, and I guess I've expressed my view. But not entirely.

kkelliher wrote: »

"Equity" works both ways. Why should someone who lives in Galway but rents a property in Dublin pay for local authority services in Dublin when they dont use them? Yes I agree they get a benifit from them by been able to rent the property with the services available but I dont believe it is equitable in that instance to make them pay the full amount. It should also be noted that any proposed tax will not be applicable for tax deduction reasons therefore the full amount will be directly payable by the owner/occupier.

It's a complex issue alright. Any government needs to balance lots of things. In principle, I think local taxes are a good idea - a mix of local income taxes, local rates, and user charges. These should be introduced on a revenue-neutral basis. It makes sense to me that taxes/charges people pay for local services are collected at source (i.e. within the Local Authority area). This is the essence of a social contract.

Due to our dysfunctional local government system, the household charge is currently being collected by the Local Government Management Agency. In time, it's expected that the property tax will be collected by Revenue. Then the money goes to central government and gets doled out to local authorities to perform their functions, which nobody perceives them to be doing to begin with.

The problem begins with our national governance structure. Arising from this Irish solution to an Irish problem, this local tax issue is yet another Irish solution to an Irish problem, and so the absurdity continues.

Anyway, I don't think a single politician in this country has the guts to have the national conversation we really need to sort out this mess. I believe if people were shown a sensible and rational reform programme involving restoring local government and involving a combination of sensible taxes derived from income, rates and services (the latter only being there in order to modify citizens' behaviours, e.g. recycling), then people could get with it.