Rent increase, thoughts

Maximus_1

Hi there fellow boarders,

I am nearing the end of a 12 month lease in a nice house where I live with my wife and baby son, its a rural village in the west and we are happy there. We currently are house hunting but wont be in a position to buy for at least 6 months and maybe more depending on how the market looks then, I'm not in a huge hurry just saving hard and talking to some banks re what we'd get approved for.

Anyway, rent is currently €500 and we have paid it without fuss for the year, model tenants and landlord knows that. Rang him to discuss extending lease by 6 months with a view to a possible 6 more. He is happy with that but wants an increase in rent to €560 to cover the rising costs of being a landlord, we all know what they are. We are obviously against this whilst don't want the hassle of having to move for what may only be 6 months.

Is this a trend people are seeing due to stuff like property tax, passing it onto tenants where possible. I have said to him we will think about it but obviously no way I am paying that increase to be honest. Its a nice house and all but its in the sticks! (just where I like it!)

djimi

How rural are we talking and how likely is the landlord to find a new tenant any time soon? If the place is likely to be empty for a month or more then they stand to lose €500 in an effort to make not much more than that over the next year. Maybe use that to your advantage when negotiating.

You also need to take a look at the general market rental price in the area; what is the average for similar properties in your area (I appreciate that there may not be much of a rental market in a rural village to gauge the average price). The landlord is not allowed to raise the rent above the average market rental price. €60 probably isnt pushing much beyond the average if what you are paying currently is reasonable, however if you are already paying a high price then they dont have much/any room to increase.

gaius c

If the increase is not in line with market rents in the area, you have grounds for an appeal to the PRTB.
Even if it is in line with market rents, you could still appeal and it takes at least 6 months before the appeal is heard and you continue paying the original rent until the appeal is heard.

Personally, I would be slow to agree to it as rents outside urban areas are falling/stagnant at best and a 12% increase in rent in a rural area is extremely steep. Rents are dictated by supply/demand, not the landlord's costs.

You also don't need to sign a new lease as you are entitled to a part 4 tenancy.

Maximus_1

Thanks for the replies folks. Its pretty rural (no shop for 4 miles for example) and nearest big town 20. A guy in the same estate was looking for €600 for his house, it was vacant for quite a few months so I'm guessing he had to sup on a dose of reality.

He would do well I'd say to find a replacement in a month, I know this, and he knows that I know this. His logic is that his costs have gone up and that its a well finished house etc but my opinion is that its not really my problem, he choose to be a landlord, there are costs involved which fluctuate etc.

On the plus side he is generally sound and prompt with any issues we've had which have been few. Easy to deal with. We like living there and moving is hassle. Bit of a game of chicken I guess.

Not sure I want to go down the appeal route if I can avoid it at all, I like a quiet life whoever I'm not going paying what hes asking either, dont think its warranted. Suppose my main reason for posting was to test the water as to what people are seeing with rents are the property tax was introduced which is the main justification hes using.

gaius c

Maximus_1 wrote: »

Thanks for the replies folks. Its pretty rural (no shop for 4 miles for example) and nearest big town 20. A guy in the same estate was looking for €600 for his house, it was vacant for quite a few months so I'm guessing he had to sup on a dose of reality.

He would do well I'd say to find a replacement in a month, I know this, and he knows that I know this. His logic is that his costs have gone up and that its a well finished house etc but my opinion is that its not really my problem, he choose to be a landlord, there are costs involved which fluctuate etc.

On the plus side he is generally sound and prompt with any issues we've had which have been few. Easy to deal with. We like living there and moving is hassle. Bit of a game of chicken I guess.

Not sure I want to go down the appeal route if I can avoid it at all, I like a quiet life whoever I'm not going paying what hes asking either, dont think its warranted. Suppose my main reason for posting was to test the water as to what people are seeing with rents are the property tax was introduced which is the main justification hes using.

Property tax is being used as an "excuse" in urban areas and right now in Dublin, landlords are in a strong position. I doubt that's the case where you are. If you want to give your landlord €360 of post-tax income that could go towards your future home, that's your business. You have one big advantage that others don't in that you don't need to worry about a landlord reference for your next rental as you're intending to buy.

Even if you do give him a "raise", you certainly shouldn't be giving him 12%. Beat him down to a percentage point or two at most.

Maximus_1

Just looking more into this whole property tax thing, he will be liable for €315, at most. And in 2013 only half of that is payable so it breaks down to €13 a month!

gaius c

Maximus_1 wrote: »

Just looking more into this whole property tax thing, he will be liable for €315, at most. And in 2013 only half of that is payable so it breaks down to €13 a month!

Also, it's tax deductable for him but won't be for you when you buy your own place.

D1stant

The market rules. Yes I have seen LLs do this in Urban areas, because they can. This guy cant really.

Is this guy chancing his arm or does he have a mortgage on the place for > 500pm do you think?

If the lstter, whilst you are in a position of power here. I would say meet him half way 530 or 520 pm. Its not worth the hassle of moving if everything else is good.

If the former say no - you wont pay more than 500. Tell him Take it or leave it

Maximus_1

He paid over the odds for the house in 2007/8 and has a mortgage of 1k a month or so, I know this to be true. The cost of a boom time house though isnt really linked to the fact its now worth half and the area is far from a hotspot for rentals. What'll probably happen is some kind of a mid-point compromise alright as for the price of a few pints its not worth the hassle of arguing too much or moving. Everything else is fine and as landlords go he is easy to deal with. Theres an element of arm chancing I suppose in this instance!

Barely Hedged

gaius c wrote: »

Property tax is being used as an "excuse" in urban areas and right now in Dublin, landlords are in a strong position. I doubt that's the case where you are. If you want to give your landlord €360 of post-tax income that could go towards your future home, that's your business. You have one big advantage that others don't in that you don't need to worry about a landlord reference for your next rental as you're intending to buy.

Even if you do give him a "raise", you certainly shouldn't be giving him 12%. Beat him down to a percentage point or two at most.

I don't get why it would be seen as an excuse, either in urban or rural areas.

Looking at it from a land lords perspective, it's a cost on their business. Any business tries to minimise costs as much as possible and pass increases in their cost base onto the customer.

Also this cost is property and resident specific - the person residing in the property benefits from what the property tax is going towards.

I'm not a land lord also.

djimi

Barely Hedged wrote: »

I don't get why it would be seen as an excuse, either in urban or rural areas.

Looking at it from a land lords perspective, it's a cost on their business. Any business tries to minimise costs as much as possible and pass increases in their cost base onto the customer.

Also this cost is property and resident specific - the person residing in the property benefits from what the property tax is going towards.

I'm not a land lord also.

On paper this is all fine and well, and I dont blame the landlord for chancing his arm, but in reality he doesnt really have any bargaining power by the sounds of it. If the property is as remote as it sounds then there will be a very small rental market; he stands to lose more than he gains if the OP were to leave. Part of the risk of buying a rental property in a rural area.

Barely Hedged

djimi wrote: »

On paper this is all fine and well, and I dont blame the landlord for chancing his arm, but in reality he doesnt really have any bargaining power by the sounds of it. If the property is as remote as it sounds then there will be a very small rental market; he stands to lose more than he gains if the OP were to leave. Part of the risk of buying a rental property in a rural area.

Completely agree with the point you make. That's the way the cookie crumbles, but i was getting at the point that was made as to why it would be an "excuse" in either an urban or a rural setting. It's a cost on their business and they're more than entitled to look for an increase so i wouldnt call a property tax an excuse or a chance of their arm. Whether they get it or not is something different

murphaph

gaius c wrote: »

Also, it's tax deductable for him.

Can you point me to the legislation?

The NPPR and HH Charge were never explicitly allowed and Revenue sent a circular stating that they should be allowed in tax returns (despite them being an obvious cost of business for any residential landlord).

There have been some rumours that the property tax will be allowed, but nothing concrete.

To the OP:
You are in a strong bargaining position, though you don't seem to realise it. I would tell the LL that you're not agreeing to an increase of 12% based on current market rates in your area and that you are prepared to challenge the rent review with the PRTB. You could leave the door open to a 6% increase max to let your LL save some face.

Ray Palmer

People are missing the introduction of PRSI on to rental income.
PRTB cases on rent increases are really about big jumps like 50% not 12%. People wonder why it takes so long to get to court these petty cases are exactly why.

gaius c

Barely Hedged wrote: »

I don't get why it would be seen as an excuse, either in urban or rural areas.

Looking at it from a land lords perspective, it's a cost on their business. Any business tries to minimise costs as much as possible and pass increases in their cost base onto the customer.

Also this cost is property and resident specific - the person residing in the property benefits from what the property tax is going towards.

I'm not a land lord also.

It's an excuse because rents are set by supply/demand, not landlord's costs. If costs dictated market rents then rents would increase any time interest rates went up!

Maximus_1

Dont worry Ray I wont be going to the PRTB, not my style if it can be avoided at all, just looking for some opinions on the situation aside from my wives and Dads who are both in the 'he is some chancer, does he know where his house is, there isnt even a shop for milk nearby!' camp. I'm a little bit less militant and can see why he would at least ask for an increase. What'll likely happen is some middle point will be reached.

To Barely Hedged I doubt somehow I will be benefiting much from where the property tax goes, last time I checked it was to fill a hole left by some bad decisions made by property developers and the banks whilst local services and infrastructure in general deteriorate!

Ray Palmer

gaius c wrote: »

It's an excuse because rents are set by supply/demand, not landlord's costs. If costs dictated market rents then rents would increase any time interest rates went up!

Supply and demand is much more complex than people think. Cost go up cost of supply increases demand may drop but that is that.

Property tax was coming in regardless of bank fall out. It had to under EU laws it really should be a household charge.

murphaph

Ray Palmer wrote: »

People are missing the introduction of PRSI on to rental income.

To be fair to those of us not in PAYE employment...

PRSI has always been payable on rental income, unless you were a PAYE employee and submitting your tax returns on a Form12.

Anybody in self employment or non-resident or retired already pays PRSI on rental income and always has.

djimi

Maximus_1 wrote: »

Dont worry Ray I wont be going to the PRTB, not my style if it can be avoided at all, just looking for some opinions on the situation aside from my wives and Dads who are both in the 'he is some chancer, does he know where his house is, there isnt even a shop for milk nearby!' camp. I'm a little bit less militant and can see why he would at least ask for an increase. What'll likely happen is some middle point will be reached.

Theres nothing militant about using the situation to your advantage. If you think that by your leaving the landlord is going to be left with an empty property for a month or more then that is your bargaining chip against this rent increase. I understand why he would ask for the increase also, but ultimately its not your problem. If you dont have to pay more than you are currently paying then why should you?

MMAGirl

djimi wrote: »

How rural are we talking and how likely is the landlord to find a new tenant any time soon? If the place is likely to be empty for a month or more then they stand to lose €500 in an effort to make not much more than that over the next year. Maybe use that to your advantage when negotiating.

You also need to take a look at the general market rental price in the area; what is the average for similar properties in your area (I appreciate that there may not be much of a rental market in a rural village to gauge the average price). The landlord is not allowed to raise the rent above the average market rental price. €60 probably isnt pushing much beyond the average if what you are paying currently is reasonable, however if you are already paying a high price then they dont have much/any room to increase.

I think people dont really understand this. If its the average then there will be places which are priced higher and lower to get to this average. Therefore the landlord can raise the rent above the average. And they can even go higher again, otherwise rent would never ever go up. This rule is only there to stop landlords taking the piss. It cant stop then raising rents as some people seem to think.

djimi

MMAGirl wrote: »

I think people dont really understand this. If its the average then there will be places which are priced higher and lower to get to this average. Therefore the landlord can raise the rent above the average. And they can even go higher again, otherwise rent would never ever go up. This rule is only there to stop landlords taking the piss. It cant stop then raising rents as some people seem to think.

Read the rest of what I said. If the rent that the OP is paying is about average then the rent increase is probably fair by this law. However if the OP is paying the upper end of the market rental rate already (ie more than the average) then this increase could tip it into the realm of beyond the average market rental rate.

MMAGirl

djimi wrote: »

Read the rest of what I said. If the rent that the OP is paying is about average then the rent increase is probably fair by this law. However if the OP is paying the upper end of the market rental rate already (ie more than the average) then this increase could tip it into the realm of beyond the average market rental rate.

Landlords can easily justify increases. All they have to say is that their place is better quality than the other ones advertised. In a rising market the ceiling will be broken or rents can never rise.

The_Conductor

gaius c wrote: »

Also, it's tax deductable for him but won't be for you when you buy your own place.

A) The property tax is not tax deductable.
Yes, its only due for a half year in 2013
C) The full NPPR is also due for 2013- so its a form of double taxation
D) The NPPR is *not* tax deductable
E) After the last budget they are now also paying PRSI on the gross rental income

So- the landlord's NET rental income after deductions and tax- is significantly lower for 2013- purely as a result of increased taxation, though its probable their other costs of ownership have also increased.

According to the DAFT surveys- rent is going up nationally, but most noticeably in the cities- and far faster for houses than for apartments/townhouses.

Is the increase in rent justifiable? It depends entirely on what is happening in the local market- if, as the OP suggests, rents, or rents sought, are increasing by a similar amount, or more, locally- then it probably is justified. If the OP is unhappy paying this- then their option is to give notice, and move.

murphaph

smccarrick wrote: »

D) The NPPR is tax deductable

I wish...

Revenue and the Department of Finance have indicated that the payment of the NPPR charge for residential properties is not an allowable expense in computing taxable rental income as it is not included on the list of allowable items.

http://taxinstitute.ie/AboutTax/PublicInformation/NonPrincipalPrivateResidenceChargeNPPR.aspx

Some LLs put it down as a levy, not rent, in a separate contract. The legality of this is not clear to me. I don't include it and just suck it up. It's a total crock of sh!t though...it's clearly an expense related to providing the property for rent and should be explicitly allowed.

dasa29

From reading this thread i think people are right in the fact that landlords are looking to put up rents, due to rising costs.

Ie, PRSI(if they don't pay it already), NPPR, Property tax(half year 2013).

But that's just for 2013, for 2014 they only have Prsi and the full year Property tax to pay.

"the NPPR will cease with effect from 1 January 2014. Outstanding charges will be collected through the LPT system." Quote from Citizens information website.

MMAGirl

Its really none of anyones business why a landlord puts up the rent. They dont need to give a reason.
I'm sure they will put them up as high as they possibly can. Obviously if they go too high people will move out and they wont be able to replace them. But thats the landlords problem then.
If people stay or its easy to get new tenants then they havent reached the ceiling with their increases.

Like any business, maximizing profits is completely normal business practise.

Barracuda1

Maximus_1 wrote: »

Thanks for the replies folks. Its pretty rural (no shop for 4 miles for example) and nearest big town 20. A guy in the same estate was looking for €600 for his house, it was vacant for quite a few months so I'm guessing he had to sup on a dose of reality.

He would do well I'd say to find a replacement in a month, I know this, and he knows that I know this. His logic is that his costs have gone up and that its a well finished house etc but my opinion is that its not really my problem, he choose to be a landlord, there are costs involved which fluctuate etc.

On the plus side he is generally sound and prompt with any issues we've had which have been few. Easy to deal with. We like living there and moving is hassle. Bit of a game of chicken I guess.

Not sure I want to go down the appeal route if I can avoid it at all, I like a quiet life whoever I'm not going paying what hes asking either, dont think its warranted. Suppose my main reason for posting was to test the water as to what people are seeing with rents are the property tax was introduced which is the main justification hes using.

He is looking for 8 1/3% increase in rent when rents are going up by 3 to 3.5 in the Dublin area. You could haggle for 3% increase if he is a good landlord and he keeps the place in tip top condition.

TheOldHand

MMAGirl wrote: »

Its really none of anyones business why a landlord puts up the rent. They dont need to give a reason.
I'm sure they will put them up as high as they possibly can. Obviously if they go too high people will move out and they wont be able to replace them. But thats the landlords problem then.
If people stay or its easy to get new tenants then they havent reached the ceiling with their increases.

Like any business, maximizing profits is completely normal business practise.

More awful advice. This is not any normal business as you are dealing with peoples homes and there is legislation to protect them. A landlord cannot increase rent beyond market rates. They PRTB have previously stated that costs are irrelevant to the definition of market rents.

As the OP is the in the middle of nowhere the landlord is being incredibly stupid trying to raise rents on a paying tenant. The likelihood is that they will find nobody to replace them and would have to cut their rents. The past few years have seen serious demographic changes in rural areas and the number of non welfare tenants is few and far between. If it were me, I'd be looking for a €50 reduction.

MMAGirl

TheOldHand wrote: »

More awful advice. This is not any normal business as you are dealing with peoples homes and there is legislation to protect them. A landlord cannot increase rent beyond market rates. They PRTB have previously stated that costs are irrelevant to the definition of market rents.

As the OP is the in the middle of nowhere the landlord is being incredibly stupid trying to raise rents on a paying tenant. The likelihood is that they will find nobody to replace them and would have to cut their rents. The past few years have seen serious demographic changes in rural areas and the number of non welfare tenants is few and far between. If it were me, I'd be looking for a €50 reduction.

whatever you say :rolleyes:

murphaph

TheOldHand wrote: »

More awful advice. This is not any normal business as you are dealing with peoples homes and there is legislation to protect them. A landlord cannot increase rent beyond market rates. They PRTB have previously stated that costs are irrelevant to the definition of market rents.

MMAGirl has a point: define market rate under the current legislation! It's incredibly vague. A property could be of a higher spec than neighbouring ones and the LL could quite reasonably argue that his property does fall within average market rates for that type of property,

I would favour better implementation of defining market rates, with districts having their average rent per m² officially published by the state. This would then be binding and tenants and landlords would know where they stand. Landlords would be free however to ask for whatever they want when commencing a new tenancy...only rent increases for existing tenancies would be governed by these official rates.

This stuff would be hard to implement without post codes defining area boundaries well. Currently it would be quite difficult IMO.

MMAGirl

murphaph wrote: »

MMAGirl has a point: define market rate under the current legislation! It's incredibly vague. A property could be of a higher spec than neighbouring ones and the LL could quite reasonably argue that his property does fall within average market rates for that type of property,

I would favour better implementation of defining market rates, with districts having their average rent per m² officially published by the state. This would then be binding and tenants and landlords would know where they stand. Landlords would be free however to ask for whatever they want when commencing a new tenancy...only rent increases for existing tenancies would be governed by these official rates.

This stuff would be hard to implement without post codes defining area boundaries well. Currently it would be quite difficult IMO.

I dont think that would work. Imagine 2 apartments exactly the same size in the same building. One has rats and the other is finished to an extremely high standard.
They are clearly in different markets, even though they are in the same place.