Rent Allowance v Market Rent

MammaZita

Apologies if posting this in the wrong forum.

We've had the same tenant for the last 4 years, with whom we're reasonably happy.

Each time rent allowance has been cut in the budget, we've foolishly taken the hit (whereas I am aware of other tenants who've applied for and been granted exceptional needs monthly payments from their CWO paid directly to the tenant and passed on to their landlord to top up rent allowance). Anyway, as a result of these reductions combined with recovery in market rents in the Dublin area, our rent is now over €300 less than the same properties in the same area, many of whom won't even accept rent allowance.

Our tenants 12 month lease is up later this year so I intend giving her 4 months notice prior to expiry of her lease that we are increasing the rent to reflect market rates.

I assume I am within my rights to do this and is there anything else I should consider?

The_Conductor

You are within your rights, as landlord, to review the rent on an annual basis.
4 months notice of a rent increase- is plenty of notice- however, if you have been massively subventing the RA level and letting the property at massively below market rates- you will have to be prepared for the tenant being awkard, and not wanting to move (why would they- when you've been giving them a property vastly superior to one they can otherwise afford to rent given their circumstances).

Unfortunately- the government's intention was by cutting rent allowance- that market rates would fall to reflect the reduction. In areas of demand- this obviously has not happened- as come what may, people will pay to live there.

You are giving the tenant lots and lots of notice of the rent increase. Do it in writing though- and make sure you keep good records- as I'd be surprised if its not disputed.

murphaph

Yes...you can and should increase it to market rate. If it was €50 a month you might leave it if a good tenant but €300 is €3600 a year lost income.

They are basically facing the prospect of emergency accommodation as no LLs are really interested in Rent Supplement in Dublin and the councils don't have anywhere near enough properties of their own. RAS is just as, if not more unpopular than RS, so your tenants are facing expensive (and crappy) emergency accommodation (not your problem by the way...you aren't a charity and have already given them several grand over the past few years!) so they may well be problematic to move on. The council and DSFA won't be any help either. It will be you versus your tenant.

Document everything as mentioned above. All correspondence in writing!

MammaZita

The_Conductor wrote: »

You are within your rights, as landlord, to review the rent on an annual basis.
4 months notice of a rent increase- is plenty of notice- however, if you have been massively subventing the RA level and letting the property at massively below market rates- you will have to be prepared for the tenant being awkard, and not wanting to move (why would they- when you've been giving them a property vastly superior to one they can otherwise afford to rent given their circumstances).

Unfortunately- the government's intention was by cutting rent allowance- that market rates would fall to reflect the reduction. In areas of demand- this obviously has not happened- as come what may, people will pay to live there.

You are giving the tenant lots and lots of notice of the rent increase. Do it in writing though- and make sure you keep good records- as I'd be surprised if its not disputed.

Thank you for the advice.

Yes I want to be as fair to the tenant as possible but at the same time I have to be realistic and on looking at daft again today it's actually €400 of a shortfall (€800 v €1,200) which is unsustainable.

Yes I intend providing the notice in writing by registered post and by email just to protect ourselves.

I assume she has no additional rights given that she's been there 4 years?

Should we inform Dept Soc Protection closer to the time to ensure they don't continue paying us rent?

Claw Hammer

ONce the lease expires and you are at the end of four years, you can give notice of termination without giving a reason. Check and be sure you haven't entered a new part 4 cycle.

Yawns

You're giving them plenty of notice and are quit right to ask for going market rate. If they are there 4 years, then they are entering a second term of Part 4 rather than it just continuing on. If on a fixed term it can only add to the rights they have under Pt. 4 but it seems you know what you're doing anyway. I haven't heard of CWO giving exceptional needs payment as a rent top up but it wouldn't surprise me either.

Best of luck

MammaZita

Claw Hammer wrote: »

ONce the lease expires and you are at the end of four years, you can give notice of termination without giving a reason. Check and be sure you haven't entered a new part 4 cycle.

She is actually living there 4 years at the moment (only managed to get her to sign the latest lease towards the end of last year). Does this effect our rights?

Claw Hammer

MammaZita wrote: »

She is actually living there 4 years at the moment (only managed to get her to sign the latest lease towards the end of last year). Does this effect our rights?

Yes, once she is there 4 years and 6 months she will be back under part 4 and a reason has to be given in order to give a valid notice of termination.

Grandpa Hassan

Claw Hammer wrote: »

Yes, once she is there 4 years and 6 months she will be back under part 4 and a reason has to be given in order to give a valid notice of termination.

But the rent can be increased, right? And so the tenant would probably have no choice but to leave, part iv or not

Yawns

You are still entitled to do a rent review and increase it to market rates once a year. Likewise a tenant is entitled to call a rent review to negotiate rent down to suit market rate once a year. If they dispute the rent increase, they can do so through PRTB and pay the existing rent rate until a decision is made but it looks like they would side with you anyway and it would be granted.

I'm unsure if then they would be liable to back rent from when the rent was originally supposed to go up if it did go down that route, but would think it does. Unsure tho. Others might know that.

Claw Hammer

Grandpa Hassan wrote: »

But the rent can be increased, right? And so the tenant would probably have no choice but to leave, part iv or not

The tenant can dispute the rent and refer it to the PRTB, all the while building up arrears.Also, it will be expensive to establish what the market rent is and the PRTB may not allow the full market rent. It is much better to get rid of the tenant and re-advertise.

Grandpa Hassan

Claw Hammer wrote: »

The tenant can dispute the rent and refer it to the PRTB, all the while building up arrears.Also, it will be expensive to establish what the market rent is and the PRTB may not allow the full market rent. It is much better to get rid of the tenant and re-advertise.

The PTRB would allow the full market rent. It is not up to them to make allowances for RA. And if it is how the OP days if is, the market rent would appear to be fairly clear

But, yeh, would take a while and, if you can, better to serve notice

The_Conductor

Claw Hammer wrote: »

Yes, once she is there 4 years and 6 months she will be back under part 4 and a reason has to be given in order to give a valid notice of termination.

Note- period of notice, for a tenancy in excess of 4 years is 112 days. For the first 6 months of a 4 year cycle- there does not need to be a reason given for terminating the lease- after the 6 month window- the tenancy may only be terminated on the grounds governing Part 4 leases in the Act.

The Act is here

drumswan

MammaZita wrote: »

She is actually living there 4 years at the moment (only managed to get her to sign the latest lease towards the end of last year). Does this effect our rights?

If she signed a new lease at the end of last year she may argue, and probably correctly, that you gave implicit approval for the current rent at that point and she is not due for another rent review until a year after that.

Claw Hammer

Grandpa Hassan wrote: »

The PTRB would allow the full market rent. It is not up to them to make allowances for RA. And if it is how the OP days if is, the market rent would appear to be fairly clear

But, yeh, would take a while and, if you can, better to serve notice

The PRTB would allow the full market rent but the difficulty is in establishing what the market rent is. The PRTB will insist on an expert giving a report and coming in to the adjudication. They will then use excuses to make deductions and will use out of date statistice.

Idbatterim

They are basically facing the prospect of emergency accommodation as no LLs are really interested in Rent Supplement in Dublin

can they not pay the difference, if they can afford it, from whatever other cash benefits they receive?

murphaph

Idbatterim wrote: »

can they not pay the difference, if they can afford it, from whatever other cash benefits they receive?

Not according to the rules. The limit is on the max rent of the property, not on the max rent supplement.

MammaZita

drumswan wrote: »

If she signed a new lease at the end of last year she may argue, and probably correctly, that you gave implicit approval for the current rent at that point and she is not due for another rent review until a year after that.

So I cannot increase rent for 2 years after the lease was signed?

My tenant signed the lease in December 2013. My intention was to give her 3 months notice of my intention to increase the rent to market rent from January 2015.

MammaZita

murphaph wrote: »

Not according to the rules. The limit is on the max rent of the property, not on the max rent supplement.

There are cases where tenants are paid an exceptional payment to cover such shortfalls. This is paid to the tenant not the landlord and the tenant passes it on. I know of 2 such cases. Though I can imagine this is becoming even more exceptional as naturally the department of social protection does not want to encourage increases in market rents.

I'd be happy with some sort of a compromise, but unfortunately €4,800 pa is too much for me to bare and I cannot supplement her rent to this level.

Yawns

MammaZita wrote: »

So I cannot increase rent for 2 years after the lease was signed?

My tenant signed the lease in December 2013. My intention was to give her 3 months notice of my intention to increase the rent to market rent from January 2015.

I think he meant that when you both re-signed the lease, the tenant may have a case to say that the rent was reviewed at that time and kept at the level. You may need to wait until that lease expires and adjust then.

When in a Part 4 tenancy, a tenant does not need to resign a lease every 12 months. Resigning a lease can only add to the rights of a tenant and not take away.

MammaZita

Yawns wrote: »

I think he meant that when you both re-signed the lease, the tenant may have a case to say that the rent was reviewed at that time and kept at the level. You may need to wait until that lease expires and adjust then.

When in a Part 4 tenancy, a tenant does not need to resign a lease every 12 months. Resigning a lease can only add to the rights of a tenant and not take away.

Thanks. I'm just trying to be as fair to the tenant as possible. I guess we accepted each rent reduction (in RA) as we were happy with the tenant and it was guaranteed. However I had not realised just how much below market rent we were accepting. There is good demand for propertiescin this area. However I now realise now we might have put ourselves in a vulnerable position by me taking my eye off the ball for a few years (work, children, 2 new babies etc).

murphaph

MammaZita wrote: »

I'd be happy with some sort of a compromise, but unfortunately €4,800 pa is too much for me to bare and I cannot supplement her rent to this level.

Why should you? Are other citizens putting their hands in their pockets to the tune of 5k a year and handing it to some stranger in need? No. You're not a charity. The state needs to decide what it wants to do wrt the upcoming housing crisis but one thing is for sure...the state has burned its bridges with a majority of private landlords by instructing RS tenants to "force" reductions in their rent despite leases being in place. Now the state has a problem. Shouldn't have been so hasty to bully landlords when the state doesn't have anywhere near enough housing stock for those on the housing lists. Emergency accommodation costs a lot more than normal rented accommodation, even at market rates. Somebody really dropped the ball on all this.

Yawns

I'm not saying you can't reduce the rent either btw. I'm just imagining if they did dispute it, then the PRTB might use the lease renewal as a stick. However I am sure you could argue that during previous lease, you reduced rent when the RS was cut.

MammaZita

murphaph wrote: »

Why should you? Are other citizens putting their hands in their pockets to the tune of 5k a year and handing it to some stranger in need? No. You're not a charity. The state needs to decide what it wants to do wrt the upcoming housing crisis but one thing is for sure...the state has burned its bridges with a majority of private landlords by instructing RS tenants to "force" reductions in their rent despite leases being in place. Now the state has a problem. Shouldn't have been so hasty to bully landlords when the state doesn't have anywhere near enough housing stock for those on the housing lists. Emergency accommodation costs a lot more than normal rented accommodation, even at market rates. Somebody really dropped the ball on all this.

I agree completely. And plenty who refuse to accept RA also charge market rents whilst not declaring so huge loss in tax revenue here also.

I'm certainly not worried about this lady ending up on the streets- she won't- she knows about all her entitlements from the state and doubtless will be well looked after. But that's a whole other thread....

murphaph

Personally I see a lease renewal as setting the rent for the coming lease period. If it isn't, what does a tenant have to gain by signing a lease at all? It's the only benefit (unless it overlaps the 6 month every 4 year cycle) and means they can't be given notice during that 6 months. I think you'll need to wait until December to increase the rent but you can give notice that as soon as the lease expires, the market rate will be due.

murphaph

MammaZita wrote: »

And plenty who refuse to accept RA also charge market rents whilst not declaring so huge loss in tax revenue here also

Well to be honest I don't believe the hype that there are loads of LLs evading tax. It's just not that easy to hide the revenue stream. You need to collect in cash for a start and even then Revenue have software systems that look for anomalies like owning more than one property but not declaring any income in a tax return. These people are flagged for audit. Houses are hard to hide and IMO tax evasion among cash in hand professions like doctors, barbers and window cleaners is likely to be far higher than for LLs where the main asset of the business is rather hard to hide!

MammaZita

murphaph wrote: »

Personally I see a lease renewal as setting the rent for the coming lease period. If it isn't, what does a tenant have to gain by signing a lease at all? It's the only benefit (unless it overlaps the 6 month every 4 year cycle) and means they can't be given notice during that 6 months. I think you'll need to wait until December to increase the rent but you can give notice that as soon as the lease expires, the market rate will be due.

I wouldn't dream of increasing rent during the rent period- but from the month after the lease expires. I'm just giving her 3 months notice of this to allow her to look for somewhere else.

MammaZita

murphaph wrote: »

Well to be honest I don't believe the hype that there are loads of LLs evading tax. It's just not that easy to hide the revenue stream. You need to collect in cash for a start and even then Revenue have software systems that look for anomalies like owning more than one property but not declaring any income in a tax return. These people are flagged for audit. Houses are hard to hide and IMO tax evasion among cash in hand professions like doctors, barbers and window cleaners is likely to be far higher than for LLs where the main asset of the business is rather hard to hide!

No you're right not that many but they do exist. Often "accidental" landlords living with a partner or back with parents or indeed renting themselves elsewhere.

Tar.Aldarion

Rent allowance seems to be a big fail, firstly there are no places that accept it(2 or 3 on daft in dublin!? Then the removed the ability to sort by that didn't they?), and even if they do it's too much and there is lying involved to get it.

murphaph

There needs to be an intelligent debate about the whole system...but we won't get it. In my opinion a working person who has lost their job should receive enough rent supplement for say 12 months to continue renting where they are, even if it's in a high demand area in one of the cities. After that if they haven't gotten back to work, they should be cascaded down to lower levels which will mean they have to move out to lower demand areas. It is not acceptable IMO to pay the housing costs in a high demand area (be it through council housing, RAS or RS) of somebody who hasn't contributed to the pot for many years. Benefits should be most generous just after you become unemployed and fall gradually thereafter. In Ireland the system is perversely the opposite of this. That's the great debate that needs to happen...but probably won't.

Idbatterim

Even if you could meet in the middle and make it 200, you would still be costing yourself E2400 a year, its simply too much IMO. The tenant may not see it this way, but they appear to have done bloody well for themselves and should enjoy it while it lasted....