Substantial Refurbishment Criteria

gizmo81

I called the RTB the other day about what constitutes 'substantial refurbishment' for a rent review.

I was told that for a rent review for this purpose the landlord has to provide the tenant with the invoices for the work carried out. (I forgot to ask for a link to this)

And directed to this,

HOW “SUBSTANTIALLY CHANGED†DOES A PROPERTY NEED TO BE TO QUALIFY FOR AN EXEMPTION?
A ‘substantial change’ must be a significant change to the dwelling resulting in increased market value of the tenancy. Therefore this would involve significant alterations or improvements which add to the letting value of the property – this may include, among other things, building works or works requiring planning permission. For example, simple repainting or replacement of white goods would not be sufficient.

https://www.rtb.ie/rent-pressure-zones/faqs

I know a lot of people on the forum were speculating about this, so, here it is.

pwurple

I changed a window and redecorated, changed all appliances, and bathroom ware. 'Twas substantial enough for me, bones of 8k.

Re-rented last week, at higher rate. Still about 100 euro a month below the average for the area, but I knew the tenants, so didn't need to advertise or interview etc.

As far as I can make out, the tenant has to actually complain? There isn't some sort of rent police around.

And also as far as I can make out, tenants are frickin throwing money around to climb over eachother. I know all the landlords in one particular building. They advertise for x rent, and people have been coming to viewings saying "i'll give you 200 extra a month in cash if you give it to us".

davindub

pwurple wrote: »

I changed a window and redecorated, changed all appliances, and bathroom ware. 'Twas substantial enough for me, bones of 8k.

Re-rented last week, at higher rate. Still about 100 euro a month below the average for the area, but I knew the tenants, so didn't need to advertise or interview etc.

As far as I can make out, the tenant has to actually complain? There isn't some sort of rent police around.

And also as far as I can make out, tenants are frickin throwing money around to climb over eachother. I know all the landlords in one particular building. They advertise for x rent, and people have been coming to viewings saying "i'll give you 200 extra a month in cash if you give it to us".

Thats not substantial refurbishment, and yes the tenants need to report.

Unfortunately, assuming you increased the are beyond market rate, now you are in the situation where your tenants are paying an increased amount on the foot of a void contract term, they could have a good case to recover this increased rent and more for the duration of statute of limitations.

Thestart

davindub wrote: »

Thats not substantial refurbishment, and yes the tenants need to report.

Unfortunately, assuming you increased the are beyond market rate, now you are in the situation where your tenants are paying an increased amount on the foot of a void contract term, they could have a good case to recover this increased rent and more for the duration of statute of limitations.

How is that not substantial? Could you describe in detail what constitutes substantial as 8k of refurbishments is going to add value and improve the property for the tenants?

gizmo81

I'm unsure what the poster means by 'bathroom ware' but realistically only the window could be considered 'substantial', white goods nor redecoration do not come under this.

Thestart wrote: »

How is that not substantial? Could you describe in detail what constitutes substantial as 8k of refurbishments is going to add value and improve the property for the tenants?

Thestart

gizmo81 wrote: »

I'm unsure what the poster means by 'bathroom ware' but realistically only the window could be considered 'substantial', white goods nor redecoration do not come under this.

So you need more information?
Can you answer my second question please?

gizmo81

I don't think the RTB are too clear on it themselves. They have given two examples of substantial 'planning permission' and 'building works' none of which come in the €8k the poster outlined.

It will probably take an RTB Tribunal to establish what it covered.

The advice I'd give anyone who receives a rent review in regards to 'substantial refurbishment' would be to open a case with the RTB so we can get a clearly picture of what is allowed.

Currently I wouldn't be advising landlords to increase rent until the two criteria outlined above were satisfied.

Thestart wrote: »

So you need more information?
Can you answer my second question please?

davindub

Thestart wrote: »

How is that not substantial? Could you describe in detail what constitutes substantial as 8k of refurbishments is going to add value and improve the property for the tenants?

The language of the act refers to "substantial change in the nature of the accommodation provided".

The amount is immaterial really but exclude the appliances and any furnishings or decorating, these are normal expenditure and expected. So you have only replaced a window which is not really going to improve the market value nor has it changed the nature of the accommodation.

The meaning of substantial has yet to be tested, but it will, given the number of LL's increasing rent on the basis of their own interpretation of what it means. But looking at the purpose of the RTB act overall, I would estimate substantial to include extensions, re-configuring layout of the property (e.g. bedsits turned into apartments).

Marcusm

davindub wrote: »

Thats not substantial refurbishment, and yes the tenants need to report.

Unfortunately, assuming you increased the are beyond market rate, now you are in the situation where your tenants are paying an increased amount on the foot of a void contract term, they could have a good case to recover this increased rent and more for the duration of statute of limitations.

Be careful; "refurbishment" is the term used when defining what can justify a termination of a part IV. To fall outside the limited rent restrictions, it need only be a "substantial change" which increases the letting value. That is a much lower standard.

davindub

Marcusm wrote: »

Be careful; "refurbishment" is the term used when defining what can justify a termination of a part IV. To fall outside the limited rent restrictions, it need only be a "substantial change" which increases the letting value. That is a much lower standard.

True regarding the terminology.

But conversely I would actually estimate change to be an equally high standard, if not impossible for most properties to attain, although I wonder if the RTB will recognise the difference between conversion of an attic for "storage" reasons and "habitable space" attic conversions.

garhjw

davindub wrote: »

True regarding the terminology.

But conversely I would actually estimate change to be an equally high standard, if not impossible for most properties to attain, although I wonder if the RTB will recognise the difference between conversion of an attic for "storage" reasons and "habitable space" attic conversions.

That makes no sense. If you spend €8k on your apartment that's a substantial change to it.

davindub

garhjw wrote: »

That makes no sense. If you spend €8k on your apartment that's a substantial change to it.

I did direct quote from the act in my earlier post, "substantial change in nature".

Anyway, you would not want to take action based on just this sentence either, read the entire act, get a feel for the intention, look at HC comments on the RTB act and other similar discussion regarding the meaning of words, look for similar reported cases at tribunal stage.

The_Conductor

gizmo81 wrote: »

I'm unsure what the poster means by 'bathroom ware' but realistically only the window could be considered 'substantial', white goods nor redecoration do not come under this.

I was told by the RTB that replacing stairs, upgrading to double glazed windows, new combi boiler and a wet room- did not constitute a 'substantial refurbishment' as none of the work required planning permission.

Honestly- the criteria appear to change depending on who you get on the phone.

Also- the RTB seem to be half in Dublin- and half outsourced to somewhere in Cork. The Cork crowd seem to be impossible to get any sort of information, of any nature whatsoever, out of.

mrslancaster

gizmo81 wrote: »

And directed to this,

A ‘substantial change’ must be a significant change to the dwelling resulting in increased market value of the tenancy. Therefore this would involve significant alterations or improvements which add to the letting value of the property – this may include, among other things, building works or works requiring planning permission. For example, simple repainting or replacement of white goods would not be sufficient.

https://www.rtb.ie/rent-pressure-zones/faqs

I know a lot of people on the forum were speculating about this, so, here it is.

resulting in increased market value of the tenancy
alteration or improvements that add to the letting value of the property

If the LL got a valuation form a licensed Estate / Letting agent would that not be enough for the RTB?

Estate / Letting agents have to be licensed by the PSRA and they do valuations all day every day...Surely the RTB could not ignore an expert opinion? After all, even the banks accept them for mortgage purposes.

For example say the property is now rented at €1000 month and the LL intends to replace windows / flooring/ redecorate / garden makeover etc surely the value is greater either for re-sale or re-letting? I imagine most estate agents would say it was.

PhoenixParker

The_Conductor wrote: »

I was told by the RTB that replacing stairs, upgrading to double glazed windows, new combi boiler and a wet room- did not constitute a 'substantial refurbishment' as none of the work required planning permission.

Honestly- the criteria appear to change depending on who you get on the phone.

Also- the RTB seem to be half in Dublin- and half outsourced to somewhere in Cork. The Cork crowd seem to be impossible to get any sort of information, of any nature whatsoever, out of.

Was it that to end a tenancy or to increase rent in an Rpz?

mrslancaster

PhoenixParker wrote: »

Was it that to end a tenancy or to increase rent in an Rpz?

If the LL needed an empty property to carry out the alterations or improvements I suppose it would be to terminate the tenancy..

I know I hate having any work done in the house because of the disruption and dust and all the cleaning that goes with it. I think most people don't like it when there's a lot of work happening or if the kitchen or bathroom was being refurbished.

If the property was being sold, does that not come under a different clause?

April 73

The idea of needing planning permission is pretty stupid. I could rip up all my flooring, replace my kitchen & bathrooms, replace my windows & exterior doors, upgrade my boiler and none of these would require planning permission. It's substantial work though & very disruptive to a tenant.
Seems like this is arbitrary - depending on the adjudicator & on the day.

4ensic15

The_Conductor wrote: »

I was told by the RTB that replacing stairs, upgrading to double glazed windows, new combi boiler and a wet room- did not constitute a 'substantial refurbishment' as none of the work required planning permission.

Honestly- the criteria appear to change depending on who you get on the phone.

Also- the RTB seem to be half in Dublin- and half outsourced to somewhere in Cork. The Cork crowd seem to be impossible to get any sort of information, of any nature whatsoever, out of.

The people who answer the phone in the RTB are never the adjudicators or Tribunal members. They are always the civil service administrative staff. They are not given any guidelines on a number of issues so it is pointless relying on them.
I know a man who is planning to add an en-suite bathroom in an apartment. It does not require planning permission because it is internal work but it does require the permission of the management company because it is a substantial alteration. There will inevitable be a tribunal hearing on the matter.
Spending a lot of money does not necessarily increase rental value. New windows may only mean that a better class of tenant can be attracted rather than a higher rent achieved. The size,location and bedspaces are the dominant factors. Sometimes more money is made by packing 4 tenants into a kippy 2 bed than upgrading and getting two tenants into the same apartment.

PhoenixParker

mrslancaster wrote: »

If the LL needed an empty property to carry out the alterations or improvements I suppose it would be to terminate the tenancy..

They're two different issues and people are conflating the two.

One reason to terminate a part 4 tenancy is that you wish to substantially refurbish the property.

That's under the residential tenancies act 2004.

5. The landlord intends to substantially refurbish or renovate the dwelling or the property containing the dwelling in a way which requires the dwelling to be vacated for that purpose (and, where planning permission is required for the carrying out of that refurbishment or renovation, that permission has been obtained) and the notice of termination (the “notice”) contains or is accompanied, in writing, by a statement—

(a) specifying the nature of the intended works, and

(b) that the landlord, by virtue of the notice, is required to offer to the tenant a tenancy of the dwelling if the contact details requirement is complied with and the following conditions are satisfied—

(i) the dwelling becomes available for reletting, and

(ii) the tenancy to which the notice related had not otherwise been validly terminated by virtue of the citation in the notice of the ground specified in paragraph 1, 2, 3 or 6 of this Table.

http://www.irishstatutebook.ie/eli/2004/act/27/section/34/enacted/en/html

Separate to that is the issue of whether the rent can be raised in a Rent Pressure Zone.

That's often in the context of tenants leaving voluntarily and the landlord then of their own accord carrying out some works. The barrier for that is lower.

That falls under The Residential Tenancies Act 2016, which states:

(b) if, in the period since the rent was last set under a tenancy for the dwelling—

(i) a substantial change in the nature of the accommodation provided under the tenancy occurs, and

(ii) the rent under the tenancy, were it to be set immediately after that change, would, by virtue of that change, be different to what was the market rent for the tenancy at the time the rent was last set under a tenancy for the dwelling.

http://www.irishstatutebook.ie/eli/2016/act/17/enacted/en/print#sec34

The two issues are quite different.

Wanting to remodel the kitchen probably isn't sufficient reason to kick your tenants out of a part IV tenancy, but if you have an empty apartment and remodel the kitchen it could well be a substantial enough change to charge a higher rent in an RPZ.


Sidenote: Reading that the RTB are talking through their ass when they talk about needing planning permission. The act says you need to have the planning permission if what you're planning needs permission. It doesn't say the works you're carrying out have to require planning permission. You can't kick a tenant out because you're planning to build an extension unless you have planning permission for that extension, but if what you're planning doesn't need permission but is sufficient to need vacant possession you're good to go.

davindub

PhoenixParker wrote: »

They're two different issues and people are conflating the two.

One reason to terminate a part 4 tenancy is that you wish to substantially refurbish the property.

That's under the residential tenancies act 2004.


http://www.irishstatutebook.ie/eli/2004/act/27/section/34/enacted/en/html

Separate to that is the issue of whether the rent can be raised in a Rent Pressure Zone.

That's often in the context of tenants leaving voluntarily and the landlord then of their own accord carrying out some works. The barrier for that is lower.

That falls under The Residential Tenancies Act 2016, which states:



http://www.irishstatutebook.ie/eli/2016/act/17/enacted/en/print#sec34

The two issues are quite different.

Wanting to remodel the kitchen probably isn't sufficient reason to kick your tenants out of a part IV tenancy, but if you have an empty apartment and remodel the kitchen it could well be a substantial enough change to charge a higher rent in an RPZ.


Sidenote: Reading that the RTB are talking through their ass when they talk about needing planning permission. The act says you need to have the planning permission if what you're planning needs permission. It doesn't say the works you're carrying out have to require planning permission. You can't kick a tenant out because you're planning to build an extension unless you have planning permission for that extension, but if what you're planning doesn't need permission but is sufficient to need vacant possession you're good to go.

"Substantial change in nature of accommodation" does not suggest to me a kitchen remodel would suffice... I cannot think of anything you can simply purchase, renovate that would change the nature of the accommodation. A kitchen would be normal expected expenditure anyway once the capital allowances are exhausted.

The key intention of the RPZ is to create rent predictability, I cannot see why
so many are sure the intention of the exemption term is to create an exemption that 100% of vacant properties could exploit.

mrslancaster

davindub wrote: »

"Substantial change in nature of accommodation" does not suggest to me a kitchen remodel would suffice... I cannot think of anything you can simply purchase, renovate that would change the nature of the accommodation. A kitchen would be normal expected expenditure anyway once the capital allowances are exhausted.

The key intention of the RPZ is to create rent predictability, I cannot see why
so many are sure the intention of the exemption term is to create an exemption that 100% of vacant properties could exploit.

so say for instance a dwelling has been rented for 5 or 6 years & needs a total refurbishment & the LL has to spend a lot of money, are you saying that if the property is in a rpz that the section in the 2016 act overrides the section in the 2004 act?
can the LL give notice to terminate in order to have a vacant property to carry out the works or not?
if the work is then finished can the rent be adjusted to market value & offered back to the last tenant or not?

davindub

mrslancaster wrote: »

so say for instance a dwelling has been rented for 5 or 6 years & needs a total refurbishment & the LL has to spend a lot of money, are you saying that if the property is in a rpz that the section in the 2016 act overrides the section in the 2004 act?

Its the same act, the 2016 act amended the 2004 to insert the RPZ related terms.

The money spent is immaterial really, white goods wear out and may all need to be replaced together, but it doesn't change the nature of the accommodation to me.

There has been no case law yet to see if a line exists as to when the exemption is satisfied, but given the intention of the RPZ, it would be extremely risky to assume a kitchen refit, plastering, etc would be sufficient. One thing I do know is there is a stock of bedsits and buildings with units that do not meet regulations and the government has been trying to phase these out, I'd guess the exemption was to allow for the redevelopment of these units.

mrslancaster

davindub wrote: »

Its the same act, the 2016 act amended the 2004 to insert the RPZ related terms.

The money spent is immaterial really, white goods wear out and may all need to be replaced together, but it doesn't change the nature of the accommodation to me.

There has been no case law yet to see if a line exists as to when the exemption is satisfied, but given the intention of the RPZ, it would be extremely risky to assume a kitchen refit, plastering, etc would be sufficient. One thing I do know is there is a stock of bedsits and buildings with units that do not meet regulations and the government has been trying to phase these out, I'd guess the exemption was to allow for the redevelopment of these units.

OK the RTA 2004 was updated...:)
didn't mean white goods, I was thinking more of a serious refurbishment.

still not clear to me if a LL can terminate in order to carry out the work in line with the section in 2004 and when work is complete then increase rent in line with the section in 2016...

thanks for any more info

davindub

mrslancaster wrote: »

OK the RTA 2004 was updated...:)
didn't mean white goods, I was thinking more of a serious refurbishment.

still not clear to me if a LL can terminate in order to carry out the work in line with the section in 2004 and when work is complete then increase rent in line with the section in 2016...

thanks for any more info

None of the below is certain and my own opinion generally, if you are considering this for your own circumstances, get a solicitor to over the plans and advise properly.

You may be able to terminate a tenancy if you are re-roofing, re-plastering etc, but this may not be enough to increase the rent beyond the RPZ rules post works. The nature of the accommodation has not changed although substantial refurbishment has indeed taken place.

Changing the layout of the property from bedsits to 2 bedroomed flats would probably be enough to terminate the tenancy and increase the rent for each unit. The nature of the accommodation has changed.

jamesthepeach

If I can't raise the rent to market rate there will be no improvements made to the property.
If I make any improvements they will be in order to raise the value to market rate. Therefore they were substantial enough to change the rent rate on the property.

And, like a couple of others I know, I will be taking everything out that is not on the list of essentials too, if I can't raise the rent on the next let. I will leave nothing that can need replacement or break, thereby costing me.

If the rent is to be kept lower than market value then it is a lower than market value property that the tenant will be getting.

Also on a new let all of the charges that I can transfer to the tenant will be. I'll be charging for supplying parking, they will be paying for bins, service charges, management charges and many other things separate to the rent. That's if I don't do short term instead, which I probably will, or even easier, just sell it.

Lumen

jamesthepeach wrote: »

If I make any improvements they will be in order to raise the value to market rate. Therefore they were substantial enough to change the rent rate on the property.

That's a circular argument.

If you're renting something at half market value, kick out the tenant, change the curtains, and then rent out at double, what has doubled the value is not the new curtains but the new tenancy.

The_Conductor

Lumen wrote: »

That's a circular argument.

If you're renting something at half market value, kick out the tenant, change the curtains, and then rent out at double, what has doubled the value is not the new curtains but the new tenancy.

However- you'll have had to employ a contractor to change said curtains- and have the bill of works, incase the previous tenant disputes it- and if they do dispute it, and it goes to Tribunal- they're back in, at their previous rent, you can't review the rent for a year, and you probably owe them a packet for an illegal ending of the tenancy.

Its all well and good to say- just change the curtains- however, keep in mind, the RTB will fight the tenant's corner, not the landlord's corner- the landlord is automatically assumed to be in the wrong, and the burden of proof is on them to prove otherwise, whereas the tenant has no burden of proof, as they are assumed to be injured party...........

I'm not joking- that is the system- and good luck to you going up against it- you are not going to win.

jamesthepeach

The_Conductor wrote: »

However- you'll have had to employ a contractor to change said curtains- and have the bill of works, incase the previous tenant disputes it- and if they do dispute it, and it goes to Tribunal- they're back in, at their previous rent, you can't review the rent for a year, and you probably owe them a packet for an illegal ending of the tenancy.

Its all well and good to say- just change the curtains- however, keep in mind, the RTB will fight the tenant's corner, not the landlord's corner- the landlord is automatically assumed to be in the wrong, and the burden of proof is on them to prove otherwise, whereas the tenant has no burden of proof, as they are assumed to be injured party...........

I'm not joking- that is the system- and good luck to you going up against it- you are not going to win.

It's a part 4 I'll be ending. For different reasons.

Then I'll change the curtains myself

Actually under the stupid system that is there it will be more like there will be no curtains, or for that matter, no bed, no table, no chairs. Nothing.

It's better for a person letting at below market rate to bring the standard down to that below market rate than to try to bring it up.

The_Conductor

jamesthepeach wrote: »

It's a part 4 I'll be ending. For different reasons.

Then I'll change the curtains myself

Actually under the stupid system that is there it will be more like there will be no curtains, or for that matter, no bed, no table, no chairs. Nothing.

It's better for a person letting at below market rate to bring the standard down to that below market rate than to try to bring it up.

I'd argue, that other than the bare minimum as laid out in the RTA (i.e. a fridge/freezer, access to a washing machine and drying facilities etc etc)- that much more property should be let unfurnished. You may be surprised- some tenants are actually willing to pay a premium for unfurnished property- as it means they can use their own furniture and not have to put it into storage. A sizeable number of Irish returning from abroad are in this category- alongside an interesting cohort of Irish Americans moving here (though the latter category are discovering that a lot of their furniture, quite simply, doesn't fit in the average Irish house/apartment.........)

So- yes, letting property unfurnished is 100% the way to go.

gizmo81

If you are in an RPZ area you have to give new tenants evidence of the previous rent. Your new tenants could dispute it as well as your previous tenants.

jamesthepeach wrote: »

It's a part 4 I'll be ending. For different reasons.

Then I'll change the curtains myself

Actually under the stupid system that is there it will be more like there will be no curtains, or for that matter, no bed, no table, no chairs. Nothing.

It's better for a person letting at below market rate to bring the standard down to that below market rate than to try to bring it up.

davindub

jamesthepeach wrote: »

The_Conductor wrote: »

However- you'll have had to employ a contractor to change said curtains- and have the bill of works, incase the previous tenant disputes it- and if they do dispute it, and it goes to Tribunal- they're back in, at their previous rent, you can't review the rent for a year, and you probably owe them a packet for an illegal ending of the tenancy.

Its all well and good to say- just change the curtains- however, keep in mind, the RTB will fight the tenant's corner, not the landlord's corner- the landlord is automatically assumed to be in the wrong, and the burden of proof is on them to prove otherwise, whereas the tenant has no burden of proof, as they are assumed to be injured party...........

I'm not joking- that is the system- and good luck to you going up against it- you are not going to win.

It's a part 4 I'll be ending. For different reasons.

Then I'll change the curtains myself

Actually under the stupid system that is there it will be more like there will be no curtains, or for that matter, no bed, no table, no chairs. Nothing.

It's better for a person letting at below market rate to bring the standard down to that below market rate than to try to bring it up.

It seems more spiteful rather than a business decision. Are you not happy with the substantial increases in rent yield and property value if you ignore the market rent?

I wouldn't recommend being the first to strip out an property either, there is likely to be some legal issues, and the rpz is a short term measure. So it seems like unnecessary risk.