The perceived legislative “loophole” in respect of termination on foot of substantial changes to private rented accommodation has been the subject of considerable media attention.
On the 23rd November 2017, in response the Residential Tenancies Board (“RTB”) published a set of guidelines for landlords and tenants on what constitutes substantial change in the nature of rented accommodation for the purposes of the termination of certain tenancies and the 4% rent cap exemption.
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Under current residential tenancies legislation, one of the grounds upon which a landlord can end a Part 4 or Further Part 4 tenancy is where vacant possession is required for the substantial refurbishment or renovation of the dwelling. The notice of termination must contain a written statement specifying the nature of the work and a copy of any relevant planning permission. Where no planning permission is required, the notice should identify the contractor, nature of the work and the proposed duration of the intended works. The notice must also inform the tenant that should the property become available to rent again within 6 months then, providing the landlord is provided with updated contact details for the tenant, the tenant will be offered the tenancy back.
The RTB have clarified the key principles to be considered to determine whether a tenancy can be lawfully terminated on this ground. It requires there to be a significant substantial change in the nature of the accommodation being provided, and these guidelines pose questions to help clarify what constitutes a "substantial change." :-
Has the property changed?
If the nature of the property changed, the property has been structurally altered, extended, reconfigured or modified the exemption may apply.
Are the works simply bringing the property up to the minimum required standards for rented accommodation?
If the works involved are only a means to bring the property in line with the minimum required standards for rented accommodation they will not be considered as a factor for the exemption. However, if carried out in conjunction with other eligible works they may be considered. For example, the complete modernisation of a property which includes a combination of works, including bringing the property to the minimum required standard, may be suitable for the exemption, if the end result substantially changes the nature of the property.
Are the works simply necessary repairs and maintenance?
As above, landlords are required to maintain a certain standard in properties offered for rent to the public. The landlord is required to carry out maintenance for general wear and tear. Over the lifetime of a property this would usually include, replacement of bathroom sanitary wear and kitchens, servicing and/or replacement of heating systems and windows. The RTB have stated that these types of repair and maintenance will not be considered substantial changes to the nature of the property.
Has the letting value of the property increased as a result of the works?
The landlord must be able to show that any increase in the rental value of the property is as a result of the works carried out to the property and not merely due to inflation and a global rise in rental prices. Landlords should retain evidence of comparable dwellings supporting the value of the property before and after the works. The RTB have a database of average property letting values which can be referenced.
Are the works substantial, how long will they take and how much will they cost?
The financial and time cost to the landlord of carrying out the works can be indicative of whether they will be classed as substantial or significant. The landlord should consider and seek professional certification for the following: -
- The value of the works relative to the value of the property and rental income.
- How the property has been enhanced by the works e.g. increase in floor area, more bathrooms.
- Whether vacant possession was required for the works.
The landlord should consider whether, given the nature and scale of the works to be carried out, if it is necessary or appropriate for the tenant to move out to allow the works to take place. If the proposed works will take a short amount of days, then termination of the tenancy for vacant possession may not be necessary or appropriate. The landlord and tenant may agree that the tenant will vacate for the duration of the works and return once they are completed. If the landlord intends to undertake a complete modernisation of the property, including a combination of works then this may be grounds for termination.
The RTB receive regular questions from landlords and tenants as to what constitutes acceptable levels of change to a property. The RTB have provided a number of examples illustrating what may or may not constitute a substantial change.
While both landlords and tenants alike will welcome this clarification, a number of tenant representative groups believe it does not go far enough and have called for statutory guidelines on what constitutes substantial renovations and stronger legal protections for tenants who must vacate a property on foot of substantial change.
Balancing a tenant’s right to security in their tenancy with a landlord’s right to deal with their property is a delicate and complicated process and it seems likely that in spite of these guidelines issuing, in the current climate, the RTB will see in an increase in disputes on this topic.
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