Property

I gave my previous tenant a good rent but now have to charge below market value

Property Clinic: your queries answered

Getting a return on rental property is difficult unless you bought at post-crash prices or are an institutional investor

Thu Aug 24 2017 - 05:00

Q Five years ago I let a three-bed house to a single occupant at a reduced rent in recognition of the wear and tear on the upmarket furniture and fittings. I never increased the rent as I had a good tenant and he has now moved on.

If I now re-let the house to a single occupant I accept I would be constrained by the four per cent rental increase.

However, if I now rent to a family or group of four to six people, a completely different entity, am I not entitled to increase the rent to the market rent because it is an entirely different category of rental?

If the answer to this is no I can see why a landlord, caught by the double-disadvantage of being stuck with a well-below market value rent and a six-year lease, would decide not to re-let the property. After all, the asset will probably continue to appreciate without all the duties and responsibilities, and hassle, of being a landlord.

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A Your question exposes the rent pressure zones for what they are, a blunt instrument which has provoked a hard-nosed approach from many landlords to ensure that they achieve maximum rental returns, as the offer of conciliatory terms to an existing tenant must be applied to future ones too, regardless of occupancy or market rental evidence.

The Act does not recognise the differential between how many people are living in the property but rather that the property was registered with the RTB at a particular rent.

You are, therefore, constrained in the level by which you can increase the rent, even in a new letting scenario to multiple tenants.

However the news is not all bad. If you go to the rent calculator on either the SCSI or RTB website, you can check what rental increase might now apply. The rent calculations start from five years ago and are index linked at four per cent, so it is worth checking. You may be surprised that the outcome is not as bad as you anticipated, as the calculation starts from the time of the last recorded rental level.

Finally, you are correct, getting a return on rental property is difficult unless you bought at post-crash prices or are an institutional investor. The private rented sector has been the only source of accommodation for many people over the past decade, but the number of policy interventions and restrictions recently introduced has seen many landlords leave the market.

Kersten Mehl is a Chartered Residential Agency Surveyor and member of the Society of Chartered Surveyors Ireland, scsi.ie

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