Mortgage misery as landlord fails to record rent

Q&A: I’m a young professional working in Dublin. I’ve been renting an apartment with a friend for one year. After a chat with some colleagues, I decided it might be prudent to consider applying for a mortgage, given that I have some savings and a decent job. I discovered potential mortgage repayments would work out at less per month than I’m paying for rent.

In order for my application to be processed, I need to provide proof that I am renting. I have proof from previous apartments I’ve lived in, but not my current one; my housemate and I pay cash in hand each month and we don’t have a rent book. My bank manager told me I need one if I’m ever to get a mortgage. Furthermore, if I want to claim rent relief or tax back, I need a rent book.

I discovered that our property is not even registered on the PRTB database.

Mr S L, Dublin

Get out would be my succinct advice.

As I think has become crystal clear to you, your landlord has every appearance of being a tax dodger and both you and your friend are complicit in that act.

There are certain obligations on landlords. From the Revenue’s point of view, first among them is that they are liable to pay tax on rental income.

In order to ensure compliance with this, landlords are obliged both to register their properties with the Private Residential Tenancies Board (PRTB) and to ensure that all tenants have a rent book.

In your case, there is no PRTB registration and no rent book; the only reasonable assumption is that there is also no return of rental income.

While that is largely the landlord’s issue, there are, as you have discovered, a number of adverse effects for you.

First, as a tenant, you are entitled to rent relief – assuming you have been renting on or before December 7th, 2010.

Although you say you only started renting from your current landlord in the past year or so, you indicate you previously rented elsewhere so you should qualify as eligibility is not lost by virtue of entering new rental agreements after December 7th, 2010.

Your risk here is twofold. First, you clearly cannot claim relief without disclosing details of your landlord and the property.

You are also required by Revenue to keep receipts of rent paid, including the landlord’s details – you have none of this.

You might also lose the right to claim relief for future rent. This current gap will indicate to Revenue that you are no longer renting and therefore you lose eligibility to claim rent relief in future years (until 2017 when it is being phased out).

In terms of financial cost, the relief is worth €200 to you this year.

In 2012, the figure was €240 and in the previous years for which you can backclaim (you can go back four years), it was worth €400 a year – not peanuts for a struggling young professional.

The second point, which has been clarified by the bank, is that without a proven record of paying rent in full and on time, you are unlikely to get beyond the first hurdle in applying for a mortgage.

Ability to pay is a critical issue for the banks. If there is no rent book, or record of payments, they are not simply going to take you at your word; they will assume instead that you are not paying rent and that your outgoings are simply personal spending.

As a general rule, if your landlord is looking for cash in hand, don’t move in. You worry that pressing the issue with the landlord could see him raise the rent or evict you. With no rental record, he could.

Protecting tenants is another reason for the obligations in place on landlords.

In your position, move out and regularise your situation (which will almost certainly mean reporting the landlord to the PRTB at least). Provide whatever corroborating evidence you can, including photographs.

* This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.