Reluctant landlords learn the basics

Homeowners who can't sell are having to rent out their property - and it's not all plain sailing, writes CLIODHNA O'DONOGHUE

PROPERTY MAGNATES they may not be, but many of the growing number of unsuccessful vendors countrywide are becoming reluctant landlords, the trendy term for this increasing phenomenon in the Irish market.

Lumbered with houses they cannot sell, but not prepared to reduce their asking price any further, many owners are seeking rental income from the property until the market steadies and returns to growth. They are simply making the most out of what is probably their biggest asset. In a bid to save all the profit the property earns, many decide to “go it alone”, taking out the middleman and his fees in the process – a sum that generally amounts to between 5 per cent and 10 per cent of the annual rental income.

But being a landlord is much harder than one might imagine and the market has changed significantly with tenants taking control and becoming more demanding.

New to the block, naïve, landlords are frequently ill-informed about important issues such as obligations imposed by the Private Residential Tenancies Board (PRTB), tenancy agreements, tax liabilities, energy certificates, insurance, repair obligations, maintenance costs, vetting processes, credit checks, etc. They may not be prepared for rental voids where the property is vacant. Equally some of the uninitiated fail to factor in a financial buffer to cover expensive emergency costs such as a new roof or boiler.

Becoming a landlord can be lucrative and fulfilling if carried out professionally but all too often ill-informed dabblers can become dangerously unstuck. So it is important to be acquainted with the pitfalls before embarking on this newest letting game.

Many people use an agent because they do not have the time, do not want the bother and worry about dealing with things themselves, or are afraid something will go wrong.

However, although many agents are wonderful, some are not and the letting industry is unregulated – so watch out for experience and a good record. Ask for references, membership of a professional organisation, and speak with other clients.

Agents offer a variety of services ranging from organising the tenant to full-time management including all paper work required for the Revenue, PRTB, checking and chasing rents, deposits and BER regulations, executing lease agreements and maintenance.

Agent Lowe and Associates, whose fees range from 5-7 per cent of the rental income, has 12 vans on the road to handle all details from a broken washing machine to a smashed window. With five offices in the capital, landlords also have the benefit of its shared database of tenants, insight into market forces and trends. Managing director, John Lowe, believes “the experience of an established agent really comes into its own in the event of a worst case scenario. When there are problems, a letting agent in the business can draw on his experience and take the hassle out of letting without heated confrontations.

“Good letting agents will give landlords peace of mind – but avoid those who offer cut-throat fees for a service that night be described as somewhat . . . wanting.

“ I had the situation myself where I gave my own property to a supposedly reputable agent in Spain but kept getting told that the property was hard to let and was vacant for months. I flew over only to find that there were tenants in the property for over four months and the agent was pocketing the rent!”

If a hands-on approach is adopted, then all the financial rewards accrued to the accidental landlord. But depending on the age of the property, quality of tenancy and state of the market, the job may involve a lot more time, energy and emotion than was initially imagined.

However, assuming a good relationship with tenants and easy proximity to the property, there is no reason it cannot be a mutually beneficial and financially rewarding experience.

Agent Pat Stephenson of North’s, which has a large number of apartments under management in the capital, recounts that one landlord who had three units within one block in Dublin city centre fell foul of the sex trade. When North’s took over the units, one apartment alone there had 16 Eastern Europeans living in two bedrooms.

“It is hard to imagine how the landlord might have coped with this alone, but experienced agents know how to confront and above all how to get them to vacate the property so it could be re-let and earn an income immediately.”

He also recommends landlords not over-furnish their unit with costly crockery or expensive bed linen. “Equally we will advise clients to accept a lesser rent in order to retain a good tenant and maintain consistency as well as saving re-letting and new legal costs.”

Nicola O’Callaghan of Hooke MacDonald warned that many new landlords do not understand the new BER energy rating regulations or that all landlords must by law register details of their tenancies with the PRTB within one month of their commencement. The landlord pays a fee for doing this (the basic fee is €70); those who don’t register may face a large fine and legal costs.

“We are very educated on the process and can advise landlords and tenants to avoid problems. We also have literature on landlord and tenants rights and can advise landlords appropriately if they are having problems with tenants with regard to noise pollution, delay in rent and a litany of other issues.”

What is the PRTB?

THE PRIVATE Residential Tenancies Board (PRTB) was established in September 2004 to resolve disputes between landlords and tenants.

It also operates a national tenancy registration system and provides information and policy advice on the private rented sector. The PRTB dispute resolution service replaces the courts in relation to the majority of landlord and tenant disputes and can be contacted at 01 6350600 or www.prtb.ie.

New landlords may not know that the Finance Acts have been amended to include compliance with the registration provisions of the PRTB in order to be eligible for mortgage interest relief. And the PRTB will report unregistered tenancies to the Revenue Commissioners, which can lead to fines of up to €3,000 and or up to six months in prison along with a daily fine of €250 for a continuing offence. It is a requirement for all landlords to register details of their tenancies within one month of their commencement on form PRTB1 which is available from the website. Registration lasts the length of the tenancy, which is up to a maximum of four years. If the same tenant is in occupation after four years, that new tenancy must be registered again with the PRTB.