Give Me a Crash Course in . . . tenants being offered new ‘right to purchase’ when landlord is selling

What is the ‘right to purchase’?

Amid the outcry over the lifting of the eviction ban last March, the Government promised a suite of measures to protect renters. One was to give them the option to buy their rental home if it is put on the market. In other words, the landlord would allow the tenant to purchase directly from them, before the property is sold on the open market. It’s sometimes referred to as the right of first refusal. Under Minister for Housing Darragh O’Brien’s draft Residential Tenancies (Right to Purchase) Bill, landlords selling a property would be obliged to first offer it to the tenant on the basis of an independent valuation. The aim obviously is to shield more tenants from eviction when their properties are being sold.

How will it work?

Under the proposed rules, once a notice termination is served signalling the landlord’s intention to sell, the landlord must simultaneously invite their tenant to make a bid to purchase the property. The tenant will then have a period of 90 days to make one or more bids. After the 90-day period, the landlord will be obliged to invite a further bid from the tenant if the sales prices agreed with a third party on the open market “is lower than or equal to the tenant’s highest unsuccessful bid made during the initial 90-day period”. The landlord would be required to give this further invitation to bid to the tenant directly before he or she agrees the final sales price with the third party. The tenant would then have 10 days to make a further [matching] bid. Under the proposed rules, the landlord would be obliged to accept such a further matching bid from the tenant.

There’s another important part

If the tenant is not in a position to buy and is at risk of being made homeless by the proposed sale, the Bill allows for the relevant local authority (for tenants in receipt of social housing support) or the Housing Agency (for private tenants) to buy the rented property “to continue renting it to the sitting tenant”.

When will it come into operation?

That’s a bit of an unknown. The draft legislation must first go through pre-legislative scrutiny phase via the Oireachtas Housing Committee, which could in theory reshape it or cut out certain parts. And then it must be passed by both houses of the Oireachtas, a process that could take up to a year. Insiders are saying the legislation won’t be in place until at least 2025.

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Are there potential pitfalls?

There are several potential pitfalls. According to one legal expert, landlords who purchased a rental property on the understanding that they free to sell it on the open market could mount a legal challenge to the legislation. Industry representatives are also concerned the new rules will create another layer of bureaucracy, particularly for smaller landlords, who have been exiting the rental sector here in droves, amplifying supply problems in the market.

Perhaps the biggest criticism is that most renters are simply not in a position to buy even if they are afforded the right. According to research by the Economic and Social Research Institute, there were almost 300,000 households, or 54 per cent of renting households, in receipt of some kind of State support to help with the cost of housing in 2020. Being in receipt of rent supports suggests they are not in a position to buy.

A significant proportion of the remainder, who are not reliant on rent supports, are renting because they can’t afford to buy for various financial reasons to do with income, house prices and the difficulties around getting a mortgage. Getting an exclusive offer to buy is unlikely to change their situation.