Tenants to have right to renew leases

Tenants living in rented apartments and houses for six months are to be given a statutory right to renew their lease for up to four years under new legislation promised by the Government.

This form of security of tenure for tenants had been one of several recommendations made last July by the Commission on the Private Rented Residential Sector which spent almost 12 months studying the problems facing both tenants and landlords. The Government has undertaken to implement much of the report but, significantly, has refused to adopt two of the key recommendations designed to increase the supply of rental properties.

The commission had suggested that the 9 per cent stamp duty on residential investments, imposed following the third Bacon report, should be reversed and that residential landlords should be treated for tax purposes in the same way as any other business.

The refusal to allow landlords offset interest payments against rental income is an indication of the Government's desire to keep investors out of the residential market until the difficulties facing first-time buyers are resolved.

In the run-up to a general election, the Government would not want to be seen to favour investors over young couples seeking their first home.

However, the Minister for Housing and Urban Renewal, Mr Robert Molloy, has undertaken to keep the stamp-duty issue under review.

The Government's refusal to make concessions on stamp duty and interest relief has been criticised by estate agents.

Ken MacDonald of Hooke and MacDonald, which specialises in the new-homes market, said the measures would not add a single new unit to the supply of rental accommodation. Interest relief on mortgages was still not being allowed on new construction so investors were still being excluded from the market-place. Since the first Bacon report was published in 1998, the supply of rental accommodation had been decimated, and rent levels for a typical two-bedroom apartment in Dublin city had risen by 73 per cent, Mr MacDonald said.

In an attempt to provide improved accommodation in houses which were converted into flats before 1964, the Government has decided to lift the tax restriction on properties purchased from yesterday.

This will only apply where at least three units are available and where half of them are available for letting to tenants receiving social-welfare assistance. The relief, which will be included in the Finance Act, will only apply to the tax liability on the rental income.

The Government is to establish a Private Residential Tenancies Board on an ad-hoc basis from next autumn to deal primarily with disputes between landlords and tenants. The board will be set up on a statutory basis once legislation is introduced within a two-year timeframe.

The Government has supported the commission's view that there should be no rent control. However, rents can only be reviewed once a year.

The decision to give tenants a greater measure of security of tenure will not unduly upset landlords because of a number of built-in safeguards.

Landlords will be able to terminate leases where there are insufficient bed spaces, or if it is intended to either sell the property or refurbish or renovate it in a substantial way. Landlords will also be able to regain possession if the accommodation is needed for their own or family use. Mr Molloy said he was confident that the package of reforms would go a long way towards achieving a better-managed and more professional sector.