As a landlord, I lease my property for £1,400 per month, which is considerably lower than the average open-market rate of £2,300. I maintain a cordial relationship with my tenants, who do not intend to relocate anytime soon.
As I’m transitioning towards renewable energy, the energy performance certificate of the property is expected to rise by seven points. This allows me to adjust the rent to align with the market value. Yet, I’m worried that this could spoil my relationship with the tenants. My only viable solution seems to be to increase the rent to £2,300.
An alternative considered is to retain the current rent of £1,400 until the tenants vacate the property. I could then request them to contribute an additional £150 monthly for the free electricity they would utilise. By keeping the rent as is for the tenants’ tenure, I wonder if it’s possible to match it to the market value once they vacate, which could be a few years down the line.
This conundrum certainly isn’t unique. Numerous landlords, like you, have come across this scenario due to the enforcement of the Rent Pressure Zones (RPZ) regulations. These rules have consequences while initially setting rent or when planning a rent increase for an ongoing let.
Is there any possibility to hike the rent after making environmentally friendly updates to my property? If disputes over a shared fence occur, who should be bearing the responsibility? If I acquired a pair of semi-detached dwellings for £550,000 just last year and plan on selling one, should I expect a capital gains tax? When an apartment complex develops leaks, would the management company be handling the repair requirements?
The RPZ is a recognised area where rent increase is restricted. The hike in these zones can’t supersede 2% annually or at times lesser, depending on the inflation rate as observed by the Harmonised Index of Consumer Prices. This rule extends to both, new and ongoing lets in RPZ, unless an exception is applicable.
Schedulers should take a sigh of relief as the Residential Tenancies Board has formulated an RPZ calculator to help them evaluate the right rental cost.
Based on your account, you’re currently utilising renewable energy sources to upgrade your property, which will result in a seven-point increase in the building energy rating (Ber). Given that there was no mention of a tenancy termination for undertaking significant renovations, I imagine this work is being done while the tenants continue to occupy the residence. This circumstances isn’t common and, speaking from my experience as a Ber evaluator, the required work will make the living conditions extremely dusty and potentially interfere with everyday life. Despite the unusual circumstance, I’ll shape my response on the presumption that the tenants remain in place.
Upon reviewing your situation, it seems apparent that you plan to make an exception that your property is subject to a significant alteration in its accommodation nature. This basically implies that under the European Union (Energy Performance of Buildings) Regulations of 2012(SI no 243 of 2012), the improvement works will enhance your dwelling’s Ber by not less than seven building energy ratings.
Hence, it is necessary for you to establish your new rent value immediately, taking advantage of the legally permitted exception. Upon serving the notice for the rent hike, you’ll find three categories in the rent review notice issued by RTB to claim this exception, where you should mark the one for the building energy rating.
If a landlord employs an exemption, an RPZ Notification of Exemption form should also be submitted to the RTB, accompanied by relevant documents, within a month of notice issuance. Although I am aware that you maintain a cordial relationship with your tenants, in reality, there are no other options. Your idea to accept £150 cash for complimentary electricity, which I presume refers to the savings from improved Ber, isn’t a viable solution. It is recommended to strictly adhere to the proper procedures or you might face repercussions in the future.
This write-up, authored by Marcus O’Connor, a chartered surveyor and a member of the Society of Chartered Surveyors Ireland, is produced specifically for readers. The property clinic just provides baseline information and should not be relied upon for accurate advice. Always consult a professional for accurate advice prior to any action based on the content.