On the face of it the Rental Accommodation Scheme (“the RAS”) seems great, you have a guaranteed rent and the costs of letting are taken care of. However, there is no such thing as a free lunch. landlordsolutions.ie looks at some of the downsides for landlords when it comes to the RAS.
Fail to negotiate? Prepare to fail…
It’s easy to forget but, like any organisation, the local authority is a going concern and must make money to operate. The RAS is a great idea but your local authority will be looking for the best deal it can get. It’s up to the individual landlord to negotiate the best contract possible, as you would if you were negotiating with a private tenant. Get the best rent available and the best conditions. Seek to include your own conditions, for example, choice of tenant and a break clause in the event of the sale or personal requirement of the property.
Reduced Rent
The local authority is likely to seek a rent which is lower than the market rent, the argument being that the landlord no longer has the costs of letting / re-letting as the case may be and also, the rent is guaranteed by the local authority. Immediately, it becomes clear that the landlord is in fact paying for the benefits of the RAS by taking a rent which is lower than the rent they would achieve on the open market. When you are considering paying for the benefits of the RAS in this way, you should compare it with the option of employing a letting agent to manage your property. Letting agents generally charge around 10% of the annual rent and for this they will let and manage the property, whereas with the RAS you may end up indirectly paying 20% of the annual market rent (by accepting a reduced rent) and will have to manage the property yourself.
Landlord Responsibility
The landlord still remains responsible for all matters that pertain to property ownership and letting to include insurance, repairs & maintenance and dealing with breaches of tenant’s obligations.
No Deposits
Under the RAS deposits will not be provided to landlords.
Out of pocket beyond one month not covered
If the tenant damages your property, reimbursement is capped at an amount equivalent to one month’s rent.
In addition, although void payments are in principal covered, if, on the expiration of an existing tenancy, the landlord fails within 7 days to reinstate the property to its original condition when requested to do so, the rent may be withheld until such restoration is completed.
Regulation Enforcement
If you wish to put your property forward for the RAS, housing authorities will inspect the property to confirm compliance with minimum housing standards. The tenancy must also be registered with the PRTB. The landlord must produce a tax clearance certificate each year and will also need a BER certificate. Some local authorities are also seeking a copy of the Fire Cert for the building concerned.
Random Tenants
Unless you negotiate otherwise, you have no control over the tenant that is placed in your property.
Locked in
You will usually be committing your property for a specified “Availability Period”. This can be for up to 10 years, however, we understand that the local authorities tend to seek periods of 4 years. A break clause should be negotiated in all instances.
Note, if your tenancy agreement is negotiated so that you end up renting the property to the local authority directly (if the authority serve you with an Option Notice, as provided for in the Availability Agreement, they have the right to take the letting directly), then be aware that the Residential Tenancies Act 2004 does not apply to local authorities (section 3(2)(c) of the Residential Tenancies Act 2004). In this way, the protection afforded to landlords who need to sell their properties or require the property back for their own use etc are not available (section 34 of the Residential Tenancies Act 2004) and the local authority could insist on retaining the property for the entire period of the Availability Agreement.
Rent Reviews only every two years and at 20% below Market Rent
landlordsolutions.ie have seen the rent review clause proposed by one local authority in their Availability Agreement where reviews are only permitted every two years. Section 20 of the Residential Tenancies Act 2004 (which does not apply to local authorities) allows for rent reviews to take place once each year. In addition, the clause we examined stated that the rent payable from the review date shall be the open market rent less a 20% discount. In this way, be aware that whatever rent you negotiated at the outset will be at best reviewed to 20% below the then market value two years later.
This document contains a general summary of recent developments and is not a definitive statement of the law. Specific legal advice must be obtained before taking action based on the summary set out herein and landlordsolutions.ie take no responsibility for any loss or damage caused in reliance on the information herein.
