Landlords evading leases

K ninja

I was having a discussion with a friend who is a letting agent. He told me that in some parts of south dublin landlords manage to evade lease agreements by maintaining a room within a rented dwelling. He says that by doing this, the exclusive possession element of a lease is not present so the tenants are not leaseholders but licence holders.

This means that the tenants are not entitled to any rights and the landlord can come and go as they please even though they may not use the room for legitimate purposes. (For example, a landlord may use a sitting room or spare room as an office.)

Is this common?

Bepolite

The house / apartment will be rented out on the rent a room scheme. They'll also not be paying any tax. I would have thought any trick in relation to landlords in Ireland would be common.

GerardKeating

Bepolite wrote: »

The house / apartment will be rented out on the rent a room scheme. They'll also not be paying any tax. I would have thought any trick in relation to landlords in Ireland would be common.

I know this is possible in theory, but I have never seen anyone use it and it works both ways, if the Land Lord does this, they cannot tie the tenant to a fixed term, and the tenant can also leave with little or no notice.

Bepolite

GerardKeating wrote: »

I know this is possible in theory, but I have never seen anyone use it and it works both ways, if the Land Lord does this, they cannot tie the tenant to a fixed term, and the tenant can also leave with little or no notice.

To be fair they can't tie the tenant anyway. They have the right to assign the lease and various other ways to walk out.

234

K ninja wrote: »

I was having a discussion with a friend who is a letting agent. He told me that in some parts of south dublin landlords manage to evade lease agreements by maintaining a room within a rented dwelling. He says that by doing this, the exclusive possession element of a lease is not present so the tenants are not leaseholders but licence holders.

This means that the tenants are not entitled to any rights and the landlord can come and go as they please even though they may not use the room for legitimate purposes. (For example, a landlord may use a sitting room or spare room as an office.)

Is this common?

It is possible, but, if the landlord tried to rely on this in court ut is far from certain that he would succeed. The test is one of substance rather than form and there are numerous examples in the caselaw if landlords who have tried this and failed.

GerardKeating

Bepolite wrote: »

The house / apartment will be rented out on the rent a room scheme. They'll also not be paying any tax. I would have thought any trick in relation to landlords in Ireland would be common.

I would have thought that you can only claim the "Rent a Room" scheme for your principle private residence, or at least for one residence. And the limit is still €10,000 a year...

K ninja

234 wrote: »

It is possible, but, if the landlord tried to rely on this in court ut is far from certain that he would succeed. The test is one of substance rather than form and there are numerous examples in the caselaw if landlords who have tried this and failed.

I find it hard to believe that a court would rule in favor of a landlord who is using a room as an office while not actually living in the house. In theory it sounds as though there is no exclusive possession but in reality does the landlord have a right to be there to begin with considering that there is no evidence of them actually living there apart from an office in the house but no bed?

For the tenants to be deprived of exclusive possession, I would have thought that the landlord would have to at least prove they are sleeping there over night to qualify for a rent a room scheme. It is as though the landlord could argue that a single room in the house which he/she uses for commercial purposes can trump the rights of 3 or 4 tenants living in what is evidently a residential area.

If found guilty, and it was discovered that a landlord had practiced this for 4 or more years, what grounds could they be prosecuted on or would it depend on whether the tenants take an action against the landlord?

A previous poster pointed out that the rent a room scheme is tax free limited to 10,000 euro so if a landlord did not declare any earnings over this they could be successfully prosecuted for tax evasion.

Bepolite

GerardKeating wrote: »

I would have thought that you can only claim the "Rent a Room" scheme for your principle private residence, or at least for one residence. And the limit is still €10,000 a year...

I'm not a tax expert but I've head it said you only need to sleep there one night a year. I'm also not sure ho tightly the rent a room scheme is controlled. I know there is meant to be a rent book but who is looking at and how many actually keep one.

Grolschevik

Bepolite wrote: »

I'm not a tax expert but I've head it said you only need to sleep there one night a year. I'm also not sure ho tightly the rent a room scheme is controlled. I know there is meant to be a rent book but who is looking at and how many actually keep one.

Pretty sure it needs to be the 'landlord's' primary residence. As in, actually lives there full time.

Reckon this thread should be in Accommodation & Property, really...

nompere

Grolschevik wrote: »

Pretty sure it needs to be the 'landlord's' primary residence. As in, actually lives there full time.

Reckon this thread should be in Accommodation & Property, really...

This is from http://www.revenue.ie/en/tax/it/leaflets/it70.html#section11

Rent-a-Room Relief

If you let a room (or rooms) in your sole or main residence as residential accommodation and the gross amount received ("relevant sums"), including monies for food, laundry or similar goods and services, does not exceed the limit for the year of assessment (currently €10,000 per annum), the profits or losses on the relevant sums are treated as nil for income tax purposes. Thus, these profits are disregarded for income tax, PRSI and USC purposes (Universal Social Charge (USC) replaced income and health levy with effect from 1/1/2011). Losses can’t be offset against rental profits from other lettings.

Total relevant sums are a gross figure, i.e. no account is taken of any expenses incurred in generating the relevant sums.

Where more than one individual is entitled to the relevant sums, the limit is divided equally between them.

An individual cannot avail of rent-a-room relief in respect of payments for accommodation in the family home by a child of the individual regardless of whether or not the child has claimed tax relief on the rent paid. This restriction applies to payments arising on or after 1 January 2007. There is no restriction where rent is paid by other family members, for example, nieces and nephews.

With effect from 1 January 2010 rent-a-room relief does not apply to payments received either directly or indirectly by an individual, or a person connected with the individual, in respect of accommodation provided in the family home where that individual is an office holder or employee of the person making the payment or of a person connected with the payer. For example, relief is not due where an individual receives payment from his/her employer in respect of accommodation provided by the individual in his/her family home, for individuals visiting the employer for work related or training trips.

The relief does not affect your entitlement to mortgage interest relief nor capital gains tax exemption on the disposal of your residence.

You can opt out of the relief for a year of assessment by making an election on or before the return filing date for the year of assessment concerned.

If you claim relief you must provide details of the relevant sums on your annual tax return, notwithstanding that the profits or losses are disregarded for income tax purposes.

Claw Hammer

The rent a room is a tax scheme. It has noting to do with situations where rooms in a house are rented individually. If a room is not let and the landlord says he or a family member resides there then the tenants do have have exclusive possession of the house and the letting is outside the remit of the prtb.
RESIDENTIAL TENANCIES ACT 2004
3.—(1) Subject to subsection (2), this Act applies to every dwelling, the subject of a tenancy (including a tenancy created before the passing of this Act).

(2) Subject to section 4 (2), this Act does not apply to any of the following dwellings—
(g) a dwelling within which the landlord also resides,

(h) a dwelling within which the spouse, parent or child of the landlord resides and no lease or tenancy agreement in writing has been entered into by any person resident in the dwelling,


The income from the dwelling would be liable for tax without the application of the rent a room relief.

Bepolite

I think some people are taking a 'liberal' view of what constitutes living somewhere and frankly it's fairly typical that no one is checking up on it.