New Rental Properties Outside the Scope of an RPZ?

Fian

Graham wrote: »

In a RPZ, a new tenancy does not reset rates.

daithiK1 wrote: »

If the landlord lives there for two years he can then legally charge market rate. There is nothing dubious with that. The new rules might have incentivised him to do just that, 500 a month or the decreased value for potential future sale are potentially big enough reasons

there is a frequent misconception that the property being off the market/unrented for 2 years prior to a new tenancy enables restricted rent to be set and disapplies the RPZ restrictions.

This is based off a misinterpretation of section 19(5)(a) of the residential tenancies act 2004, as inserted by the 2016 legislation. That subsection is as follows:

(5) Subsection (4) does not apply—

(a) where a dwelling has not at any time been the subject of a tenancy during the period of 2 years prior to the date the area is prescribed under section 24A as a rent pressure zone or deemed to be so prescribed;

(b) if, in the period since the rent was last set under a tenancy for the dwelling—

(i) a substantial change in the nature of the accommodation provided under the tenancy occurs, and

(ii) the rent under the tenancy, were it to be set immediately after that change, would, by virtue of that change, be different to what was the market rent for the tenancy at the time the rent was last set under a tenancy for the dwelling.

Subsection (4) is the provision that restricts rent increases to 4% per annum in a rent pressure zone.

There is a 2 year period referred to here, but it is the 2 years immediately prior to the area becoming an RPZ. For a property that was not let during that 2 year period the RPZ restrictions do not apply, and do not apply after the first letting either - basically market rent can be applied in that property even if that means an increase to the sitting tenant of more than 4% per annum. so that property is permanently outside the RPZ restrictions. Subsequent 2 year period of being unlet have no such effect.

Conversely if a property was let during that period, then was bought by someone who lived in it themselves and it was not rented before the legislation came in, and if it next came onto the letting market in 2030 (assuming current legislation still applied in 2030) then the rent would be capped at an increase of 4% per annum from the last rent charged until the new letting.

daithiK1

Fian wrote: »

there is a frequent misconception that the property being off the market/unrented for 2 years prior to a new tenancy enables restricted rent to be set and disapplies the RPZ restrictions.

This is based off a misinterpretation of section 19(5)(a) of the residential tenancies act 2004, as inserted by the 2016 legislation. That subsection is as follows:



Subsection (4) is the provision that restricts rent increases to 4% per annum in a rent pressure zone.

There is a 2 year period referred to here, but it is the 2 years immediately prior to the area becoming an RPZ. For a property that was not let during that 2 year period the RPZ restrictions do not apply, and do not apply after the first letting either - basically market rent can be applied in that property even if that means an increase to the sitting tenant of more than 4% per annum. so that property is permanently outside the RPZ restrictions. Subsequent 2 year period of being unlet have no such effect.

Conversely if a property was let during that period, then was bought by someone who lived in it themselves and it was not rented before the legislation came in, and if it next came onto the letting market in 2030 (assuming current legislation still applied in 2030) then the rent would be capped at an increase of 4% per annum from the last rent charged until the new letting.

Apologies so my bad

Fian

daithiK1 wrote: »

Apologies so my bad

Clearly there is absolutely no call for an apology - and my post wasn't a reaction to your post really.

You see the 2 year thing on this forum all the time and it seems to be the general received wisdom that a 2 year off market period takes you out of the RPZ restrictions - but that's not what the legislation says.

There is a corresponding error on teh other side of course - most people do not appear to realise that properties which were not let in the 2 years before RPZ came in are permanently outside of it's scope - rent increases to market on every rent review.

So if the RPZ legislation were left as it stands you would have a two tier market, with some properties rent controlled and some not. That would be untenable in the long run so inevitably it will be addressed by an amendment at some point. But they won't want to dis-incentivise constructions / new properties coming on to the market so it is tricky i guess.

Graham

Mod Note: Hypothetical Legal Points moved to Legal Discussion. New forum charter applies.