Legally setting leases

LolaJJ

Hi there,

My tenants are leaving my apartment next month.

I will be looking for new tenants then, however, I will probably sell the apartment in a year or so and I'm worried that I will have problems legally when it comes to the end of the lease.

Is it legal to enforce the lease after 12 months and ask them to leave? It's in a rent pressure zone in central Dublin and my current tenant is a friend so even putting the rent up by 7% it's going to be about 40% cheaper than anything similar in the area. Which, I guess makes me a bit worried.

Can anyone advise?

Fian

Once a tenant is in place for 6 months they acquire a part IV tenancy, which lasts for 6 years.

However if you intend to sell within 3 months that is one of the legally permissible reasons to serve notice on your tenants and terminate the part IV tenancy.

Read up about terminating tenancies on the RTB website. You will need to serve written notice in the statutory form, you can't rely on the lease being for 12 months.

https://onestopshop.rtb.ie/ending-a-tenancy/how-a-landlord-can-end-a-tenancy/#targetText=In%20a%20fixed%20term%20lease,28%20days%20notice%20is%20required.

The_Conductor

If the tenant is unable to find alternate accommodation- it is highly likely that they will overhold.
If they contact Threshold, or any of a number of other bodies- they will be advised to overhold- wholly irrespective of the fact that you intend to sell, and serve proper notice.

If you intend to sell in circa 1 year's time- and your current tenant is leaving (of their own volition)- the logical thing to do is to sell now- rather than getting new tenants and only letting them stay for a year.

punisher5112

Would air BnB be an option?

dennyk

punisher5112 wrote: »

Would air BnB be an option?

Is this apartment your primary residence (where you currently live full-time)? If so, there is no limit on how long you can rent a room in it for short-term lets while you're living there. You can also rent the entire property for short-term lets for up to 90 days a year if it's your primary residence. If the apartment is not your primary residence, then you would have to get change-of-use planning permission to rent it out for any short term lets, and you would never get such a permission (barring some sort of corruption), so AirBnB is not going to be an option in that case.

the_syco

LolaJJ wrote: »

Is it legal to enforce the lease after 12 months and ask them to leave?

If you intend to sell within a year, keep it vacant.

The_Conductor

the_syco wrote: »

If you intend to sell within a year, keep it vacant.

Esp. cognisant of the fact that it is rent locked at 40% below open market rates. Any new tenant would be clinically insane to vacate the property in a years time- wholly aside from any lease obligations.

OP- if you intend on selling- sell. If you get a new tenant in- you have a whole new problem to deal with.

murphaph

I had the opposite situation in Berlin in 2007. I'd bought an apartment for my own use but due to my father passing I needed to delay my move over. I just left the property empty for a year rather than risk an overholding tenant.

I would strongly urge the OP to do the same rather than let a property for way under market rate! You'll quite likely put all the rent and then some into your legal fees in trying to get the tenant out.

And that's if the government don't legislate to remove selling as a ground for termination!

punisher5112

90 day air BnB it and be done with it...

Edgware

the_syco wrote: »

If you intend to sell within a year, keep it vacant.

I agree. You are looking for trouble. No reason to believe the market will be better next year.

SozBbz

OP, perhaps it would help if you could give us some background that might help.

Why do you want to sell in a year as opposed to now? What circumstances are behind this timeline?

Like others, I think you'd be best either keeping it empty or short lets under Air BnB etc.

drunkmonkey

Can you not just jack up the rent to market rates when the existing Tenants leave, if that's not legally allowed how long does it need to be vacant before you can?

dennyk

drunkmonkey wrote: »

Can you not just jack up the rent to market rates when the existing Tenants leave, if that's not legally allowed how long does it need to be vacant before you can?

If it's in an RPZ, then the rent can't be increased by more than ~4% per year since the last time the rent was set; the restriction still applies even if a new tenancy begins. The property has to be without a tenancy (whether vacant, owner-occupied, etc.) for at least two years before the RPZ restriction no longer applies.

LolaJJ

Thanks all,

I hadn't even considered leaving it empty.

Perhaps I have been given bad advice.

Property was my primary residence and I lived there for 5 years. I then moved in with my partner and we live in his property. I rented mine out 11 months ago to my friend. She has a low income and couldn't afford much more than that and after my tax return it pays my small mortgage so I was happy with that arrangement.

Myself and my partner wish to buy a property but will have to wait at least one year (maybe more) as he recently became self-employed. I have a lot of equity in my apartment and have been advised that when I sell it, if I am not immeadiately buying another property that I will have to pay a lot of tax?

vandriver

dennyk wrote: »

If it's in an RPZ, then the rent can't be increased by more than ~4% per year since the last time the rent was set; the restriction still applies even if a new tenancy begins. The property has to be without a tenancy (whether vacant, owner-occupied, etc.) for at least two years before the RPZ restriction no longer applies.

So,if for whatever reason,you are selling next year,the new owner might only need to keep it empty for a bit over half a year to get full market rates.
It's a selling point.

Del2005

vandriver wrote: »

So,if for whatever reason,you are selling next year,the new owner might only need to keep it empty for a bit over half a year to get full market rates.
It's a selling point.

No. Rent is locked in at the price the OP had and limited to the 4% annual increases. Another reason why a lot of ex rentals exited the market, investors with cash couldn't buy them.

The only way to increase rent is by a substantial redevelopment and IIRC that's nearly impossible with an apartment.

vandriver

Del2005 wrote: »

No. Rent is locked in at the price the OP had and limited to the 4% annual increases. Another reason why a lot of ex rentals exited the market, investors with cash couldn't buy them.

The only way to increase rent is by a substantial redevelopment and IIRC that's nearly impossible with an apartment.

'...Exempt properties include properties that have not been rented for a period of two years prior to the immediate tenancy commencement date.....'

The_Conductor

However- its sitting there vacant for 2 years- to extinguish the improbably low rent level that the OP set the rent at for her current tenant.
Best bet- is to sit down with a tax consultant- see how long the OP can hold funds from the sale without generating a taxable gain- and then buying within that timeframe from the proceeds of the current unit.

Note- property sales have slowed considerably- it could very well take several months to sell the unit- even if its in a reasonable condition in a high demand area.

The OP is paying the price of letting to her friend at an improbably low rent level!

SozBbz

LolaJJ wrote: »

Myself and my partner wish to buy a property but will have to wait at least one year (maybe more) as he recently became self-employed. I have a lot of equity in my apartment and have been advised that when I sell it, if I am not immeadiately buying another property that I will have to pay a lot of tax?

I don't think so...I mean you don't pay CGT on the appreciation of the property for the years you've been living in it. If its only been rented to your friend for 11 months, there may not be any CGT due as prices have been stagnant or slightly falling in some areas (you'd have to make a judgement based on the local market in your area).

so if you bought your apt in 2013 for €100,000, and lived there until 2018, at which point it was worth €160,000, and you sell in 2019:

Sell at €165,000, then you pay CGT on €5,000
Sell at €160,000, no gain during its time on then rental market, then no CGT due
Sell at less than the 2018 value, again no CGT due


You only have to pay CGT on any appreciation during the period of rental, in this case 11 months, so its going to be marginal. Whether you sell now and sit on the money for a year or sell in a years time (say 2 years time as a rental) you just have to pay CGT on any gain from 2018 onwards. If you know your property isnt gaining value, then this doesnt really matter. If you think properties are still going up in your area, then its a factor to consider.

I don't think theres any other tax issue to consider if you sold now and sat on the money for a year.

The_Conductor

Not quite- they look what it cost at the outset- and what it made when its sold- they don't apportion the rise or fall on an annual basis- other than 5 years @ owner occupied dwelling, 1 year not, 6 years total- any increase in the value of the property is taxed at 1/6 of the increase = a taxable gain.

The fact that prices have fallen in the last year- is moot- its the overall picture they look at.