Accidental Landlord Question -

Lipbalmpam

We built a new home in 2013 but at the time were struggling to sell the house we lived in so decided to rent it out. We were never trying to make money from the home - just to cover the mortgage really, and now we find ourselves in a big pile of you know what!

We rented to house out for €575 for 5 years, then put the rent up to €675 and last year increased it to €800. We are aware that this is dramatically lower than the market value - as I said we were not in it for money - we have had the same tenant all that time. We never registered with RTB and plodded along like this for years. Last year we discussed with our tenants that we wanted to register with RTB and that to do that we would need to be charging the correct market rent - that was when we upped the rent to €800 and agreed that we would discuss it in the new year. We called yesterday to discuss what we both thought would be a fair amount we said we thought €1400 would be more than fair on them and they were horrified that it was going to be so much…. we had checked and the going rate in our area with the house as is at €1500 per month - but if we got it painted etc it would be €1800 so €1400 was more than reasonable.

We are now a nervous wreck about what will happen. Anyone with any experience of the RTB being easy to deal with? Should we come clean and advise how long the tenants have been there? They may not want to stay now they've said as they don't think they can afford €1400 - they won't get anything cheaper so may have to move home to Poland - if they go should we just cut our losses and sell? We are so confused about what to do now and are nervous of opening a can of worms!

meijin

it doesn't matter for the rent review if the house was previously registered or not

re. rent, see https://www.rtb.ie/calculator/rpz

• check if it's in RPZ
• if yes, use the calculator provided

for non-registration, you need to do it anyway…

https://www.rtb.ie/registration-and-compliance/registrations/registering-your-tenancy/why-register

Penalties for non registration

A person who does not comply with their responsibility to register their tenancy/ tenancies faces a criminal conviction and a fine of up to €4000 and/ or 6 months imprisonment, if convicted. In addition to the Court imposed fines, the landlord will also have to pay the RTB’s legal costs which can be in the region of €2,500 plus VAT per case.

jo187

https://www.boards.ie/discussion/2058396928/accidental-landlord-question

Kinda show the whole problem of "the going rate". It's not based on what you need but best profit for you.

Seems like you a good relationship with them and your basically going to ruin their life to make more money.

Whole thing in a bowl there. But of course "poor landlords".

Donald Trump

Reading between the lines, is it the case that "wanting to register" is a euphemism for regularising what had previously been undeclared payments?

Hence the wanting to go such a relatively large jump

D-Lo Brown

COuld also be tax implications if you haven't been declaring etc

Regardless of whether or not you're registered, you're bound by the residential tenancies act. Tenant entitled to 90 days notice and as mentioned above, if you are in an RPZ there are far more restrictions

I work in this industry and rent and manage aa good new properties. I never like doing rent increases. I believe that just because you can get a certain rent doesn't mean you should.

My mortgage is around 900 or so a month. I don't know what I'd do if I was told it was going up to 1400 overnight

Kaisr Sose

I dont disagree with post above, except for one thing, Homeowners have little.to no say if their mortgage rate.increases. They have to pay it. Many renters think their rent should never go up.

OP has made a number of mistakes in how they managed the rent increases. But, they have been quite fair to the tenant for a long time. I just wonder if they are in an RPZ, and will now find themselves in a situation where they are stuck on a rent that's way below normal, having to go back to the lower rent and apply the permitted increases only. It wont get past €800. If they are outside a RPZ, there is nothing to stop them resetting the rent.

Then face paying late registration fees and possibly having to settle tax affairs too.

3DataModem

You've collected 85k in rent, and never once thought about normalising your affairs.

As other posters have said;
1. You need to register, and register retrospectively.

2. You need to sort out your tax. You may owe some, you may not owe some, but it will come back to bite you some day.

3. A lot of the country is part of an RPZ, you need to check if you are. If you are, you will not be able to increase the rent much past 800. Enter your eircode here to check: https://www.rtb.ie/calculator/rpz

Tim Robbins

Increasing from 800 to 1400 is very hard for anyone. Are you in a rent pressure zone? If not you could register it for lower but give them forewarning you can't keep it so low and need to increase over a few years closer to market rent?

Also once your set up correctly they can claim some tax back on their rent.

Hairy123

What can of worms are you afraid of opening? Have you been declaring the income for tax purposes? Do you think a 75% increase in rent is reasonable? How did you expect the tenants to respond to such an increase?

Ray Palmer

https://www.boards.ie/discussion/comment/123182744#Comment_123182744

They certainly are not going to ruin the tenants lives if anything they let them have a massive discount for years to live beyond their means or save. Do you refuse a pay increase because you don't need it? Value of any service is decided by the market and it is not up to somebody else to say the maximum profit allowed.

OP

The likelihood of the maximum fine for somebody letting RTB know you didn't register is zero. They are much more likely to not fine you at all after that it is a low fine about 40euro

Now it does sound like you may not have paid tax on the income which is different. They will want all tax paid up on any income undeclared with 1.5% interest. They will agree a payment plan if you don't have the funds ready. Again they are not going to maximum fines if you come clean.

Yes be completely honest and say when first rented. You don't want a disgruntled tenant to have anything to hold over you.

Ray Palmer

https://www.boards.ie/discussion/comment/123182938#Comment_123182938

Do you think 29% discount on rent is reasonable after have years of paying less than 50% of the market rate for at least 5 years ? Still sounds like an amazing deal for the tenant. I get the shock element bu when you do ALL the sums you see the tenant has and will have a good deal.

Donald Trump

https://www.boards.ie/discussion/comment/123182850#Comment_123182850

Homeowners have little.to no say if their mortgage rate.increases

Investors can fix their rates if they don't want to take the risk. One cannot take on, or willingly continue to hold, a risk and expect to benefit from the upside (rates decreasing) while at the same time insisting a third party with no input into that decision compensate them should any downside materialise.

DubCount

For OP. Regularise your position with the RTB and revenue. If you are in a RPZ, sell up. You would be better off selling and getting a better return from a different property or a different investment. If you are not in a RPZ, sell up or give notice of increase to full market value immediately.

Its not about fairness, its not about consideration for your tenants, its about playing by the rules the Irish state has set for landlords. Good guys get the hardest kicking. No matter what you do, you'll earn the "greedy landlord" tag as that is what all landlords are labelled by the court of public opinion.

In Ireland, landlording is not seen as a "regular business". Its seen as a "social service". Thats why landlords are restricted by price controls, mountains of regulations, and support for gougers who dont pay their rent. If you must be an investor in a social service, make as much as you can while you still can, and park your plans to be a nice guy.

oinkely

This thread sort of encapsulates a lot of what is wrong with the rental market and makes me really despair for the state that Ireland inc will be in for the foreseeable future due to not enough feckin houses on / in the market. In the first post we see that the owner doesn't really want to make a profit, just cover the mortgage etc, and very quickly moves to 'the going rate in my area is….' and justifies a massive rent increase on this basis.

It seems that covering the mortgage is not sufficient anymore, that hefty profits are justified now because the market says so.

The impact on the renter in this case is a massive jump in rent which may or may not be sustainable for them, and will likely be life changing as they may have built their life around the rent they were paying with a reasonable annual uplift. Maybe not though, and they have been spending the extra cash on coke and hookers all these years and will be able to cut back on these frivolities to cove the extra rent.

The impact on the OP is more cash in their pocket. I want to regularise the situation = I want more of your cash in my pocket because i can get away with it.

That's what it says to me anyway.

I don't rent, nor am i a landlord. I do have kids who I hope will be able to move out some day and this sort of situation really brings home how fcuked the rental market is and how little chance there is of them moving out of home and staying in Ireland.

Madeoface

https://www.boards.ie/discussion/comment/123183436#Comment_123183436

And Revenue will want a 10% penalty for what looks like deliberate behaviour; IF the landlord comes forward. If he/she doesn't this could be 100% penalty depending on the level of tax owed (i.e. if the tenant alerts Revenue and they open an intervention before the landlord regularises their tax affairs and there is significant liability).

Ray Palmer

https://www.boards.ie/discussion/comment/123183662#Comment_123183662

They could possibly do all of that but in practice that does not happen. Revenue often waive penalties and even reduce tax amount to be paid We don't even know if tax is an issue.

Ray Palmer

https://www.boards.ie/discussion/comment/123183624#Comment_123183624

You are missing a huge issue here if tax is involved. The landlord will end up with less money if they haven't paid tax on the rent and now do. So rent goes from 800 without tax to 1400 with tax the landlord will get less than 700 now. They won't make extra profit and be paying back tax on the earlier income.

The tenant has done very very well out of the low rent and they certainly know it. If they weren't aware that the deal was so good then they were very naive.

Don't rent under the table as a landlord or a tenant and none of this will ever effect you.

Donald Trump

https://www.boards.ie/discussion/comment/123183602#Comment_123183602

"Landlording" is indeed a regular business. And subject to rules and restrictions like most other businesses. And like any investment and any business, there are associated risks.

The issue arises because many amateurs don't appear to understand that it is a business, and blindly jump in and only realise possible issues if or when they manifest.

oinkely

https://www.boards.ie/discussion/comment/123183724#Comment_123183724

That does colour the picture differently. Why would anyone bother being a landlord? No wonder rents are ridiculous.

Ray Palmer

https://www.boards.ie/discussion/comment/123183779#Comment_123183779

You aren't even considering if a tenant stops paying rent, interest rate increases, insurance, additional government charges, damage by tenants, maintenance etc… which rent has to cover. When looking at private landlords rent the government get 52% and more dependent on the landlords source of other income. Landlords are not all just about greed they have costs and for ever euro increase in cost basically requires 2 euro in rent.

Landlords are also subject to a lot of abuse which you jumped on without any consideration for reality probably because of the general public view.

oinkely

https://www.boards.ie/discussion/comment/123183857#Comment_123183857

Our perceptions are influenced by the facts as we see them. It certainly appeared as though the OP was going from a 'cover the costs at €800 per month' situation to charging 'going rate at €1400' because the current rate in their area is that or more. The tax implications were not highlighted or discussed initially and it looked very much like the increase in rent was going to go in the pocket of the OP.

My perceptions have been altered.

Regularising the situation in this case appears to be bad for both the tenant and the landlord - with the only winner being the coffers of the state.

OT - The tax man always wins - i wonder why we don't hear any proposals from govt to lower rents by adjusting the tax treatment of rental income?

Donald Trump

https://www.boards.ie/discussion/comment/123183899#Comment_123183899

Why do you think that lowering tax rates would decrease rents any more than interest rates lowering decreased them over the past 2-10 years?

The landlord will charge as much as they can (which they are entitled to do). Given a landlord can end up more money if they have lower tax, all that will happen is that prices of houses and development land would increase. The number of rental units might increase as a result of more landlords outbidding would-be-homeowners but that is essentially a zero-sum-game.

Moonbeam

so you rented illegally for years? did you declare it for tax purposes?

Technically any increase in a rent pressure zone in illegal whether registered or not.

I think that rent increase is scandalous and extremely unfair on the tenants but it is your house and your decision.

oinkely

https://www.boards.ie/discussion/comment/123183993#Comment_123183993

Ray palmer noted that every €1 in rent requires the landlord to charge €2 to cover tax and other costs. If the tax rate was lower then the landlord would not have to charge as much rent to have same profit.

Sadly - the second part of your post probably hits closest to reality - charge what can be gotten away with. I'm sure there are plenty of landlords out there who don't do this - but it seems that the reality is that most do.

Rocket_GD

https://www.boards.ie/discussion/comment/123184207#Comment_123184207

When are reductions ever passed on to the end consumer when rates are lowered?

VAT reduction not passed on, prices increased because of energy increases, then when energy dropped by 25%, did prices reduce in line? No they continued to rise.

Reduce tax rates for Landlords and they will still increase the rent to the maximum that the RPZ allows them to.

This LL appears to have been paying no tax on an income source totaling €85k, essentially getting a major asset paid for them under the table by tenants. I really hope that they're hit with a major tax bill. Just because they weren't charging the market rate doesn't make them good LL's.

Donald Trump

https://www.boards.ie/discussion/comment/123184207#Comment_123184207

A common refrain from some posters on this thread is "I'm not a greedy landlord. I don't want to just maximize income by charging the rate for my area. But the RPZ forces me to put up my increases because if I don't, then I might be prevented from charging the rate for my area". I mean, they are entitled to maximize income. But be honest.

Ray Palmers figures are obviously taken from the perspective of someone who doesn't have a good grasp of finance. Let's apply similar logic to my purchase of Nvidia shares. One share is trading at almost $140 today. I bought it exactly 12 months ago when it was trading at $70 using a personal loan at a rate of 8%. That's 5.60 per year in interest. Now the dividends I received were 4 cent in total. So I only took in 2c net for the year on my $70 investment. I would have needed to earn 280x that dividend before I make any profit on my $70 investment. Considering I wanted to pay back the principal from the dividend as well, I'd have needed 455x to pay that back (big simplification) over 20 years. Therefore I think I should get a tax break on all my investing income.

Kaisr Sose

https://www.boards.ie/discussion/comment/123183528#Comment_123183528

My comment was in reply to a post referrifng to a mortgage payment today 900pm and what to do if it suddenly went up. Some investors and homeowners (many of whom were not in arrears) had massive increases in their interest rate when loans sold to vulture funds. There just have to suck it up .A tenant, provided the increase is permitted, would be no different.

ThreeGreens

You have three things to think about.

1. Tax. It's not clear if you paid your tax on the rental income or not. Most seem to assume that you haven't and that may well be the case. If it is, speak to an accountant. You might not owe all that much once you take into account your costs and capital allowances.
2. RTB. You can register the property late. The penalty for doing so is relatively small. It's not worth worrying about it's so small.
3. RPZ. This is going to be the killer in it all. If you are in a RPZ then your rent is based on the previous (way below market ) rents and you can't just increase to market value now. If you do, and even if your tenant agrees to say nothing and just register with the RTB as a first letting, nothing stops them from taking a claim years later for over charged rent. They will always have that over you.

If you're not in a RPZ you don't have a lot to worry about. The tax and RTB can be sorted.

If you are in a RPZ, your biggest problem will be setting a new market rent and even doing so with the agreement of the tenant doesn't stop them making a claim later.

Ray Palmer

https://www.boards.ie/discussion/comment/123184292#Comment_123184292

I know what I am talking about and did use a simplistic explanation of how much tax would be involved in a rent increase situation where tax was not being paid and went to a situation where it was now being paid. You are changing that around to talk about overall investment and taxable income. They aren't the same thing.

We still don't know if there was tax paid on the rent or not. I did not need to mention any capital repayments because that was not what was being discussed. If the landlord in this case didn't pay tax they passed that onto the tenant directly which they will be liable for the tax on now but the tenant remains the benefactor without the liability and did very very well out of it.

@Gary_dunne

The landlord saved the tenant about 90k which most people would see as a good thing if it was them benefiting by the that amount. If they get hammered with tax and fines it will means they have to sell and the tenant has to pay market rate rents so nobody benefits other than revenue.

It is annoying as a tax abiding person to see people avoid tax and get all the benefits but in this case it was the tenant that got the benefit with the landlord holding the liiability. That certainly isn't a greedy landlord and people still want them to be punished as much as possible. By all means somebody pocketing full rent and paying no tax should have punishment but that is not the case here. Seems like you want to punish them just for being landlords

Ray Palmer

https://www.boards.ie/discussion/comment/123184020#Comment_123184020

Then by your measure they should sell up and make the tenants deal with the market rate for tenants. The tenats have been at 90k undercharges over 7 years. Seems extremely generous to them as opposed to unfair

Rocket_GD

https://www.boards.ie/discussion/comment/123184533#Comment_123184533

They have got 90k paid off their mortgage that they haven't paid tax on. I think it's very disingenuous of you to suggest that only the tenant benefitted from this arrangement.

They've been acting as a tax avoiding rogue Landlord for the past 12 years. They say they weren't looking to make money on it but by renting it out, getting their mortgage paid for they've been accruing an asset tax free for 12 years. They deserve to be punished.