Tenants will be entitled to leases of “unlimited” duration under the new bills from Housing Minister Darragh O’Brien. The measure aims to strengthen long-term tenure security, but landlords will continue to have ample discretion to terminate these leases.
The laws are part of a package of measures that includes a 2 percent limit on annual rent increases in designated pressure areas when inflation exceeds that rate of increase. The cap, set a fortnight ago, comes with a rapid rise in inflation to an annual rate of 5.1 percent in October.
The 2 percent limit will take effect once legislation introduced on Tuesday becomes law. The effect of the limit will be to “significantly” reduce rent increases, O’Brien said.
However, indefinite leases will not be introduced immediately. They shall enter into force six months after their promulgation and in the new leases settled after that point.
The new scheme will change the provisions known as “Part 4”, which come into force six months after the lease to give tenants the right to a lease with a total duration of six years. These provisions are linked to fixed-term private leases, in fact extending them, although with specific causes for termination by the owners.
New laws to improve “Part 4” protections for tenants will also enter into a lease in six months. But the lease will be set “for an unlimited duration and not subject to expiration at the end of a six-year period,” according to the minister’s statement of reasons on the bill.
Still, the reasons for landlords to terminate “Part 4” leases will remain the same. Those provisions have long been criticized by housing activists who have argued that they weaken the tenant’s position.
Causes of extinction
Reasons for termination include landlords who have the right to terminate the lease if they need the property for their own use or for a family member. They can also end the lease if they plan to change the commercial use of a property, remodel it substantially, or sell it within nine months.
In addition to all new leases operating under the rules of indefinite duration, Mr. O’Brien said all existing “Part 4” contracts will change to the new scheme over time as they expire, expire or renew.
“Within six years and six months of the passage of this bill, all residential rents will become of unlimited duration,” the memorandum says.
“In the meantime, this bill provides that a landlord may consent to any existing lease being treated as a lease of unlimited duration.”
The 2 percent limit changes the rules in effect only since mid-July, under which rent increases above the inflation rate have been banned. Before mid-July, a 4 percent cap will be applied to annual rent increases in pressure areas.
Mr O’Brien said inflation was rising at an “unexpectedly fast pace”. The Harmonized Index of Consumer Prices (HICP) rose an average of 0.73 percent in the three years to July, but rose 1.6 percent in the 12 months to June and has risen every month since.
“In introducing legislation to link any income increase to HICP inflation in July, I was very clear about the need to carefully monitor inflation,” O’Brien said.
“Given the unexpectedly rapid rise in HICP inflation, I quickly moved into contact with the Attorney General’s Office and got government approval to introduce a 2 percent limit on rent increases in rental pressure zones. This bill respects the constitutionally protected property rights of landlords and aims to safeguard continued investment in the sector from existing and new landlords to provide the necessary supply of high quality rental accommodation.