Irish Water have finally agreed to accept tenant details from landlords with regard to registering for water charges. Prior to this the tenant had to register and if they did not, the landlord faced the possibility of being billed for the tenants water consumption.
With Irish Water agreeing to accept tenant details from landlords, the tenant can now be billed directly for their water consumption.Further information is available on Irish Water website (link below). At SCK Group, for all properties that we manage for you, we will be registering your tenants with Irish Water over the next couple of days, so in this case there is no need for you to do anything further.
This question appeared in today’s Irish Times and raises the age old problem of how to handle a situation where tenants leave without notice and leave your property in bad condition. At SCK Group we have helped landlords with similar problems and have made representations on their behalf to the PRTB.
Q I rented my apartment to a couple and the lease is up at the end of the month. However, when I contacted them they told me that they had already moved out and had put the key in the post and that I can keep their deposit as the last month’s rent. I have since been to the property and it’s filthy with some damage to the furniture and some items missing. I have the tenancy registered with the PRTB but am not sure what to do. I tried to contact the utility companies to see if the bills are paid but they won’t talk to me due to “data protection”. What should I do?
A This is a most unfortunate position to find yourself in but one that does happen from time to time. It is good that you have registered the tenancy with the Private Residential Tenancies Board (PRTB) and the benefit of that will now be apparent.
Photograph the property with a date camera before you start the clean up. List all items that are missing. Obtain a quote for the repairs and replacement of the missing items. It can often take a few days to really check the property so make sure that you pick up on all damage. You can download a claim form from the PRTB website, prtb.ie, and I would recommend making a claim against the tenant for the damage. Provide their PPS numbers to the PRTB in the first instance.
If you are still in contact with the tenants, ask them to provide you with a forwarding address which will allow you to transfer the utilities back into your name and the utility company will send any outstanding bills to them at their new address. Take the meter readings and make the transfer by email keeping a record of each transfer.
You should seek compensation from the tenant in the first instance for the damage and missing items at the cost to you to make good and replace. If they refuse this request, you should then proceed with the claim to the PRTB.
The PRTB process will require you to provide clear evidence of the damage and you will be asked to provide receipts for any expenditure. Be careful only to seek compensation for issues that would be beyond normal wear and tear as this is allowed under the Residential Tenancies Act and can be hard to quantify.
Try to have all communication with the tenant recorded either by email or text. The tenants appear to have been unreasonable in their behaviour and so you must demonstrate that you are reasonable in your management of the issue. If you can’t resolve it amicably, the only route for you is to go through the PRTB.
Fergal Hopkins is a member of the Society of Chartered Surveyors Ireland (SCSI)
Further to Mr Patrick Honohan’s comments that the “banks will have to be more aggressive in repossessing properties in the buy-to-let sector” a couple of points should be noted. Firstly, as a company working closely with buy-to-let investors, we are unaware that the banks were ‘holding off’ on being aggressive with landlords. In our experience working with our clients, we have found that the banks have already been taking an aggressive approach with borrowers, and it has taken considerable effort on our part to get the banks to agree to any arrangement with the borrower. In addition, many landlords have cross-secured their buy-to-let investment with their home, so if the bank seek repossession, this will place the landlords home at risk.
Since the downturn landlords have seen their rental income drop, increases in variable mortgage interest, the introduction of NPPR, USC on rental income, the reduction of mortgage interest that is tax allowable to 75% and the recent introduction of the household charge. Take a landlord who has rental income of €12,000 pa . If is mortgage is on a variable rate, his interest repayments will typically also be €12,000 pa, of which he can only allow €9000 against his rental income, so he will be liable for tax, USC etc on €3000. He will also pay €300 in property taxes and will have other bills for service charges, maintenance costs etc. Unless the landlord has losses forward from previous years or unused capital allowances, he will be paying income tax on a negative income.
If the banks insist on repossessing buy-to-let properties, they will either sell them at a vastly reduced price, leaving the landlord with the remaining debt leveraged against his home, or the bank will attempt to manage the properties themselves. Managing buy-to-let properties is not the banks area of expertise. The bank would be better coming to an arrangement with the landlord with regards to his loan repayments and allow the landlord to manage his property himself, or with the help of a property management company, who have experience in the area and can maximise rental income and therefore enable the loan to be paid off over time.
At SCK Group, we have been working with our clients to help them navigate what has been a difficult time for landlords. We have been negotiating with the banks on their behalf and have had some success in this. Many landlords have not been utilising all the capital allowances available to them and we have been able to reduce their tax bill by advising them in this area. Some properties have fallen into disrepair because landlords have not had the money to pay for ongoing maintenance. When we realised that this was preventing landlords getting tenants for their properties, we set up our Property Refurbishment Scheme, whereby we will carry out the repairs, pay the up-front costs and then the landlord can repay us overtime from the rental income. This year, because we recognise the extra burden placed on landlords, we are going to pay the NPPR (second home tax), for all new properties let and managed by us.
Owner-occupiers, Landlords and Tenants of Aras Na Cluaine, Yellow Meadows, Clondalkin are concerned following recent newspaper articles re High Court Proceedings against the Developer in relation to issues raised by the fire officer.
At SCK Group we have been liaising with Aras Na Cluaine Management Company Ltd to ensure that the issues are satisfactorily resolved.
Below are relevant links
This article was in the Irish Times Property Supplement on 27th Jan and explains why things have become so difficult for landlords recently. Just 1 small point; PRTB is now €90 not €70 as stated in the article.
Far from being members of a fat-cat elite, many small-time property investors say they face bankruptcy if Section 23 tax reliefs are phased out, writes CAROLINE MADDEN
MENTION the phrase “Ireland’s landlord classes” and it conjures up images of a rackrenting, bed-sit- peddling elite who simply sit back and watch the money roll in from their vast property empires. In reality, today’s landlord is much more likely to be a small-time, buy-to-let investor, with one or two white elephant properties, who is now facing death by a thousand cuts.
Last Thursday night, about 250 such property investors gathered on Dublin’s northside for a meeting of the Irish Property Owners Association (IPOA), where they expressed fears of financial devastation. Many warned they would face bankruptcy if the curtailment of Section 23 tax relief announced in Budget 2011 went ahead.
The following afternoon, IPOA members and thousands of other investors breathed a sigh of relief as the Finance Bill put the Section 23 proposals on ice until at least 2012. However although they have been granted a reprieve, it is only temporary.
In last December’s Budget, Minister for Finance Brian Lenihan announced that property-based legacy reliefs were to be phased out. The most controversial element of this related to Section 23 tax relief on rented residential property in tax-designated areas.
The main attraction of this type of property for investors was the ability to offset between 75 and 90 per cent (typically) of the purchase price against all of their Irish rental income, thereby cutting their tax bill.
However Minister Lenihan announced that from January 1st 2011, the relief could only be offset against rental income from the Section 23 property, as opposed to rental income from all of the investor’s Irish properties.
As the rents on Section 23 properties tend to be low, and borrowings are almost always high, little or no taxable income arises on such properties. Therefore if the tax relief were to be ring-fenced in this way, it would become worthless for many investors.
Doubtless the Government banked on the public appetite for meting out punishment to anyone associated with property development to carry this proposal through. However the big property players would have escaped unscathed from any such restriction, as they were generally able to use up their all of their reliefs or allowances in the first year or so.
Instead, small individual investors – from middle-class full-time landlords to tradespeople to pensioners – would have found their unused Section 23 relief effectively guillotined this year.
Representative groups argued that to retrospectively change the terms of the incentive was unfair, as investors had a legitimate expectation of being able to claim the full relief as offered to them by the State at the time of investing.
The Government was inundated with several hundred submissions to this effect and announced it was delaying the change, ostensibly to allow for the completion of an economic impact assessment.
In reality, as Labour finance spokeswoman Joan Burton summed it up last week, what the Government has done is to simply kick the can down the road.
It will take at least six months for the assessment to be completed, by which point it will be someone else’s problem as a new government will be in place.
If the Labour Party gets into power it is unlikely to take a softer line with property investors than the current Government, but it is impossible to predict whether the Section 23 proposals will eventually be implemented, changed or scrapped.
A recently-formed group, Justice for Investors, is encouraging investors to continue lobbying TDs and the Minister for Finance on this issue because of the uncertainty surrounding it. It has provided sample letters and TD lists on its website, justiceforinvestors.com.
Paul Reynolds, president of the Institute of Professional Auctioneers and Valuers (IPAV), has highlighted the fact that the deferral of any decision on property incentives has created serious uncertainty in the market. Investors now find themselves caught in a limbo – whatever hope they had of selling a Section 23-type property before, they have even less chance now.
This tax-shelter saga is not the only thorn in the side of property investors. In the 2009 emergency Budget, the amount of mortgage interest that could be offset as an expense against rental income was reduced to 75 per cent (from 100 per cent).
According to a Munster-based landlord (who did not wish to be identified) with more than 20 properties and no other source of income, this is a more serious issue for investors than the proposed restriction of Section 23 reliefs as it affects everyone who owns a second property and rents it out. “It’s not purely rack-renting fat landlords,” he says. Many investors are just waking up to the impact of this change now, as they only became aware of it when they filed their tax return three months ago.
“It’s a bigger but less immediate problem. People are going to slowly go bust,” says the landlord.
“With the 75 per cent mortgage interest restriction, there is no case for investing in residential property in Ireland,” he says. “You can only lose money.” He makes the point that if, for example, an individual earns €1,000 a year in rent, and they pay €1,000 in mortgage interest, (ignoring other expenses) they are breaking even. However they can only deduct €750 for tax purposes, and therefore will be taxed on €250, even though in reality they did not make a profit.
“It’s one thing to pay tax on income you have. It’s quite another to pay tax on income you don’t have,” he says. He believes that if the 75 per cent interest restriction is not repealed, he’ll be “wiped out” and the property market will not recover. “Investors are never coming back into the market while some of the interest costs are disallowed,” he predicts.
Like many investors, he is only repaying interest on his property borrowings at the moment. “I can only repay capital if I’m making a profit, so I’m interest-only.” He says he has been “invited” by his bank to begin repaying capital, but he has not been “compelled” to do so.
“If I was, it would be become a distressed loan, so the banks can’t afford to go there,” he says. Different banks have different approaches, though, and many investors have been contacted by their lenders in recent months to inform them that they are due to begin repaying capital on their borrowings.
In some cases, investors on tracker mortgages have been presented with two options: begin repaying capital as well as interest, or switch to a more expensive variable rate mortgage and remain interest-only for a further period of, say, two years.
The problem is that many landlords are struggling to meet their interest repayments, let alone repay the principal of the loan. Not only have rents shrunk, but the list of expenses landlords face has grown considerably longer. Firstly, there’s the annual non-principal private residence (NPPR) charge of €200, which cannot be written off for tax purposes.
If the investor’s property is divided up into different flats, bedsits or apartments, this charge applies to each of the units.
Management fees are another area of growing concern for owners of apartments, including buy-to-let investors, as they can run into thousands each year. Landlords also have to register every tenancy with the PRTB now, at a cost of €70.
And as of January 1st, 2009, all homes for sale or rent have been required to have a BER certificate, which indicates how energy efficient the property is. There is no set fee for getting a BER assessment carried out, as it depends on the type of property, but it usually costs between €120 and €300.
“A lot of people are in a situation where they would be better off to have nothing [no property],” a spokeswoman for the IPOA said. “They’d be better off on social welfare instead of working and paying money towards their investment properties. They’re in a situation where they have pared down their own expenses to the bare bone.”
With the most vulnerable sections of society being hit by budget cuts, and family homes being repossessed, there is little sympathy for those who saddled themselves with debt to join the landlord classes.
But with no property market recovery in sight, many investors will soon be forced to choose between paying their taxes and repaying their borrowings, at which point their problems will become the State’s problems too.
Multi-unit bill will prevent rip-offs
NEW legislation which came into force this week may help prevent apartment-owners being ripped off by management companies. The Multi-Unit Development Act, which was signed into law by the President, Mary McAleese, on Monday, addresses major weaknesses in current legal protections for people who buy units in apartment blocks.
A key provision is that ownership of common areas in apartment blocks or housing estates is transferred from the developer to the management company, controlled by owners, before any unit is sold.
Transfer of ownership must occur in a timely fashion for developments already completed or partially completed. This addresses a situation where developers have held on to a small number of units to retain control of the development company. It has led in some cases to management fees running into thousands of euro being levied on apartment owners.
Another requirement will be an annual minimum contribution of €200 per unit for a sinking fund to meet any large, unexpected or non-regular costs. One unit, one vote, will apply on management companies and owners will have to pay charges, whether they are a developer or not and whether the unit is occupied or not.
The Act is one of the last that the current Dáil will pass before it is dissolved. However, the related Property Services (Regulation) Bill, which provided for the setting up of a national house price register, didn’t make it through all stages in the Oireachtas. As a result, housebuyers and sellers will remain in the dark about prices, at least until a new Government tackles the issue.
Costs, benefits for landlords
The dream of capital appreciation has been replaced by the nightmare of negative equity. Most investors who bought between 2004 and 2008 now find their borrowings exceed the value of their properties, in some cases by several hundred thousand euro.
Although rents are showing signs of stabilising, they have fallen to levels last seen at the turn of the millennium.
Mortgage repayments : interest rates are set to rise; many investors are coming to the end of their interest-only term; and only 75 per cent of mortgage interest is now allowed as a deduction for tax purposes.
Annual Non-Principal Private Residence (NPPR) charge : €200 per unit
Cost of registering each tenancy with the PRTB : €70
BER assessment : €120-€300
An interesting article entitled “The PRTB – a fair deal for landlords?”
Click below to view the article or you can download a printable version here.
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