Creating a New Tenancy

On 24 December 2016, The Planning & Development (Housing) & Residential Tenancies Act 2016 (“the Act”) was signed into law. The Act aims to provide greater stability and protections for residential tenants.

A significant amendment has been introduced in relation to the creation of new tenancies in a Rent Pressure Zone. Where a landlord is creating a new tenancy in a Rent Pressure Zone, the landlord is required to furnish the tenant in writing with the following information at the commencement of the tenancy:

  • the amount of rent that was last set under a tenancy;
  • the date the rent was last set; and
  • a statement as to how the rent set under the tenancy with the new tenant has been calculated having regard to the rental cap formula.

This requirement effectively places a limit on the amount of rent which a landlord can charge when granting a new tenancy of an existing dwelling. The rent in effect must be similar or comparable to the rent which the landlord previously charged in relation to that residential unit.

From a landlord’s perspective this is a very significant imposition and will curtail its ability to obtain a premium rent from a new tenant on the creation of a new tenancy as the rent must be comparable to the rent previously charged for the dwelling by the landlord. In practice, and particularly where a property has been sold since it was last occupied, it may prove difficult to establish the last rent paid by a tenant and it may be the case that market rent will be considered in these circumstances.

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