knowledge | 20 July 2021 |
The Residential Tenancies (No 2) Act 2021: New Rent Cap Regime and Tenant-Focussed Protections
The Residential Tenancies (No 2) Act 2021 (the “Act”) was enacted on 9 July 2021, providing for an extension of the temporary protection regime for tenants financially impacted by Covid-19, as well as longer term changes to the regulation of residential tenancies of real significance for landlords and tenants.
RPZs and rent increase restrictions
One of the most significant changes is the change to the maximum allowable increases in rents in rent pressure zones (“RPZ”s). The current 4% per annum (or, more accurately 8% over two years) cap on rent reviews during the term of a tenancy is replaced so that any rent review increase in an RPZ initiated by notice served by a landlord after the commencement of the relevant section of the Act cannot exceed inflation as recorded in the harmonised all-items index of consumer prices (the“HICP”).
The Act requires the Residential Tenancies Board (the “RTB”) to establish and maintain a rent pressure zone calculator to calculate any increase in rent in a rent pressure zone in accordance with the method set out in the Act and to publish and keep up to date a table of HICP values published by the Central Statistics Office. The percentage increase (if any) between the latest HICP value published by the RTB at the time the rent was set and the latest HICP value published by the RTB prior to the service of the relevant rent review notice is the maximum percentage that may be applied to increase the rent last set on review.
Importantly for landlords, breach by landlords of these provisions of the Act is “improper conduct” under the broader residential tenancies legislation, with the associated penalties.
In keeping with these substantive changes, the Act extends current and potential future designation of RPZs to 31 December 2024. For rent reviews in areas outside of RPZs, the current restriction on frequency of review to once in every 2 years is also extended to apply to 31 December 2024. Rent reviews within RPZs continue to be allowed annually.
Deposits and advance rent payments
As a further tenant-focussed protection, the Act restricts any requirement by landlords for upfront payments to secure a tenancy to one month’s advance rent payment and a rent deposit equal to one month’s rent.
The Act also restricts any requirement by landlords for advance rent payments during the tenancy, to cover one month only. Students in student-specific accommodation can opt out of this restriction and pay more than one month in advance if they wish.
Again, breach by landlords of these provisions of the Act is “improper conduct” under the broader residential tenancies legislation, with the associated penalties.
Termination of tenancies by students
In a move, specific to students of purpose built “student-specific” accommodation, the Act clarifies that the required notice period for termination of a tenancy by a student in student-specific accommodation is 28 days, but that the student may give a longer notice period, should the student wish.
Extension of COVID-19 protection regime
Part 3 of the Planning and Development, and Residential Tenancies Act 2020 (“PDRTA 2020”) provides for protection for qualifying tenants financially impacted by Covid-19 from termination for rent arrears and from rent increases during the “emergency period” provided for in that Act. The Act extends the “emergency period” for the purposes of the PDRTA 2020 to 12 January 2022. For more detail on the operation of the PDRTA 2020 measures, see our briefing here.
The Act was signed into law on 9 July 2021 and came into effect on the same date except for:
- the changes to advance rent requirements by landlords, which will apply to tenancies created not earlier than one month after the passing of the Act (being tenancies created on or after 9 August 2021); and
- section 6, providing for the changes to rent review increases in rent pressure zones, which was commenced effective 16 July 2021 by commencement order.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.