Landlords will attempt to dodge new rules to cap rent increases
Unscrupulous landlords will attempt to circumvent new rent regulations by imposing a raft of fresh charges on tenants, property experts have warned.
The Government's plan for the rental sector will restrict increases in Cork and Dublin to 4pc per annum for the next three years. It could also be expanded to other cities as well as the Dublin commuter belt.
But some tenants are already being hit with increases of up to 40pc after the Government outlined its plans for a rent cap.
The country's biggest housing charity, Threshold, said it received a flurry of calls from anxious tenants yesterday who were contacted by landlords seeking significant increases before the new rules come into force.
Property Industry Ireland director David Duffy said there was a danger that landlords could seek to boost incomes by other means.
"There is a danger if you limit income that people will look for alternative sources and therefore always a danger that rent controls will bring about other payments," said the former ESRI property economist.
"Generally rent controls are not in favour with economists because they can badly impact supply and quality of buildings in the market, and can have the effect of not helping the people they are designed to help."
The new rules are contained in the Government's Strategy for the Private Rented Sector which provides for Dublin and Cork to be designated as 'Rent Pressure Zones' for the next three years, with other urban areas maybe following early next year.
But among the main concerns are fears that landlords will consider other means to boost their income, including:
Passing on the Local Property Tax or service charges, traditionally paid by the owner. This could add €1,500 to €2,500 a year.
Imposing an administration charge to cover the cost of advertising the property, checking references and meeting the prospective tenant.
Letting the property, but imposing an additional charge for a car parking space.
Demanding key money, or a fee to take possession, as sometime applies in the retail sector.
Imposing an under-the-counter charge to help secure the property for the prospective tenant
Threshold Dublin services manager Stephen Large said that, in the absence of legislation, there was a concern that landlords would simply demand higher rents. Some had already done so.
"The initial setting of rents involves landlords setting them in line with market rates. We have to ensure it [an increase] can't be front-loaded. The longer it drags out, the more risk there is of that," he said.
"It seems a lot of people are contacting us where a rent review hasn't been done and is now being sought.
"One lady said she had been hit with a 40pc increase. We're dealing with 20pc, 30pc and 40pc rent increases every day."
Tom Dunne, head of the School of Surveying and Construction Management at DIT, said he was not surprised that some landlords were imposing price hikes in advance of the introduction of the new controls.
"Normally, in the Budget, the date [when a measure applies] is made clear... there is a lack of clarity," he added.
The Irish Property Owners Association, which represents 5,000 landlords, said it had sought legal advice amid concerns that property rights were being breached.