Wednesday 21 August 2019

How to stay in the letting game without flouting new rent laws

New rules have thrown many owners of second properties into a quandary

Holiday homes outside rent pressure zones will escape the new short-term letting rules – though a recent widening of those zones means more holiday home owners will be caught by the rules
Holiday homes outside rent pressure zones will escape the new short-term letting rules – though a recent widening of those zones means more holiday home owners will be caught by the rules
Louise McBride

Louise McBride

This summer could be the last time that many holiday home owners will be able to rent out their properties to tourists - unless they flout the Government's new short-term letting rules. Under those rules, which kicked in at the start of this month, holiday home owners must have planning permission to rent out their property to tourists, or for stays of up to two weeks - if that property is in a rent-pressure zone (RPZ, an area where rent is typically above the national average).

As people typically take a holiday home for a week or two, many property owners will be breaking the rules if they continue to rent their homes out to tourists - unless they already have, or can soon secure, planning permission to do so.

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Those in breach of the new rules face fines of up to €5,000 or six months' imprisonment - or both.

The only holiday homes in RPZs that are not affected by the new rules are those which "have been purposely designed and constructed, and approved as dedicated tourism accommodation complexes, sharing communal facilities, and [which] would normally be subject to planning conditions in relation to their continued operation, management and maintenance as a commercial development rather than a residential estate", according to Government guidelines.

However, four out of five holiday homes around the country do not have holiday home planning permission, according to Jacinta Doolan, founder of Trident Holiday Homes and vice-chair of the Irish Self Catering Federation.

"Owners of these properties would have planning as normal for residential [use of a property]," said Doolan. "The introduction of these regulations means that many traditional owners of tourism-based products in RPZs now have to apply for change-of-use planning permission [for their holiday homes], while their neighbours in counties outside the RPZs do not."

So if you inherited an old family home previously owned by your parents or another relative, and you occasionally rent that property out to tourists for stays of up to two weeks, you must now have - or get - planning permission to be able to continue to do so, if the property is in an RPZ. The same applies if you bought a holiday home in a favourite rural retreat of yours, if you converted one or two properties on your farm into a holiday home, or if you simply have a couple of properties on your land which you rent out as holiday homes. Once these homes are in an RPZ, they must have planning permission to be rented out for tourism purposes, or for stays of up to two weeks at a time.

There is no guarantee that you will get planning permission for tourist accommodation or to short-term let your property if it is in an RPZ - indeed, you are likely to struggle to do so.

Furthermore, a recent widening of RPZs means more holiday home owners now fall under the new rules than would previously have been the case. Since the beginning of July, a number of local electoral areas are now RPZs - including Arklow, Gorey, Kilkenny, Gort-Kinvara and Athenry-Oranmore in Galway, Athlone and Kells. Many holiday homes are based in these areas.

Holiday home owners are not the only ones affected by the new rules. Anyone renting out a second property or an investment property for short-term stays (those of up to two weeks) must now have planning permission if they wish to continue to do so - if the property is in an RPZ. Many Airbnb hosts and landlords who prefer short-term lets will be caught by the new rules.

So if you are one of those hampered by the new rules, what options do you have if you wish to continue renting out your property?

Rent for longer

It is unlikely that you will be granted planning permission for short-term lets if you are renting out an investment property in an RPZ. You could instead rent your property out for periods of a year or more. One advantage of doing so is that the rental income is often more consistent than it is with short-term lets - as long as you have reliable tenants. The rental income, however, may not be as lucrative as it is with a short-term let.

You should not have any difficulty securing tenants - and a comfortable level of rental income - if your property is in an RPZ. You may, however, lose around half of your rental income to tax - depending on your total earnings.

There are downsides to renting to tenants on a long-term basis. You could end up with unreliable tenants who damage your property or fail to pay the rent. "Where tenants fail to pay the rent, the landlord is effectively supporting the tenant financially - but no one is supporting the landlord," said Margaret McCormick, spokesperson for the Irish Property Owners' Association, which represents property owners.

"If the landlord has a mortgage to repay on the investment property, the landlord's own family home - and credit rating - could be at risk if a tenant doesn't pay rent."

It is important to understand and meet your obligations as a landlord. Failure to do so could see you facing financial penalties running into the tens of thousands - and possible imprisonment.

You do not have to rent out your property for periods of a year or more to get around the new rules. The regulations define a short-term let as the letting of a house or apartment - or of part of a house or apartment - for up to 14 days.

So should you have a second home or investment property which is located in an RPZ, you could rent it out in blocks of 15 days or more at a time - without having to get planning permission to do so.

Steer clear of RPZs

Properties located outside RPZs are not bound by the new rules. So buying a holiday home or investment property which is not in an RPZ - and in a location which is unlikely to become one in the future - is one way to dodge the rules. Be sure, however, that you do not buy in an area where you will struggle to secure tenants.

Rent a full home

It is possible to rent out your entire home for short-term stays while you are temporarily absent from it - as long as the total number of days that your home is rented out in a year does not exceed 90, even if it is in an RPZ. You do not need planning permission to do so - though you must register the arrangement with your local authority. So, for example, you could let out your entire home for two days on 45 separate weekends of the year (which adds up to 90 days in total) without having to apply for planning permission. However, if you go over the 90-day limit, you must apply for permission.

Home share

You can short-term let a room or rooms in your own house, or a 'granny' flat adjacent to or in the garden of your home, while you are living at home, without getting planning permission for doing so, even if your property is in an RPZ. Such arrangements are considered home shares and must be registered with your local authority.

Renting out a granny flat to tourists (while you are at home) would be deemed a home share because when a granny flat is no longer being used to house a family member, the unit should revert to being part of the home, according to a spokesman for the Department of Housing.

Act quickly

Property owners affected by the new rules should apply for planning permission as soon as possible. It should be possible to honour any bookings already made for this summer - as it is unlikely that a planning authority will take enforcement action while a change-of-use planning application is being decided on.

Planning permission to change the use of the property from residential to commercial should be sought. Planning fees must be paid if granted that permission - and those fees will be much higher if retention permission is being sought.

For example, in Dublin city, the planning fee for change of use of a 140 sq m four-bed semi-detached home from residential to commercial would come to €502 - but that rises to €1,506 if retention permission is being sought, according to Dublin City Council. The planning fee for change of use of a 93 sq m mid-terraced home would come to €335 - or €1,004 for retention permission, added the council.

So the earlier you apply for planning permission, the better - bearing in mind that you may not be granted permission at all.

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