knowledge 11 December 2021 |

The Residential Tenancies (No 2) Act 2021: New Rent Cap Regime and Tenant-Focussed Protections

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 Act introduced a cap on rent reviews during the term of a tenancy 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 could not exceed inflation as recorded in the harmonised all-items index of consumer prices (the“HICP”) published by the Residential Tenancies Board (the “RTB”).

The intention of the inflation-linked cap was to keep rent increases in RPZs below the annual 4% cap in operation up to that time. However, an unanticipated high rate of inflation immediately following the enactment of the Act meant that the HICP index for August to October 2021 ran above 4%, leading the Government to take further action. As a result, these provisions of the Act have been since amended and supplemented by further measures introduced under the Residential Tenancies (Amendment) Act 2021 (the “Amendment Act”). With effect on and from 11 December 2021, the Amendment Act requires that annual rent increases for both new and existing tenancies in RPZs in line with the market rent cannot exceed the lower of (i) inflation as recorded in the HICP and (ii) 2% per annum on a pro rata basis. For further detail on these and other measures introduced under the Amendment Act, see our briefing here.

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.

Commencement

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.