Residential Lettings In Rent Pressure Zones ' Recent Case Law

• Law Firm: Walkers
• Subject Matter: Real Estate and Construction, Real Estate, Landlord & Tenant - Leases
• Author: Ms Rachel Rodgers, Jody Toner and Robert Upton
• Published date: 19 January 2023

A recent judgment of the Dublin Circuit Court in Wow Investments Limited v. Residential Tenancies Board [2022] WECC3 has emphasised the importance of due diligence on current and past rental levels on the acquisition of investment residential property.

Wow Investments Limited ("Wow"), the appellant in this particular case, acquired an investment property from Permanent TSB. The property was sold with vacant possession and when Wow asked about prior tenancies, the bank advised that it was not aware of any - as is often the case in a distressed sale by a lender where the bank's knowledge of the property is limited. Wow acquired the property, went on to lease it to a new residential tenant and registered the tenancy and the rent with the Residential Tenancies Board ("RTB").

Unknown to Wow, a previous letting of the property had in fact been registered with the RTB in December 2017 at a rent of '1,150 per month. As the property was located in the Rent Pressure Zone ("RPZ"), Wow was only permitted by law to increase the rent by 4% in a 12 month period. When the post-acquisition tenancy was registered in December 2019 with a rent of '1,850, this represented an increase of 61% in a 24 month period and therefore the Residential Tenancies Act 2004 (the "Act") had been breached.

This matter arose following an investigation instigated by the RTB as opposed to any complaint from the tenant.

The outcome was not favourable to Wow. Even though the company relied on the responses provided by the vendor as part of the acquisition process, this was no defence to a breach of the legislation whose purpose was effectively to protect tenants. The court pointed out that had Wow reviewed the register of tenancies on the RTB website itself, it would...