I thank the committee members for the opportunity to address them this afternoon. My presentation is only four pages in length but I will try to shorten it even further because I know many of the facts and arguments were already presented to the committee today and three weeks ago.
The Institute of Professional Auctioneers and Valuers is a professional body that gives advice to around 10,000 landlords. Last year we set up a course to guide letting agents, both members and non-members of the IPAV, on the Residential Tenancies Act and other matters relating to lettings. This has proved very popular and we intend to run it again this autumn. We are doing good work in this regard. There are other advisory services in this business includingwww.Irishlandlord.com and the Irish Auctioneers and Valuers Institute. Less than 1% of landlords subscribe to the Irish Property Owners Association, a smaller body, but everyone must work together on this matter to ensure those providing accommodation to tenants are represented and consulted as widely as possible.
A number of members of the IPAV are also adjudicators and mediators for the Private Residential Tenancies Board. Approximately 108,000 landlords have signed up to the PRTB and this is a far greater level of compliance than under the 1996 registration system; in that case only 17,000 landlords registered units with local authorities. Approximately 220,000 tenancies are registered with the PRTB.
I participated in the deliberations of the rented housing commission, which framed the recommendations for the Residential Tenancies Act 2004. At the time it was estimated that approximately 10% of tenancies would present on an annual basis for dispute resolution. However, the reality is since the establishment of the Private Residential Tenancies Board, the total number of disputes lodged has been a little more than 5,500, a fraction of the anticipated figure.
Many people may not realise this but the private rental sector is a happier place than people think. Some 90% of tenancies are trouble free and the very fact that less than 1% present for dispute resolution on an annual basis is testament to this. If this were not the case we would see many more problems, but when problems arise they are fraught and very difficult, there is no question about this. When one meets a problem tenant, one meets a problem tenant but if it were not the case that a large number of tenancies were trouble free then there would be a good deal less investment in the business. The figures are in line with our European partners. Tenants and landlords do not differ throughout Europe and the problems are the same. I was on the board of the European property owners' body for seven years. I was assistant general secretary to the body and I experienced matters at first hand.
There has been talk of inspections. Local authority inspections are important and it is very important to have standards. However, there is a figure of which people are not aware. Since the introduction of standards in the mid 1990s, some 100,000 local authority inspections have taken place. We understand there are 200,000 rented units which means almost half of them have been inspected. I realise there are repeat inspections but quite a number have been inspected. A number of properties are new stock and the stock has doubled or perhaps trebled in the past ten years because of the influx of investment and foreign nationals coming here and residing in the rental sector. Such properties do not need to be inspected. The inspections should be well targeted.
I refer to another figure about local authorities. The reality is that 60% of rented accommodation is located in key urban areas. There are several local authorities operating in areas in which the number of rented units is quite small and they do not really need to inspect these. The entire registration fee which goes to the PRTB should resource the PRTB entirely and inspections should be funded differently.
Of the inspections which took place, some 20% of properties have been found to be sub-standard, but sub-standard does not mean the places are uninhabitable. Frequently it means a pane of glass is broken, a room needs to be painted, a vent is missing or something minor needs to be done. Usually the authorities write to the landlord and he complies and very few people actually reach the situation whereby there is legal action taken against them.
I refer to the current statistics on deposit retention. Reference was made in the last presentation to the deposit protection scheme. Officials from the PRTB have spoken at our letting courses and addressed our seminars. They have pointed out that of the disputes lodged to date 70% have been lodged by tenants and 52% of these relate to deposit retention. Adjudications and tribunals have broadly determined that in 25% of cases the tenant was entitled to a return of the entire deposit and in a further 24% of cases the landlord was justified in withholding the deposit, which in many instances did not cover his or her losses. In 51% of cases the deposit was apportioned between the disputing parties. These are important figures because in many cases where the landlord has given back the deposit the tenant may not have the resources to pay the deposit or he may have the resources to pay the deposit but a good deal more damage may have been done and the tenant has gone into the ether and cannot be tracked down.
I point out again that 1% of tenancies are brought annually to the PRTB for dispute resolution. In any given country deposit retention is par for the course and this goes with the territory. Landlords will see damage done and withhold deposits and sometimes they withhold too much. Tenants may cause damage and believe they are being penalised unduly or they may wish to move to other accommodation and take the deposit with them. Tenants may build up arrears of rent and use up the deposit and then seek a reference from the landlord when they wish to move on to further accommodation and some landlords return it simply to get rid of them. Anecdotal evidence suggests that many landlords are pleased to return the deposit to get rid of a tenant who is troublesome. I do not believe that introducing a further layer of bureaucracy in the form of a deposit protection board would cure the problem. It may even make it somewhat worse because in New Zealand where there is a deposit protection board there are between 20,000 and 30,000 applications for deposits every year. There would be a good deal more work involved and we should fine-tune the activities of the PRTB a good deal more before we go down that road. It would be to all intents and purposes using a sledgehammer to crack a nut.
We propose several recommendations. We note the PRTB is introducing a paper based adjudication process which will we hope expedite the dispute resolution process. The PRTB should be empowered — in given circumstances where the power would be used very rarely — to refer disputes relating to deposit retention up to a certain threshold to the Small Claims Court, where they were dealt with in the past. This approach may well be necessary if, in a continuing economic downturn, there is a significantly increased number of disputes lodged which would clog up an already overstretched dispute resolution process. Moreover, this facility, if applied pragmatically and judiciously, would free up the board to deal with serious fraud cases. Thismodus operandi would enable the board to give far greater protection to the rights of landlords and tenants. A facility would be in place, but it would not need to be used in all circumstances.
Equally problematic is the cumbersome, overly-bureaucratic registration system. I was on thead hoc board of the rented housing commission, which drew up the report. I knew before the registration system was introduced that it would be a bureaucratic nightmare for landlords, and so it has proved to be, as 35% of the forms are still coming back incomplete. A significant number of PRTB staff are tied up with the process.
There is a movement towards an IT system and undoubtedly it would help to expedite things in the future and eradicate the problem of incomplete forms. However, the situation which pertains means that in one rented unit alone there can be three requirements to apply for registration in one 12-month period. Imagine if we had to send in deposits for the same apartment three times every year. There is a lot of transience in the rental sector. People like to move on to different pastures, especially in a downturn where rents are falling. They break their leases routinely and many landlords are left helpless.
Five years on from the introduction of the Residential Tenancies Act, one third of applications are returned incomplete. There are 11 or more mandatory boxes to be filled on the form and this bureaucratic nightmare must be dealt with. The rented housing commission proposed that rented units, rather than actual tenancies, be registered once every four years, but for a fee that would be adequate to resource the PRTB. This would get rid of the problem of incomplete registrations, would provide for far greater compliance from landlords and would free up PRTB staff.
Section 86 of the Residential Tenancies Act needs to be amended. Currently, tenants can stay in accommodation for extended periods of up to two years, can clock up €12,000, €15,000 or €20,000 in rent and people just have to wait. It is happening fairly widely. This situation needs to be addressed and because of it there is a very bad perception of the PRTB in the property industry. PRTB staff are doing their very best to cope with the situation and the legislation, and are very much confined by it.
The notice of termination needs to be simplified. It is littered with references throughout the Act and even experienced legal practitioners write out invalid notices of termination. It extends the problem when one has to get rid of a tenant. Adjudicators and tribunals should, in certain circumstances where it is warranted, have the power to terminate a tenancy even where a notice is invalidly served. That would help the situation.
I could say much more about this Act, but I have deliberately confined my comments. We are making this presentation in the context of the review of the Residential Tenancies Act. I have consulted widely with our members and landlords and the view is that if what we have proposed here today was looked at and taken seriously it would greatly transform things.
The recent €200 levy on rental units, while clearly unwelcome for investors and landlords, is accepted as a necessary evil in the current fiscal climate. However, the IPAV hopes local authorities will be sympathetic and be empowered to waive liability for the levy on property owners who now own units that cannot be let and are, in some extreme cases, facing grave hardship having lost their jobs. Economists believe that thousands of section-driven investment properties purchased in the boom will never be saleable again, even when normal activity returns to the property market.
It is also disappointing that the Minister did not accept an amendment to cap the levy so that it would amount to no more than €600 in older converted pre-1963 style houses that provide comfortable accommodation for HSE-assisted tenants, some with disabilities. I would have liked to have seen €200 levy capped at €600, but it was not done. It is estimated that some 30,000 people are in rented accommodation. Some of them are challenged, do not like to house share and want to have their own self-contained unit. These units may not be available in the future because of the expense of providing them and the heavy charges.
I agree with previous speakers who indicated that the rent supplement is not sufficient to help single people reside in these units or to pay their rent. The Government should reconsider the €200 levy. To someone who owns an apartment in Monkstown that is earning an annual rent of €25,000 or €30,000 a year, €200 is only a detail. However, if one owns a house in Limerick divided into seven units, housing seven tenants receiving assistance, some with disabilities, earning an annual income of €20,000 or less due to vacancies or people being unable to pay rent, and one is paying PRTB registration charges and the €200, one might pay a total of €3,000 or €4,000 a year. These houses will disappear and there is a need for housing to take up the slack.
The IPAV is also concerned that the proposed introduction of a residential property tax will delay a recovery in the housing market. The property tax introduced in 1983 was inherently unfair and penalised urban dwellers, especially in Dublin. The IPAV recommends that at the very minimum such a tax be postponed and if introduced that it be accompanied by a significant reduction in, or abolition of, transaction taxes. Stamp duty rates in the past ten years have been penal. People were able to bear them in the property boom when there was high employment and property prices were going up. Some of the people concerned have lost their jobs and are in straitened circumstances so asking them to pay a property tax when they have already effectively paid one up-front is unfair. The property tax should be carefully reviewed before its introduction.
Agents have been made responsible for the production of energy rating certificates on properties they are selling or letting but do not own. A recent survey of estate agents working in 14 European countries revealed that not only was this obligation not imposed on agents but that in no less than 10% of sales or lettings was there a reference to building energy rating, BER, certificates. They are not taking it very seriously in Europe.
The obligation on agents should extend to no more than informing and reminding property owners of their obligations in respect of the BER. To demand more is to cast the agents in an invidious and unfair position. That is important. If one does not own a property one cannot order the owner to get a BER certificate for his property. If one refuses to sell the place for him he will move to another agent and one loses business. People will take on that business, especially those who are not affiliated to professional bodies and operate in a different environment.
We have been told that there are 91,000 tenants on rent supplement in the residential rented sector out of a total of between 450,000 and 500,000 tenants. In the past ten years that would have represented approximately 20% of the residential rented sector. I do not accept the view that the rent supplement underpinned market rents. There was an influx of approximately 400,000 foreign nationals in the past decade who were used to a rental culture, who filled the sector and were employed in lucrative construction jobs so were able to pay higher rents. I agree, however, that in some parts of the market, particularly for single people, the rent supplement is not sufficient to match the market, even where rents are falling because that type of accommodation is in high demand. That should be examined.
I thank the committee for its attention. My presentation was short but I will be delighted to take questions.