We are grateful for the opportunity to speak to the committee today, on behalf of the membership of the Irish Property Owners' Association, on the critical matter of the general scheme of the residential tenancies (right to purchase) Bill.
The IPOA is a not-for-profit organisation that seeks to protect and promote the interests of private residential property owners and encourage the supply of good-quality accommodation and professional standards of property management. The IPOA is a national association and represents landlords throughout Ireland, from owners of a single property to owners of multiple properties.
At present, tenants are free to bid on properties on the open market like every other citizen. Indeed, many tenants have purchased from their landlords. Local authorities are also able to compete on the open market. When a tenant wishes to buy a property from a landlord, and a landlord wishes to sell, it is discussed between both parties, and if a deal can be done, a deal is done. This arrangement, which is not uncommon, saves estate agent fees, advertising, time and the potential costs of staging a property for sale. It benefits both parties and does not need a change in law to make it happen.
The issue facing the rental market is the lack of supply. Investors assist the State in its obligation to house people by providing homes in rental accommodation. Without investors willing to purchase, there is no private rental market. This legislation could end up worsening the already severe shortage of housing units faced by the rental market in Ireland. Landlords will be discouraged from investing in rental properties if their ability to freely sell them is restricted. This, in turn, could further diminish the available rental supply, exacerbating the current housing crisis. This legislation could also lead to unintended consequences that could make the process of selling a rental more difficult, in the case of default by the mortgagor. The risk to the financial institution is increased, which is likely to increase the interest rate.
This legislation may make it impossible for a landlord to secure vacancy of their property to prepare it for viewing and sale. This legislation will be unfair to private buyers who may invest significant resources, such as surveyors' fees and legal expenses, secure mortgage approval and then enter a contract in the expectation of acquiring a property. This proposal, however, introduces the possibility that their efforts could be superseded at the last minute by a tenant making a final matching bid. As a result, this legislation will, in effect, make auctions unfeasible. The hammer coming down will no longer have any effect if a buyer can be subsequently denied the right to purchase by a tenant's matching bid. This will deprive a landlord of availing of the auction option to sell a property and does not protect owners in situations where properties are in receivership. Another consequence is that properties whose occupants are in nursing homes would become unlikely to be let in view of the restrictions on selling proposed in this legislation.
What happens if a tenant's mortgage approval falls through? Any homeowner would prefer to sell to a cash buyer rather than a mortgage buyer for numerous reasons. What happens at the end of the process if both a cash offer and a tenant's mortgage offer are equal? If the tenant's mortgage approval fails and the cash buyer is gone, will the State compensate the seller?
What happens if a tenant seeks to vexatiously stall a sale by initially offering €1 for the property and then tries again to stall the process at the end? This may happen only very rarely but landlords must nonetheless be assured of protection under the law. Since landlords must provide a statutory declaration when selling, it would seem appropriate that a tenant should also be required to provide a statutory declaration to the effect that they have the necessary funds to complete a purchase, rather than the less stringent declaration that is currently proposed.
The legislation does not deal with shared tenancies where multiple tenants wish to purchase, one of whom may be in receipt of HAP and wish their local authority to purchase it on their behalf. These examples are just some of the potential unintended consequences and challenges to which this legislation could lead.
While the intention behind this proposal is to increase tenants' rights, we argue that the most significant of the potential unintended consequences of this legislation is that it may inadvertently curtail tenants’ options. By reducing the overall pool of rental properties, tenants may face increased competition and fewer choices when seeking new accommodation. We ask the committee to weigh up whether there is a valid need for this Bill versus the risks and possible unintended consequences.
Any property owner constitutionally has the right to dispose of their property as they see fit and in a timeline that is determined by them, to any person or company for whatever price they decide, at an auction, by gifting a property; or by offering it for sale on the open market. The right to purchase appears to be fundamentally unsound, unfair to prospective purchasers, damaging to tenants and will cause further damage to an already dysfunctional market. There are many more issues relating to this Bill which we are happy to discuss with the committee.
