In comparison: European private rental sectors

How does Ireland’s private rental market compare with those in other European countries in relation to its policy context and dispute resolution framework?

Ireland

Context: In Q1 2019, 356,500 dwellings were privately rented in Ireland an increase of almost 15,000 on Q1 2018. Almost one-fifth (19.1 per cent) of Irish households are privately rented dwellings. This represents a dramatic increase since 2004, when only 8 per cent of households were privately rented. The total number of people renting in Ireland in Q1 2019 was 910,300. Meanwhile, in Dublin, over one-quarter (25.9 per cent) of dwellings were rented privately in the same period.

Q4 2019 marked the end of 29 consecutive quarters of nationwide rental inflation, meaning that for the first time since mid-2012, rents did not rise nationally in a three-month period. Rents in December 2019 were 0.1 per cent less than in September 2019. However, year-on-year, rents in Q1 2020 were still an average of 3.8 per cent higher nationally than in 2019. This is the lowest rate of inflation since late 2012.

The Residential Tenancies Act 2004 is the main legislation governing the rights and obligations of landlords and tenants. The Act introduced Part 4 rights to provide security of tenure to tenants in a tenancy for between six months and four years while also detailing required notice periods.

The Planning and Development (Housing) and Residential Tenancies Act 2016 introduced several amendments to the legislation including extending Part 4 tenancies (after 24 December 2016) from four years to six years for tenancies commenced after that point and removing the provision which enabled landlords to end a Part 4 tenancy during the first 6 months without reason. The 2016 legislation also introduced rent pressures zones (RPZs). Taking effect from 24 December 2016, RPZs are designated areas in which rent can only increase by 4 per cent per annum.

Additional changes to the 2004 legislation were made by the Residential Tenancies (Amendment) Act 2019 which, among other measures, increased notice periods required for a landlord to terminate a tenancy longer than six months and shorter than five years.

Dispute resolution: Under the 2004 Act, the Residential Tenancies Board (RTB) replaced the courts in dealing with most disputes between landlords and tenants. The RTB’s Dispute Resolution Service offers the choice mediation or adjudication and any agreement reached between parties with the RTB’s assistance or adjudication is legally binding.

The dispute resolution process is defined by several stages:

1. Self-resolution
   A dispute may be resolved quickly and privately between landlord and tenant through informal discussion of the problem.
2. Mediation or adjudication
   Mediation is a free service provided by the RTB to tenants and landlords to find resolution to a dispute. Any agreement subsequently forms the basis for a binding Determination Order. Or an adjudicator can more formally investigate a case, using an evidence basis to determine how a dispute should be resolved. Again, the determination of an adjudicator is binding with a Determination Order issued to both parties.
3. Appeal to Tenancy Tribunal
   If agreement cannot be reached via mediation or either the tenant or landlord is unhappy with the decision the adjudication, either party is entitled to appeal to a Tenancy Tribunal. The tribunal is presided over by three members of the appointed by the RTB who will hear the dispute and make a decision.
4. Determination Order
   The Determination Order, or the decision reached by adjudication or tribunal, is legally binding on those party to the dispute.

Germany

Context: Germany has a tradition of renting as a secure and long-term option, with home ownership relatively low in comparison with other European countries at a rate of 51.4 per cent in 2018. According to 2018 Eurostat data, 48.5 per cent of German households are tenants.

Mietspiegel (rent index) is the mechanism which is used to determine the level of rent that can be charged. It is a database of all rents in a local geographic area and is utilised by landlords to determine the appropriate rent for their property relative to size, quality and location. This rent can only be increased once every twelve months, should not exceed 10 per cent of the reference rent and cannot be increased by more than 20 per cent in three years. This means that tenants’ rights are respected while ensuring an acceptable yield for landlords.

Simultaneously, new build residential units are exempt from this rental regulation, though a rent increase may not exceed 20 per cent of the rent reference. Landlords also benefit from tax deductions to facilitate depreciation allowances, as well as mortgage interest tax relief, deduction of maintenance costs and the potential to deduct losses from the income tax base.

Dispute resolution: Civil courts retain the competency for the litigation of Germany’s private tenancy law and, as such, residential tenancy disputes are heard in the local courts. In some German states, or Länder, mediation is required before disputes valued at less than €750 go to trial. In cases where the dispute is valued in excess of €600, an appeal against the first judgement is admissible.

A local court may also permit an appeal if the case is fundamentally important to developing the law. The regional court may then scrutinise a local court judgement either for infringements or accuracy in its findings. A second appeal is possible if the regional court agrees or if the Federal Court of Justice grants it. The latter applies when it is successfully argued that the appeal will further develop the law. The Federal Court of Justice solely scrutinises the regional court’s judgement for questions of law or infringement. It is also possible for a leap from court of first instance to the Federal Court of Justice in this circumstance.

The Netherlands

Context: According to the Dutch Government, the housing market in The Netherlands comprises 4.4 million owner-occupied homes (60 per cent of housing stock) and 2.9 million social (32 per cent) or private rental homes (8 per cent).

The Dutch Civil Code lays down the rules of landlord and tenant law in The Netherlands and exhibits a significant emphasis on the protection of tenants. For instance, the ‘ill reliance doctrine’ contained in the Civil Code indicates that a contract can only end when both the tenant and the landlord have legitimate reason to believe that one party is ending the contract based on terms understood to be true.

Within Dutch tenancy law, the price regime to increase rents is dictated by the characteristics of a dwelling rather than status of the landlord (professional or otherwise). Within this regime, a maximum percentage of rent-increase per annum is set by the Housing Minister. Outside of this regime, while prices are not determined by specific rules, rent can only be increased once per annum.

Dispute resolution: Tenancy disputes relating to rent levels, maintenance or service charges can be heard in the Huurcommissie (Rent Tribunal), a national and independent organisation, not unlike the Residential Tenancy Board in Ireland. However, it does not mediate and adjudicate disputes involving nuisance, housing benefit or business/office accommodation. The ruling of the Huurcommissie is binding, though appeal to the Dutch courts is possible. Local ‘rent teams’, established in some city municipalities, are an alternative avenue and operate as an interim to tribunal, providing free assistance in rent disputes.

Finland

Context: According to Eurostat, 71.1 per cent of Finnish households were owner-occupied while 28.9 per cent were tenants in 2019. Strict rent controls were abolished in Finland in the early 1990s meaning that the country swung from having a highly regulated private rental sector to having an exceptionally liberal one. Following an economic crisis, the reforms successfully aimed at injecting more rental dwellings into the market. Consequently, a legal limit on initial rents or annual rent increases is now absent from the Finnish private rental market. Complete contractual freedom means that security of tenure for tenants has been eroded.

However, unless the grounds for rent increase are agreed in a tenancy contract, Finnish landlords cannot unilaterally increase rent. Before any such increase, tenants must also be notified in writing as to when this will occur. ‘Fair Rental Practices’ guidelines recommend that any increases must be proportional and that negotiations on these be initiated at least six months in advance. Unless extensive renovations are being made to a property, these increases must not exceed 15 per cent per annum.

Dispute resolution: Finnish courts have jurisdiction in tenancy disputes and at a tenant’s request, the courts can scrutinise the proportionality of a rent, reduce it or alter the stipulation determining the rent if it is in excess of the market rate for a similar property in the locale. Since 2007, the Consumer Disputes Board has also dealt with tenancy disputes, delivering recommendations for dispute resolution in circumstances where private landlords are party.