You will recall that earlier this year we provided an update regarding the Joint Committee on Housing, Local Government and Heritage’s PLS report on the Residential Tenancies (Right to Purchase) Bill 2023. The full bill has now been published, renamed as the Residential Tenancies (Amendment) (No.3) Bill 2004 (the Bill). This post considers the various scenarios where the legislation may apply, if it were to become law in its current form.
Background
By way of reminder, the Bill actions the Government’s stated policy of introducing a tenant right of first refusal where their home is being sold by the landlord and the landlord is seeking to terminate the tenancy for that reason. The General Scheme of the Bill indicated that the requirement to issue an invitation to bid to the tenant would not apply to:
- student-specific accommodation,
- dwellings within a build-to-rent development, and
- a dwelling which is one of 2 or more dwellings comprised in the same property which the landlord intends to sell in its entirety.
Current draft and potential application
However, the Bill which has been published doesn’t precisely reflect the exclusions anticipated by the General Scheme and we have therefore summarised below a number of scenarios and how they would be affected by the current wording of the Bill.
Sale of investment property where the tenants are to remain in situ post-sale
The most important thing to bear in mind in the context of this legislation is that the tenant right of first refusal is only of relevance where a landlord is seeking to serve a notice of termination on the grounds of the prospective sale of the property. It therefore will not affect sales of fully-tenanted investments where the tenants are remaining in situ. The only scenario where it may become of relevance is if a landlord is for some reason seeking vacant possession in order to facilitate the sale – see below scenarios for further detail on where this may bite.
Student-specific accommodation
This is, as expected, exempted from the legislation – the right of first refusal provisions do not apply and a landlord can therefore terminate on the grounds of the sale of the property without first having to offer the property to the tenant.
Cost-rental accommodation
Also exempted from the legislation – the right of first refusal provisions do not apply and a landlord can therefore terminate on the grounds of the sale of the property without first having to offer the property to the tenant.
PRS scheme where the landlord owns the entire and no management structure in place
Again, exempted from the legislation – the right of first refusal provisions do not apply and a landlord can therefore terminate on the grounds of the sale of the property without first having to offer the property to the tenant. This analysis is based on the following wording in the Bill:
“This Chapter shall not apply where the dwelling […] is one of 2 or more dwellings contained in a property owned entirely by the landlord and the landlord intends to enter into an enforceable agreement for the transfer to another, for full consideration, of the whole of the landlord’s interest in the property”.
PRS scheme with a management structure (MUDs or otherwise) where the common areas are held by a management company
Arguably the current drafting of the Bill would mean that these schemes are not exempt from the notice of invitation to bid provisions – i.e. if a landlord of one of these schemes is selling it will need to offer to the tenants first if it is seeking to terminate the tenancies on the grounds of the sale. Where the landlord intends to sell the scheme fully-let, no issue arises.
“Pepper pot” arrangement where a landlord owns a number of discreet units within a scheme
Again, such an arrangement is not exempt from the notice of invitation to bid provisions and if the landlord wishes to sell the units it will need to offer them to tenants first if it is seeking to terminate the tenancies on the grounds of the sale. Again, where the landlord intends to sell the units fully-let, no issue arises.
Impact on bulk sales
Note overall that the so-called Tyrrellstown amendment continues to apply i.e. where 10 or more units within a development are sold together, the sale is subject to the existing tenants remaining in situ.
Next steps
The Bill remains at the very early stages of the legislative process and has yet to be debated in either house. The pace of its passage through the Oireachtas is likely to be determined by the timing of any general election, which is as yet uncertain.
We will continue to keep its provisions under review and will provide further updates in due course. For more information in the meantime, please contact Aoife Smyth, Knowledge Consultant, or any member of ALG’s Real Estate team.