The Joint Committee on Housing, Local Government and Heritage has just published its report (the Report) on its pre-legislative scrutiny of the General Scheme of the Residential Tenancies (Right to Purchase) Bill 2023 (the General Scheme).
On 7 March 2023, the Government agreed in principle to the introduction of a new legislative measure giving tenants a “right of first refusal” in respect of their rented accommodation. The General Scheme is the product of that agreement in principle and essentially represents the draft workings of the officials at the Department of Housing, Local Government and Heritage (the Department) before the formal bill is prepared. It is therefore a very early draft and and its terms should be seen as subject to further revision, both in the initial legislative drafting process, and also during its subsequent journey through the Oireachtas.
Right of first refusal
Head 7 is the head which deals with the right of first refusal, referred to as an “invitation to bid”. In very basic terms, when serving a notice of termination on the ground of the sale of the property, the landlord will be required to simultaneously invite the tenant to make an offer to buy the property, which the tenant must do within 90 days. Note that, as presently drafted, this obligation only arises where the landlord is seeking to terminate on the grounds of the sale of the property. Consequently, notwithstanding the specific exclusions (more of which below), it will not be of relevance on the sale of a fully-tenanted investment where the expectation is that the tenants will remain in situ.
A landlord cannot contract to sell the dwelling to a party other than the tenant, a local authority, an AHB or the Housing Agency (any of which wish to acquire the dwelling for the continued occupation of the tenant), during the initial 90 day period. If a tenant makes one or more unsuccessful bids during the 90 day period and the landlord then proposes to contract at the end of that period with a third party for an amount equal to or lower than the tenant’s bid, the landlord must give a further invitation to bid to the tenant, giving the tenant a further 10 days within which to make a further (i.e. matching) bid.
Where a tenant is not in a position to exercise their right of first refusal, they can contact their local authority for assistance and any local authority, AHB or the Housing Authority (as appropriate) can make a bid on the property during the 90 day period where the tenant is deemed to be at risk of homelessness.
Presently, the right of first refusal can only be availed of by:
- a Part 4 tenant in situ in a rented dwelling as their principal private residence;
- who does not own residential accommodation in Ireland;
- who can provide to the landlord evidence (in a form to be prescribed by Ministerial regulation) of their financial capacity to meet their bid; and
- who is not in breach of their obligations to pay rent, repair, not behave in an anti-social manner etc.
Under the General Scheme, the requirement to issue an invitation to bid to the tenant does not apply to:
- student-specific accommodation;
- dwellings within a build to rent development;
- dwellings provided by approved housing bodies to social tenants;
- cost-rental dwellings under the Affordable Housing Act;
- a dwelling which is one of 2 or more dwellings comprised in the same property which the landlord intends to sell in its entirety (note the so-called “Tyrrellstown amendment” continues to apply and where 10 or more units are sold together the tenants of those units will remain in situ);
- dwellings where the landlord lives in a separate self-contained dwelling within the same property, originally constructed as a single dwelling;
- dwellings where the landlord wishes to gift, or partially gift, it to a third party;
- the sale of a dwelling bequeathed to one or several beneficiaries by that beneficiary / those beneficiaries.
Build to rent
It is proposed that “build to rent development” will be defined as a development comprising purpose-built residential accommodation and associated amenities built specifically for long-term rental that is managed and serviced in an institutional manner by an institutional landlord.
The explanatory notes state that such accommodation may include houses, duplexes and apartments. It goes on to state that “In practice, the planning permission granted would specify that the development in question is ‘built to rent development’ – such development being a separate class of development. The development description on the planning application form, site notices and planning permission must have Build to Rent (BTR) as the proposed development description. A planning condition is applied to the permission stating that the development must be used as BTR.”
The Report makes a number of recommendations, as follows:
- The title of the legislation be amended to reflect the intention of the legislation – i.e. a right of first refusal or invitation to bid, rather than a right to purchase.
- FAQs should be developed by the Department to understand the various circumstances in which the legislation is to be applied.
- The draft should be amended such that the 90 day period does not apply where the tenant submits in writing that they are not interested in bidding for the property.
- There should be a standardised process set out to ensure that there is an official record of the tenant’s bid, for example by way of statutory declaration.
- Safeguards should be incorporated into the conveyancing to ensure counteroffers are bona fide.
- A mechanism should be set out in the legislation for a tenant to transfer their right to bid within the 90-day period to an eligible agency, such as a local authority or approved housing body.
- Any new functions arising from the legislation should be evaluated for resource allocation to the relevant bodies.
- Any discrepancies in language between landlord and tenant obligations should be reviewed.
The next step in the legislative process is for the General Scheme to be converted into a formal bill, which will be considered and debated in both houses of the Oireachtas. It is therefore likely to be a number of months before we see these provisions (or further iterations thereof) become law.
The General Scheme also proposes a number of technical amendments to the Residential Tenancies Act 2004, not related to the right of first refusal. We will provide further information on these proposed changes in a separate post.
Our Real Estate Team is tracking the legislation as it moves through the legislative process and will be providing further updates to this post.