Residential Zoned Land Tax (RZLT) is a new tax introduced as part of the Government’s “Housing for All” plan, which will become payable from 1 February 2024. However, owners of land zoned for residential use should be aware that 1 January 2023 is the deadline for filing an appeal against inclusion of lands on the local authority RZLT maps which are detailed in this post.

What is RZLT?

It is an annual tax calculated at 3% of the market value of land within scope, which will apply from 2024 onwards and will be administered by Revenue. It replaces the Vacant Site Levy which was not deemed a success.

The Government states that the tax is aimed

at increasing housing supply by activating zoned, serviced residential development lands (including mixed-use lands) for housing [and] to incentivise landowners to use existing planning permissions for housing.

What land is impacted?

RZLT will apply to land that is, on or after 1 January 2022, both zoned for residential use and serviced (even where the current use of the land is not residential). Land is considered to be serviced where it has sufficient access to the necessary public infrastructure and facilities required for residential development.

Certain exclusions apply, for example:

• Residential property subject to LPT which includes garden/yards under 1 acre. (Residential property with gardens/yards over 1 acre falls in scope and the owner must register for RZLT, although no RZLT is payable by such owners).
• Land zoned for residential use but used by a business to provide services to residents of adjacent residential areas e.g. a corner shop.
• Mixed zoned land that includes residential use where it is reasonable to consider the land is integral to the operation of a business carried out on or beside it.
• Land that is required or occupied for certain social, community or governmental infrastructure purposes.
• Land subject to the Derelict Sites Levy that is payable in accordance with the Derelict Sites Act 1990.
• Land that is affected by considerations which might prevent development e.g. contamination or where historic or archaeological artefacts are present.

How will I know if my land is affected?

Each local authority is required to prepare and publish a map identifying land within the scope of RZLT, which maps will be updated annually to reflect changes in zoning and servicing status. The first draft maps, which were published on 1 November 2022, are currently subject to review as follows:

  • Parties whose properties are designated as subject to RZLT by virtue of this mapping exercise may make a submission to the local authority have their lands excluded if they do not believe that such land meets the criteria for inclusion. This submission must be made no later than 1 January 2023.
  • In the case of such a submission, the local authority will notify the owner of its determination, not later than 1 April 2023;
  • The local authority, before making its determination, may request additional information from the owner, or other third party, within 21 days of receipt of the submission;
  • The owner, or other third party, has 21 days, from the request being made, to provide the information requested to the local authority;
  • A landowner who wishes to appeal the local authority determination to An Bord Pleanála (ABP) may do so not later than 1 May 2023; and
  • ABP will notify the owner of its determination not later than 16 weeks from the date of the notice of appeal.

The final map, which will reflect the outcome of the submission and appeals process, will be published on 1 December 2023. Land included on the local authority’s final map which is no residential property is known as a “relevant site” and is subject to RZLT.

Who is liable?

The legislation requires payment by “owners”. This term is broadly defined as the registered owner, the person entitled to receive any rack rent payable in respect of the land (or who would be so entitled if that land was let) and “any other person whose interest in the land entitles them to develop the land”. This arguably includes developers with contractual rights to develop the land.

When and how is it paid?

RZLT will first be charged on 1 February 2024 with a requirement to file a return and pay any RZLT due for 2024 by 23 May 2024. This is in respect of land which was zoned as suitable for residential development and serviced prior to 1 January 2022 and on which development has not commenced prior to 1 February 2024. Land zoned for residential use and serviced after 1 January 2022 will become liable for RZLT 3 years after the year in which it comes within the scope of the tax.

RZLT operates on a self-assessment basis and owners of lands liable for the tax must register from late 2023. An annual return must be submitted to Revenue with a liability date of 23 May in each year, beginning in 2024.

What do I need to do now?

If you own services land that is zoned residential (whether or not the current use of the land is residential), you should check whether it has been included in the relevant local authority RZLT maps. If you wish to contest that designation, you will need to prepare and submit an appeal against the designation on or prior to 1 January 2023.

Revenue’s very helpful guidance document on RZLT can be found here.

For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer, Alan Roberts, Partner,  or any member of A&L Goodbody’s Real Estate or Environmental and Planning team.

Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media, Catherine Martin, TD has today (Wednesday 7 December) announced that the Government has approved the priority drafting of the Registration of Short-Term Tourist Letting Bill.

This is another initiative provided for in the Government’s Housing for All policy and Minister Martin was joined at today’s announcement by Darragh O’Brien, Minister for Housing, Local Government and Heritage.

The legislation will relate to short-term lettings of 21 days or less and will require suppliers offering accommodation for such periods to register with Fáilte Ireland and provide a valid registration number when advertising properties for letting on online platforms.

Amongst the stated aims of the legislation are to make more efficient use of existing housing stock and to bring properties back into the long-term rental market.

The Government’s press-release can be found here. We will provide further updates as the legislation progresses through the Oireachtas.

For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer or any member of A&L Goodbody’s Real Estate team.

The Central Bank of Ireland (CBI) has announced new rules that will apply to Irish regulated funds that invest 50% or more, directly or indirectly, in Irish property assets.

The most significant provision is the implementation of a 60% debt to total asset leverage limit. Both third party debt and shareholder loans count toward this 60% limit.

There is a carve-out from this leverage limit for certain funds that invest primarily in social housing but that carve-out is subject to a number of caveats.

The leverage limit applies immediately for all new funds authorised since 24 November 2022. For existing Irish regulated funds, there is a 5 year implementation period though the CBI has said it expects funds that need to get below the limit to have made significant progress within 3 years. The CBI has also said that it will expect any existing Irish regulated property fund that is over the 60% leverage limit not to incur additional debt while it is over the limit (or that would bring it over the limit).

The rules announced by the CBI also include new guidance for Irish regulated property funds that offer redemption facilities, effectively requiring them to have a minimum redemption period of at least 12 months from the redemption request dealing deadline to the date of payment of the redemption proceeds. Again the guidance applies immediately for all new funds authorised since 24 November 2022. There is an 18 month implementation period for existing regulated property funds in this regard. This is less significant as most Irish regulated property funds are either closed-ended or heavily limited liquidity, such that this provision would not cause undue concern.

The CBI’s paper outlining the guidelines can be found here and our further analysis can be accessed here.

For further information on this topic, please contact Michael Barr, Partner, or any member of A&L Goodbody’s Asset Management & Investment Funds team.

Performance Security

Performance security is a prominent feature of construction projects and is used as a means of protection for the Employer against the non-performance of the Contractor. The advantage to the beneficiary of the bond (i.e. the Employer) is that a third party surety (often an insurance company or bank/funding institution) agrees to fulfil the Contractor’s obligations under the underlying construction contract or to pay a sum of money that was advanced to the Contractor by the Employer. Bonds issued by a robust and reputable bond provider with a strong credit rating certainly provide comfort to the Employer in the event of default, insolvency or termination of the Contractor. Further, in the development finance context, its lender will also seek to ensure such performance security is in place to protect the Employer’s interest in such scenarios and protect the lender’s interest in an enforcement/step-in scenario.

The term “performance security” captures all types of third party security instruments. The most commonly used in the construction context are performance bonds and advance payment bonds. Whilst often referred to interchangeably (and both do fall under the umbrella of “performance security”), these instruments serve different purposes and often include different trigger events that allow the Employer to call on the bond.

What’s the difference between an advance payment bond and a performance bond?

Advance payment bond

An advance payment bond (APB) is often used in the construction and engineering industry in circumstances where an Employer has agreed to make a payment to the Contractor prior to the Contractor fulfilling its obligation for that payment. For example, it can provide the Contractor with funds for site mobilisation or the purchase of key materials or equipment manufactured off site. The concern on the Employer side is failure by the Contractor to fulfil obligations for which the Employer is already out of pocket. As a means of protection against this, the Employer may require the Contractor to provide an APB that provides that, once called upon by the Employer in accordance with its terms, the issuer will refund the advance payment or the “unperformed” element of the advance payment to the Employer.

Key features of an APB:

  1. The issuer has an independent, primary obligation to pay the bond amount under the APB to the beneficiary on receipt of a demand that has been properly issued in accordance with the terms of the APB.
  2. As APBs are regarded as a substitute for cash, they are usually on demand rather than on default based instruments.
  3. The issuer is often a bank rather than an insurance company.
  4. APBs usually cover the entire of the advance payments made to the Contractor, whereas a performance bond is often a percentage of the overall contract sum.
  5. The issuer will usually seek evidence that the advance payment has been made to the Contractor prior to its obligations under the APB taking effect (for example by way of copy of a SWIFT transfer of the bond amount to the Contractor by the Employer).
  6. The bond amount may increase to cover further advance payments made under the underlying contract or decrease as the obligations under the underlying contract are fulfilled e.g. an advance payment of 10% is made for the order and delivery of equipment and the bond value decreases by 10% when such equipment is delivered to site and approved by the Employer.
  7. An APB will often have a fixed expiry date with mechanics under the underlying contract for the Employer to seek an extension to the existing APB or replacement APB if the relevant obligations relating to the advance payment have not been fulfilled prior to such fixed date.
Performance bonds

The clue is in the name – a performance bond is security for the Employer for the performance by the Contractor of its obligations under the contract. If the Contractor fails to fulfil its obligation under the contract, for example due to insolvency, the Employer will suffer a loss . In such circumstances the Contractor needs to be terminated and replaced and the Employer will need to procure a replacement contractor (potentially at a premium price) in order to try to make up the lost time and complete the works.

Key features of a performance bond:

  1. Can be on demand or on default but are usually on default based instruments meaning that the issuer has secondary obligation to the beneficiary that is contingent on failure by the Contractor to fulfil its primary obligation to the Employer under the contract – trigger events typically include breach of the contract, insolvency or termination for contractor default.
  2. The issuer is often a bank or insurance company.
  3. Performance bonds usually cover the risk of the Contractor’s default or insolvency up to an agreed limit (in the Irish market, usually 10% of the contract sum under the relevant construction contract, often reducing to 5% on practical completion of the works).
  4. Performance bonds do not usually have a fixed expiry date but rather remain in place until the end of the defects liability period or a minimum period of time following practical completion (in the Irish market, usually 12 – 15 months).
  5. Performance bonds often provide that the Employer is entitled to recover amounts that are “established and ascertained” under the performance bond. Following the decision of the Irish case Clarington Developments Limited v HCC International Insurance Company, such words were interpreted by the courts as the Employer having to first exhaust the dispute resolution procedures under the relevant construction contract to crystallise the amount to which the Employer was entitled.

It is worth noting that, while performance bonds can help the Employer recover some of the costs incurred in finishing out the works in an insolvency/default/termination scenario, the Employer would first need to complete the works. Thereafter they can attempt to recover costs under the bond, however this may be challenged by the bondsman particularly in a difficult economic climate. In this sense, performance bonds are a means of recovering costs post completion and not a liquid instrument to fund completion of a project in a default scenario.

Recent Trends in Irish Market

The Irish market has seen an increased use of APBs in recent years. This is primarily being driven by the current delays and shortages in supply chains that is being experienced globally because of the aftermath of Covid-19 and the effects of the on-going conflict between Russia and Ukraine. Such delays and shortages have led to continued surges in prices of fuel and materials in particular. According to the latest Construction Industry Federation Economic Outlook research, 96% of construction companies have reported a rise in the cost of building materials between June and August 2022, with 85% expecting cost rises to continue to year end. The increasing cost of materials was cited as the top concern for companies over the next three to six months (86%). In response, many Employers are asking Contractors to place orders at an early stage in order to lock in prices and production/factory slots for key materials and equipment. Consequently, Employers are increasingly seeking APBs as security for such advance payments. This can pose a challenge to subcontractors and some smaller main contractors who may not have a sufficiently strong balance sheet or credit rating to facilitate the issue of performance security. Employers should carry out detailed analysis and due diligence of the supply chain to identify the pinch points and where performance security can assist. Employers should also work closely with their insurance advisors to map an overall realistic and achievable plan for performance security for the project, in the context of the current market and the financial strength and credit rating of the relevant contractors and subcontractors.

For further information in relation to this topic, please contact Siobhan Kearney, Senior Associate, Clare McAdam, Lawyer or any member of A&L Goodbody’s Construction and Engineering team.

RTB

On 17 November 2022, the Residential Tenancies Board (RTB) published its 2021 Annual Report and Accounts.

The report is available here and deals with issues such as:

  1. How the RTB communicates with customers
  2. How the RTB helps resolve rental disputes
  3. How the RTB regulates the rental sector
  4. How the RTB monitors trends
  5. How the RTB ensures good governance

For more information on this topic contact Aoife Smyth, Knowledge Lawyer or any member of A&L Goodbody’s Real Estate team.

RTB

The Residential Tenancies Board (RTB) has published details of 38 sanctions which it has imposed on landlords who have failed to comply with the requirements of residential tenancies law. This brings to 76 the total number of sanctions imposed since the RTB was given regulatory powers in 2019.

Importantly, over 85% of the total number of sanctions imposed are for breaches of rent controls in rent pressure zones (RPZ). This reflects the fact that the RTB currently prioritises the investigation of breaches of RPZ restrictions.

Other sanctions in this latest batch relate to:

  • failure to register with the RTB;
  • failure to notify the RTB of changes to a tenancy;
  • failure to notify the RTB of reliance on an RPZ exemption; and
  • failure to offer back premises to a tenant where required to do so under the legislation.

The latest sanctions range from a written caution to a fine of €3,963.76. The RTB states that, as a result of all investigations conducted by the RTB to date:

  • Over €338,000 in overcharged rent has been returned to tenants by landlords;
  • The rents in these cases have also been reset to amounts in compliance with the legislation; and
  • Over €60,000 has been paid by landlords in sanctions to date. All sanction amounts are paid to the Exchequer.

Further details are available here.

For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer or any member of A&L Goodbody’s Real Estate team.

A short post to confirm that the Residential Tenancies (Deferment of Termination Dates of Certain Tenancies) Act 2022 was signed into law on 29 October 2022. The “winter emergency period” referred to in the Act, during which there is to be a moratorium on the termination of residential tenancies, therefore runs from 30 October 2022 to 31 March 2023.

The deferred termination dates under the Act will operate as follows:

Period during which termination date falls Tenancy duration Deferred termination date
Beginning on 30 October 2022 and ending on 31 January 2023 Less than 6 months 1 May 2023
Beginning on 1 February 2023 and ending on 1 March 2023 Less than 6 months 18 June 2023
Beginning on 30 October 2022 and ending on 31 January 2023 Between 6 months and 1 year 1 May 2023
Beginning on 1 February 2023 and ending on 1 March 2023 Between 6 months and 1 year 1 June 2023
Beginning on 30 October 2022 and ending on 31 January 2023 Between 1 and 7 years 15 April 2023
Beginning on 1 February 2023 and ending on 1 March 2023 Between 1 and 7 years 1 May 2023
Beginning on 30 October 2022 and ending on 31 March 2023 7 years + 1 April 2023

For more detail on the operation of the Act, see our earlier post here.

For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer or any member of A&L Goodbody’s Real Estate team.

The Residential Tenancies (Deferment of Termination Dates of Certain Tenancies) Bill 2022​ has been published today. This is the draft legislation intended to give effect to the temporary moratorium on residential tenancy terminations during what is referred to as the “winter emergency period”. The Bill provides the following:

  • The winter emergency period is defined as beginning on the day after the passing of the legislation (expected before the Oireachtas breaks up at the end of next week) and 31 March 2023.
  • The bill applies to both residential tenancies and licences of student accommodation.
  • Where a notice of termination has been served on or before the date of the passing of the Act which specifies a termination date that falls during the emergency period, that termination date is deferred as follows:
Period during which termination date falls Tenancy duration Deferred termination date
Beginning on the day after the date of the passing of the Act and ending on 31 January 2023 Less than 6 months 1 May 2023
Beginning on 1 February 2023 and ending on 1 March 2023 Less than 6 months 18 June 2023
Beginning on the day after the date of the passing of the Act and ending on 31 January 2023 Between 6 months and 1 year 1 May 2023
Beginning on 1 February 2023 and ending on 1 March 2023 Between 6 months and 1 year 1 June 2023
Beginning on the day after the date of the passing of the Act and ending on 31 January 2023 Between 1 and 7 years 15 April 2023
Beginning on 1 February 2023 and ending on 1 March 2023 Between 1 and 7 years 1 May 2023
Beginning on the day after the date of the passing of the Act and ending on 31 March 2023 7 years + 1 April 2023
  • A notice of termination served by a landlord during the emergency period in respect of a tenancy of less than 6 months’ duration cannot specify a termination date earlier than 18 June 2023. Note that there is no need for provision for what happens where you serve a notice during the emergency period in respect of a tenancy of greater than 6 months, as the notice periods under the legislation are such that it takes you past the end of the emergency period without need for deferral.
  • The above deferral periods do not apply where the tenant is in breach or the landlord is terminating on the ground that the accommodation no longer suits the tenant’s needs having regard to the number of bed spaces and the size of the household. ​​
  • A tenant can’t acquire Part 4 rights by virtue of the operation of the Act – i.e. the additional time that they are in occupation by virtue of the operation of the legislation is not to be counted towards Part 4.​

For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer or any member of A&L Goodbody’s Real Estate team.

The Environmental Trust Ireland v An Bord Pleanála & Ors case involved an application seeking to quash a decision of An Bord Pleanála (the Board) which granted planning permission under the Planning and Development Act 2000 and the Planning and Development (Housing) and Residential Tenancies Act 2016 to Cloncaragh Investments Limited, the notice party developer of a Strategic Housing Development (SHD). The judicial review succeeded on one ground only – the Court was satisfied that as a result of the Board’s failure to circulate the plaintiff’s submission to Limerick City and County Council in a timely manner, it was necessary to quash the permission granted in respect of the SHD. ​The application has been remitted to the Board to allow it to properly engage with the planning authority and to remake it decision.

For further information on this topic, please contact Alan Roberts, Partner, Niamh Collins, Lawyer or any member of A&L Goodbody’s Environmental & Planning team.

Photo of Paul Hughes

The Technology and Construction Court (TCC) in England and Wales has recently given judgment in Essential Living (Greenwich) Limited v Elements (Europe) Limited in relation the extent to which an adjudicator’s decision is binding on the parties for the purpose of an ongoing final account process. The judgment may be of interest in an Irish context.

Background

Essential Living engaged Elements to design and construct modular units for a mixed use development.

The contract contained a provision whereby the construction manager could, within 12 weeks after practical completion, fix a completion period which was ‘fair and reasonable.’ A dispute arose between the parties regarding adjustments to the contract sum, variations, extensions of time, loss and expense and liquidated damages. An adjudicator’s decision dealt with those issues and valued the works up to March 2019. The adjudicator’s decision found in favour of Essential Living.

Subsequently, after practical completion was certified in May 2019, Elements submitted its documentation for the final account process as set out in the contract. The submission included increased sums for variations, an extension of time claim, and additional prolongation costs with no allowance for liquidated damages.

Elements contended that the adjudicator’s decision was limited to an interim payment application and did not affect the final account process as it was conceptually different to the interim valuation decided by the adjudicator. Essential Living maintained that the adjudicator’s decision was binding in relation to those items until determined otherwise in arbitration or litigation and that Elements, under the guise of the final account process, was essentially reopening matters decided by the adjudicator.

Decision

Plenty of case law is available on the issue of whether a subsequent adjudication is ‘the same or substantially the same’ as an earlier adjudication, but there is little case law on the extent to which an adjudicator’s decision concerning an interim valuation binds the subsequent final account process.

At paragraph 84 of the judgment in this matter, O’Farrell J held that:

‘…iii) the Adjudication Decision is not binding on the parties for the purpose of the Construction Manager’s final determination of the Completion Period … from which would flow any liability on the part of Elements for liquidated damages and finance charges;

iv) the Adjudication Decision is not binding on the parties for the purpose of determining the … Contract Sum;

v) the Adjudication Decision is binding in respect of variations considered and assessed by the adjudicator, unless and until the Adjudication Decision is overturned, modified or altered by the court, or unless either party identifies a fresh basis of claim that permits such variation claim to be opened up and  reviewed under the terms of the Contract…’

Commentary

This is an important decision as it provides guidance on the circumstances in which an adjudicator’s decision may or may not be binding in a subsequent final account process carried out under the provisions of the contract.

Central to the decision in this case was the fact that the contract included a provision whereby the construction manager (contract administrator / employer’s representative) had, after practical completion, an overarching power to assess the time for completing the works on a fair and reasonable basis. Such a provision is contained in many standard forms of construction contract. It appears from this judgment that where a contract includes such a provision, then the adjudicator’s decision on extension of time claims will not be binding in the final account process under the contract. However, where an adjudicator has assessed the value of variations that assessment is binding in the final account process until such time as the adjudicator’s decision is altered by the court. In an Irish context, a degree of caution may be required as Simons J has warned about the potential dangers of reading across judgments from the TCC.

For further information in relation to this topic, please contact Conor Owens, Partner, Enda O’Keeffe, Partner, Paul Hughes, Senior Associate or any member of A&L Goodbody’s Construction and Engineering team.