Regulatory Impact Assessment
Implementation of proposals to amend the Residential Tenancies Act
2004
November 2010
Contents
1.
Background
2.
Voluntary & Co-operative Sector
2.1.
Policy context
2.2.
Policy objectives
2.3.
Policy options
2.4.
Analysis of Costs, Benefits and Impacts
3.
Deposit Retention
3.1
Policy context
3.2
Policy objectives
3.3
Policy options
3.4
Analysis of Costs, Benefits and Impacts
4.
Rent Arrears
4.1
Policy context
4.2
Policy objectives
4.3
Policy options
4.4
Analysis of Costs, Benefits and Impact
5.
Consultation
6.
Enforcement and Compliance
7.
Review
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1.
Background
In April 2009 my Department commenced a review of the provisions of the Residential
Tenancies Act 2004, under which the Private Residential Tenancies Board (PRTB)
operates. The purpose of this review was to consider whether the Act best supported the
PRTB’s key functions and whether legislative amendments would support either the
achievement of additional operational efficiencies by the PRTB in the delivery of those
functions or the broader good working of the private rented sector.
The Residential Tenancies Act 2004 introduced a measure of security of tenure for tenants,
specified minimum obligations applying to landlords and tenants and provided for the
establishment of a Private Residential Tenancies Board to resolve disputes arising in the
sector; operate a system of tenancy registration and provide information and policy advice.
The Act contained provisions relating to rent setting and reviews and procedures for the
termination of tenancies, including gradated notice periods linked to the duration of a
tenancy.
The Residential Tenancies Act provides that one of the functions of the Private Residential
Tenancies Board is the review of the operation of the Act and the making of
recommendations to the Minister for the amendment of the Act. The Board of the PRTB
and its legislative committee have recently completed an examination of the Act and they
have made several recommendations for change. These recommendations are informed by
five years experience of operating the current system.
While the review indicated that, overall, the PRTB has achieved considerable success
since it was established, there is a lot more to be done. The proposed Bill will make
recommendations in a number of key areas with an overall emphasis on streamlining and
simplifying the Act and reducing service delays in the Private Residential Tenancies Board
(PRTB).
For the purposes of the RIA this report will focus on three key areas identified as the main
areas for amendment under the Bill and will assess the impact of the proposed regulatory
reform in terms of its overall costings and benefits.
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2.
2.1.
Voluntary & Co-operative
Policy context
The Government is committed to the continued development of the voluntary & cooperative housing sector including expanding their role in social housing delivery, improving
governance and achieving more formal accountability generally in relation to the activities
of the sector. In view of the ongoing evolution of the sector and its greater role in social
housing provision, it is proposed to extend the remit of the Residential Tenancies Act to the
voluntary and co-operative sector. However, segments of the voluntary sector, such as
sheltered housing, may not be suitable for regulation under the RTA so it will be important
that those segments of the sector that most closely parallel the current remit of the RTA,
that is, “standard social housing” be carefully defined.
2.2.
Policy objectives
There is a general acceptance that there is a need for regulation in the voluntary and cooperative sector and that this regulation can be delivered by amendments to the RTA.
There is a significant difference between the voluntary and co-operative sectors regarding
the extent of that regulation. The co-operative sector is very well managed and regulated
and the RTA may have limited application to them e.g. access to dispute mediation. The
voluntary housing sector on the other hand are/is open to having almost all of the
provisions of the RTA applied to them/it with some exceptions to take account of the
specific nature of the service they provide. Regarding dispute resolution, the PRTB have
experience in dealing with landlord tenant issues, whereas the courts are unfamiliar with
the legislation and role of approved bodies in general and as such it is proposed that the
PRTB would be the body best equipped to deliver this service.
The key objectives in introducing this legislation are:
a) to regulate the voluntary and co-operative sector tenancies,
b) to provide a dispute resolution service when problems occur
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c) to ensure amendments to the RTA take into consideration the special nature of
these types of tenancy arrangements and make distinctions and differentiations
where necessary.
2.3.
Policy options
In response to the Government’s commitment to the development of the voluntary & cooperative housing sector including expanding their role in social housing delivery, improving
governance and achieving more formal accountability the following options were
considered:

doing nothing;(option 1)

extend the ambit of the Residential Tenancies Act to the voluntary and co-operative
sector;(option 2)

Introduce separate governing legislation for this sector.(option 3)
Option 1 (no action)
At present the relationship between tenants of these dwellings and the housing bodies
(their landlord) is not generally provided for in either the Housing Acts or the Residential
Tenancy Acts and operates on the basis of lease agreements (where they exist), the
various Landlord and Tenant Acts and common law. To retain the status quo for this sector
would have continued impact on socially excluded and vulnerable groups in terms of their
tenant rights particularly in relation to security of tenure and termination of tenancies.
In addition Government has already given its commitment to develop the voluntary & cooperative housing sector including expanding their role in social housing delivery. To take
no action would mean a failure to make good on this commitment. Therefore the “do
nothing” option is simply included here for benchmarking purposes and it is not envisaged
that this option applies.
Option 2
The main policy option being considered is the inclusion of the voluntary and co-operative
housing sector within the ambit of the Residential Tenancies Act in view of the ongoing
evolution of the sector and its greater role in social housing provision. It was noted however
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that certain segments of the voluntary sector, such as sheltered housing, may not be
suitable for regulation under the Residential Tenancies Act so it will be important that those
segments of the sector to be included within the ambit of the RTA be carefully defined. In
this context, a small and informal working group was established to consider this proposal
the results of which will be outlined in detail in the analysis of costs, benefits and impacts
section of this RIA.
Option 3
The final option considered involved introducing separate legislation to govern tenants in
the voluntary & co-operative housing sector. However, the segments of the sector which
required regulation, closely parallel tenancies which are currently under the remit of the
RTA. The RTA already provides a detailed legislative basis and system for landlord and
tenant relationships and given the time and costs involved in introducing separate
legislation in this area it was not seen as a viable option in the current environment.
2.4.
Analysis of Costs, Benefits and Impacts
The following are important points in considering the implications of including the voluntary
and co-operative sector under the PRTB registration and dispute resolution services:
Costs
It is likely that the registration of approximately 18,500 tenancies from the Voluntary and
Co-Operative Sector will increase pressure on existing staff resources in the PRTB. The
initial registration of the tenancies should be fairly straightforward given that a good
proportion of it is owned by the 10 main providers.
At current activity rates, it is expected that approximately 185 additional disputes will be
referred to the PRTB each year resulting in an additional 128 hearings and 73
Determination Orders.
The PRTB currently has a maximum staffing capacity of 70
(including permanent staff and agency staff and vacant positions). That equates to
approximately 1 staff member for every 3,350 registered tenancies. Using this ratio, a
minimum of 5.5 additional staff would be required in year 1 of the inclusion of approved
housing body tenancies under the Residential Tenancies Act.
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Approved housing representative bodies and some providers have expressed a concern
that their housing associations would find it difficult to raise the revenue necessary to pay
the PRTB registration fee. They argue that their rent levels are based on the differential
rents which are significantly below the private rented sector making it difficult for them to
raise the necessary fees revenue. Based on current registration fees the initial cost to the
sector would be over €1.6m and over a 4 year period up to €2m with the inclusion of re-lets.
Benefits
Registration fees could raise up to €1.66 million in revenue to cover a four year period, or
€2 million over the period if re-let fees are included.
Access to dispute resolution services at below costs levels will also lead to savings for
approved housing bodies. A legal fee of €10,000 was estimated by one approved housing
body as a typical example of the cost of an anti-social behaviour case going to court.
As it currently stands approved housing bodies have to use the court service in order to
issue a determination order requiring a tenant to vacate the property for continual breach of
their tenancy agreement. Under the PRTB dispute resolution service, the PRTB can issue
such an order once the due process has been followed. This in turn will greatly reduce the
demand on the courts service.
Other Impacts

National competitiveness
None envisaged

Socially excluded or vulnerable groups
Most tenants in the Voluntary and Co-operative sector are taken from the social
housing waiting list, therefore these lower income households will benefit from the
rights conferred on them by the Residential Tenancies Act as do the tenants in the
private rented residential sector.
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
Environmental impacts
None envisaged

Significant policy change in an economic market
None envisaged

The rights of citizens
Compliance burden
3.
3.1
Deposit Retention
Policy context
Issues around the retention or the incomplete return of tenancy deposits feature in a large
portion of the disputes cases submitted to the PRTB. Deposit issues featured in 51% of all
cases in 2009, representing nearly 74% of Tenants' cases. In 75% of such cases, it was
determined that Landlords should refund part or all of the deposits, which they had
retained, to their Tenants.
However it is worth noting that while 1,859 disputes cases were submitted to the PRTB in
2009 this represents less than 1% of all tenancy registrations in that year. In other words,
99% of tenancies do not result in a PRTB dispute so it’s fair to say that landlord-tenant
relationships are working reasonably well.
3.2
Policy objectives
The core objectives of the proposed legislative changes are to eliminate illegal withholding
of deposits by landlords with a consequent reduction in dispute referrals to the PRTB.
3.3
Policy options
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There is interplay between a number of possible actions addressing the issue of
unjustifiable deposit retention (e.g. fixed fine, damages, statutory deposit mechanism)
One of the suggestions during the consultation process was the setting up of a deposit
retention scheme whereby landlords would no longer hold the tenants deposits but they
would instead be held by an independent third party, such as the PRTB or a separate body
. In this respect, the PRTB commissioned research by Candy Murphy and Associates to
assess the viability of introducing a deposit retention scheme. Critical issues considered in
this examination were the potential costs and benefits of establishing a deposit retention
scheme and identifying the elements that are most likely to make it both financially viable
and operational, including how the proposed new body would relate to the existing dispute
resolution services of the PRTB.
Having considered the Candy Murphy report and the potential costs and benefits of
establishing such a scheme the PRTB has advised the Minister that they are not in favour
of recommending the establishment of a deposit retention scheme at this time and in the
current economic climate. (International Review: Deposit Resolution Mechanisms in
relation to Deposit Retention – February 2007). Notwithstanding this, the PRTB, in a
companion piece of research to its earlier study, is to look at the economics of the
deposit retention situation in Ireland in general and in particular the possible costs
of establishing a specific scheme to address this.
However, the PRTB has recommended that the legislation be amended to provide that
landlords will face a sizable mandatory fine if found to have illegally withheld a deposit, or
portion thereof. This fine will act as a deterrent to landlords who automatically refuse to
return deposits. The imposition of a fine has worked successfully in the UK where landlords
can face fines of up to 3 times the deposit.
3.4
Costs
Analysis of Costs, Benefits and Impacts
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Due to the difficulty in extracting adequate data from the PRTB data base and the
commercial sensitivity around obtaining accurate costings on the establishment of a
Deposit Retention Board it was not possible to carry out a full cost-benefit analysis on the
proposal. To adequately access the proposal from the perspective of its financial viability
would require the commissioning of a detailed economic model which will be researched by
the PRTB over the coming months.
The proposed legislative changes will be Exchequer-neutral as the PRTB will exercise their
strengthened powers within existing staffing levels and budgets. Over time, the new
legislation should lower the incidence of illegal deposit retention leading to a reduction in
disputes and savings in the PRTB dispute resolution service.
Benefits
Deposit retention complaints have consistently been the single largest category of cases
submitted to the PRTB for dispute resolution. 51% of dispute cases in 2009 were deposit
retention cases. An estimate of the direct cost of deposit retention cases in 2009 is
€485,959.11. This estimate was arrived at by totalling the Tribunal Fee’s, Adjudicators and
Mediators Fees and stenography costs for the year and calculating 51% of this figure.
It its envisaged that these costs will greatly decrease on the imposition of a mandatory fine
where landlords have been found to have illegally withheld part or all of the deposit.
A reduction in dispute cases will simultaneously lead on to an increase in confidence in the
private rented sector, improving its image and making it more attractive as a housing
option.
Other Impacts

National competitiveness
None envisaged
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
Socially excluded or vulnerable groups
This proposal provides the PRTB with new powers in relation to its regulatory
functions. In this regard, it should help prevent homelessness and housing crises
faced by tenants on low incomes who have their deposits unreasonably withheld.

Environmental impacts
None envisaged

Significant policy change in an economic market
None envisaged

The rights of citizens
Compliance burden
4.
Rent Arrears
4.1. Policy context
A particular problem which has arisen is that in a small (but not insignificant) number of
cases tenants have discontinued rental payments to the landlord pending the outcome of
dispute proceedings before the PRTB.
Section 86(1)(c) of the Act provides that the termination of a tenancy may not be effected
“pending the determination of a dispute that has been referred to the Board”; this can give
rise to particular difficulties for the landlords involved as dispute resolution can take up to
12 months before the matter is determined by the PRTB.
In the course of a dispute other than one involving notice of termination if the tenant ceases
to pay rent the landlord is required to serve a notice terminating the tenancy for failure to
pay rent. The validity of this notice may also be referred to the PRTB, thus giving rise to
exactly the same problem. Not only might this cause cash flow difficulties for landlords, but
the recovery of substantial arrears of rent could prove very difficult in those circumstances.
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It is, of course, possible that a landlord faced with such difficulties might request the Board
to apply to the Circuit Court for interlocutory relief under section 189(3). Not only is this
procedure inherently cumbrous, but it is hardly satisfactory, especially if it meant that the
Board was regularly required to apply to the Circuit Court for such relief.
The combined effect of these factors might well create a situation where the
constitutionality of aspects of the 2004 Act would be open to question. The Act effectively
blocks the entitlement of a landlord to take any effective measures in respect of his
property for the best part of a year or more while no rent is paid.
4.2
Policy Objectives
The problem to be overcome is that the 2004 Act contains no procedure (or, at any rate,
no effective procedure) whereby the landlord can effect a termination of a tenancy for non
payment of rent pending the outcome of a dispute referred to the Board.
4.3
Policy Options`
We may consider two options for change:
Option A
This is the option suggested by the Board. This involves an amendment to section 86(1)(a)
so that the tenancy may be terminated where the rent has not been paid. If, however, the
rent is paid in full, the notice of termination is deemed to be withdrawn and any issues
concerning the validity of such a notice may be considered separately by the PRTB, i.e., at
a time and in a manner which is separate from the main dispute.
Option B
The other option would be to provide for an expansion of the circumstances in which the
Circuit Court might be empowered to grant interim or interlocutory relief and specifically by
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reference to the necessity to maintain the status quo pending the outcome of any PRTB
adjudication.
4.3
Analysis of Costs, Benefits and Impacts
Costs & Benefits
Option A:
If this option were adopted, it would be necessary for the PRTB to provide a system of
interim adjudication on the rent issue. In effect, the adjudicator would be required to make
speedy decisions on the papers before him whether (in effect) to give the equivalent of an
interlocutory injunction to the tenant restraining the termination of the tenancy pending the
final determination of the dispute by the PRTB.
Option B:
This would be at odds with the objectives of the 2004 Act.
Other Impacts

National competitiveness
None envisaged

Socially excluded or vulnerable groups
None envisaged

Environmental impacts
None envisaged

Significant policy change in an economic market
None envisaged
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
The rights of citizens
This should allow a landlord to legally gain occupation of the property within a
reasonable timeframe while also minimising the risk of an illegal eviction.

Compliance burden
None envisaged
5.
Consultation
As part of the review process of the Residential Tenancies Act, 2004 my Department
engaged in a formal public consultation process, which took place from 29 May to 10 July
2009. Submissions were received from a number of organisations, including landlord and
tenant representative groups, social and voluntary bodies and residents’ associations,
together with individual submissions from landlords and tenants and from the staff and
Board of the PRTB. The preliminary outcomes of the review were announced in November
2009. They include recommendations in a number of key areas, and have an overall
emphasis on streamlining and simplifying the Act and reducing delays. Among the main
issues that will be addressed by the amending legislation are –

a statutory objective of 6 months to be set for the issuing of determination orders
arising out of dispute resolution applications,

the Board of the PRTB to be reduced from 15 to 12 members,

the introduction of fixed fines where deposits are illegally retained by landlords,

measures to address non-payment of rent by tenants during a dispute process, in
particular to introduce scope for the legal termination of such a tenancy,

the separation of the governance and quasi-judicial functions of the Board,

the inclusion within the ambit of the Residential Tenancies Act segments of the
voluntary and co-operative housing sector that most closely parallel its current remit.
A number of issues requiring further research, including third party complaints under the
Act and the Act’s engagement with anti-social behavior matters will also be considered in
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detail. The Department will continue to engage in direct consultation with key stakeholders
so as best to address those issues.
6
Enforcement and Compliance
The Private Residential Tenancies Board (PRTB) is responsible for the administration and
enforcement of the Residential Tenancies Act (as amended). The PRTB dispute resolution
service replaces the courts in relation to the majority of landlord and tenant disputes in the
private residential sector. The Residential Tenancies Act 2004 stipulates that failure to
comply with a Determination Order (DO) made by the PRTB may be enforced by either a
criminal prosecution or by civil proceedings, or both. In either event there are serious
implications for a party who does not comply with a PRTB Order.
7
Review
Section 151 of the Residential Tenancies Act 2004 sets out the principal functions of the
Board of the PRTB. Two of those functions are; the provision to the minister of advice
concerning policy in relation to the private rented sector, and the review and the operation
of the Act and any related enactments and the making of recommendations to the Minister
for the amendment of the Act and related enactments.