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Landlord Info
Our letting and management services are designed to be as comprehensive as
possible to meet all the requirements of the property owner. However should you
have any queries or special requirements, please do not hesitate to contact us.
We would like the opportunity to view each property prior to placing on our
letting lists and discuss our service in more detail.
Our extensive marketing in National papers, the Golden Pages, letting signs and
various mail shots ensures a large number of prospective tenants on our books.
We strive for 100% occupancy rate, noting upcoming lease expiry dates and
placing properties on our books in advance.
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Normal wear
and tear on rented houses and apartments
Normal Wear and Tear
Just want to mention that it's always a good idea to keep all communication with
the tenant in writing. When your property is damaged and the tenant agrees in
writing to a payment schedule and then defaults on his or her promise, there is
no way the tenant can show up in Court and say "It wasn't me, I didn't do it.
It was like that when I moved in".
By agreeing to a payment schedule they have acknowledged responsibility for the
act and cannot deny the existence of the damage. If they do, the Judge will
surely have follow-up questions of his/her own. Though I agree that tenants
should be held responsible for their actions. I would be very careful with
encouraging a tenant to do his/her own wall painting. What was a few crayon
paintings on the wall will grow into a problem with the carpeting having to be
replaced because the tenant did not have the common sense to cover the carpet
before painting, or toppled the paint bucket in the process. Of course this
same tenant will express to you that it was your fault, after all, you should
have known better and they were working at your insistence.
We discussed what to do about tenant damages. Somewhere, probably in the
nightly meetings of bad tenants, where they get lessons on how to live for free
and trash rental properties, they learned the catch phrase "normal wear and
tear." Thus, when you complain about, repair and bill them for the damage they
did, like a broken record the rationalization and alibi "normal wear and tear"
will come out of their mouths. If you don't know what normal wear and tear
really is, sometimes you can actually get sucked into their version of the
truth. That's why this week's Tip of the Week is an explanation of what normal
wear and tear really is.
A hole in a plaster wall, a broken window, crayon marks on the ceiling, cabinet
doors torn off their hinges--those are obviously above and beyond normal wear
and tear. But how about a worn place in the carpet, what about tiles on the
kitchen floor cracked or missing? That is where the tenant can claim that he
doesn't owe a dime of the security deposit, because that was just normal wear
and tear and you can't charge him for that.
What follows is a list of common things you will find around the house that a
tenant might have some affect on and a range of life expectancy. For vinyl and
wall-to-wall carpets you should get a pretty good idea of the life expectancy
when you buy it, but for other items you may not.
A rule of thumb to follow, whenever there is a question about who should pay
for damage, is that the landlord should pay. In this article, however, I will
attempt to remove some of the questions and possibly enable you to get a better
idea of when you should deduct money from the security or cleaning deposits.
The first step in determining wear and tear is good record keeping. You need
records, as complete as possible, of when you purchased items and/or when you
installed them. If you don't have a starting point, you certainly will have no
way of knowing with any accuracy how long they should be expected to last.
If the fixtures or appliances were in place when you bought the property, try
to find out their history from the seller. Many times the previous owner will
have all the warranty and product information, including manuals.
The other vitally important thing to have is the tenant move-in checklist,
signed by the tenant. Without that, the tenant can claim, often successfully,
that whatever the damage was, it was there when he or she moved in.
In addition to that, some damage is the fault of the landlord for not checking
the property regularly. As you well know, you cannot expect a tenant to take
care of a property the way the owner does. Tenants just don't notice things
that can do major damage to a building.
For example, few tenants would think anything about earth to wood contact. They
will shove dirt up against the side of a house and not even notice when the
wood on the side of the house starts to rot. That is the fault of the landlord.
A tenant will probably not notice a bad roof until it leaks, despite the fact
that it shows all the signs of being on its last legs.
There is simply no way you could collect damages from a tenant for dry rot due
to earth-to-wood contact: you should have seen it. Once you have noticed that a
tenant is piling dirt against a building, though, it is up to you to tell him
not to do it anymore. Once you do, and you have left a paper trail proving that
you have, then the tenant would have some responsibility. Even so, it is up to
the landlord to take care of his investments.
When a tenant moves in, make it clear to him or her that you want to be
notified of damage and that you don't want things let go.
How tenants damage things
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Dishwashers
They use the dial to run them through their cycle. This will strip the timing
mechanism. Dishwashers should be allowed to run through their cycles fully, not
set to rinse again or dry again. Since a dishwasher should last between five
and twelve years, if the control knob breaks before that, it is above and
beyond ordinary wear and tear.
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Water heaters
Do not wrap them in an insulating blanket, no matter what the environmentalists
claim. Doing so voids their warranties and the Underwriter's Laboratory
certification. The insulating blanket makes them too hot and can overheat the
wiring. If a tenant wraps a water heater, thinking they are saving energy, and
the water heater goes out, that is beyond ordinary wear and tear. Tenants will
sometimes drain an electric water heater without turning the electricity off.
That will burn out the elements. Water heaters last from eight to twelve years.
Burnt out wiring or elements are beyond ordinary wear and tear.
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Ranges
Gas ranges will last indefinitely. About the only thing a tenant can do to
damage one is break a knob, and it happens. But accidents happen, and it is
probably ordinary wear and tear.
Electric ranges, on the other hand, do not last as long, about 15-20 years.
Tenants will remove elements to clean and not put them back in properly,
shorting out either the element or the entire wiring on the stove.
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Furnaces
It is important to change the furnace filter once a month. Leave a dirty filter
in and risk ruining the fan motor. If necessary, get the tenant a supply of
filters with the instruction to change it the first of every month, whether he
thinks it needs it or not.
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Driveways
Concrete is damaged by something known as "point loading." That happens when a
heavy vehicle is parked on the same spot for a long period of time or over and
over. Eventually that weakens the concrete in that spot and it cracks. The
cracks radiate out from the spot of the point load. If your tenant has a heavy
vehicle, ask that he park it in different places on the driveway. Point load
damage could be considered above and beyond ordinary wear and tear.
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Cabinets
Most tenants will not pick up a screwdriver and tighten a screw that is coming
loose. Many don't know what a screwdriver is. Then, when the door comes loose
from one hinge, they will let it hang from the other one. Cabinets should last
for 20 to 30 years. If they are damaged from tenant neglect such as that, it is
above and beyond ordinary wear and tear. It doesn't cost a tenant anything to
tighten a screw. At the same time, though, a periodic inspection would probably
have discovered a loose cabinet door.
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Floors, hardwood, tile, vinyl
You know what the life expectancy is when you buy the flooring, and it varies by
quality. If you buy cheap vinyl, and a tenant's high heel pokes a hole in it,
you got what you paid for. But if a tenant drags something sharp across the
floor and scratches or cuts the flooring, that is above and beyond ordinary
wear and tear.
Doors (hinged)--tenants have been compared to teenagers: if something doesn't
work the first time, force it. Things get caught in doors, such as broom
handles on the hinge side of the door, and then the door gets sprung. Screw
holes are stripped and hinges get bent. Doors last indefinitely, if used
properly. Damage to them is above and beyond ordinary wear and tear.
Doors (sliding)--These come off their tracks, and despite the fact that it is
easy and costs nothing, tenants don't put them back on their tracks. Then they
come loose and get banged around, damaging the tracks so they have to be
replaced. Take the cost of damage out of the security deposit.
You can't be there all the time to watch to see that a tenant doesn't do
anything stupid or destructive. Previous landlords can often give you some
insight on how well a tenant took care of a property. Some tenants are simply
unconscious: they don't mean to do any harm, they just have no way to connect
what they have done with the damage. One of the mysteries of life.
Deciding whether damage is beyond ordinary wear and tear often boils down to a
landlord basicly, deciding if something was used in a way it wasn't designed
for. If it wasn't, it is damage which should be paid by the tenant.
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LandLord FAQ
Q. What rent
can I charge?
A: You can charge a full market rent. It may be useful to look in the local
paper in the property or classified section under accommodation for an idea of
local market rents.
Q. How do I
create an assured shorthold tenancy?
A. You need to agree the main terms of the letting with your tenant; the
monthly or weekly rent, and the length of the term of letting. This should be
done with a standard form called a tenancy agreement.
Q. What
happens when the fixed term of an assured tenancy comes to an end?
A. Your tenant has the right to remain in the property until the court has
granted you possession. In the case of an assured shorthold tenancy, the court
must grant you possession if you apply for it once the fixed term is over. To
bring an end to a full assured tenancy you will need to use one of the
seventeen grounds.
Q. How do I
get my tenant to leave?
A. You must give him written notice that
you intend to seek a possession order in the court or, in the case of an
assured shorthold tenancy where you are relying on the fact that the term of
the shorthold has come to an end, simply notice that you require possession.
Although there is no prescribed form for this notice it should contain certain
information, your letting agent will be able to advise you.
If you are relying on one of the seventeen grounds, rather than the shorthold,
you need to give notice using a special form. You normally need to give two
months' notice before applying to the court to bring an assured shorthold
tenancy to an end, although the period of notice you must give will sometimes
be longer, for example for a yearly tenancy (one which runs from year to year)
where the period of notice required is at least six months.
The period of notice is only two weeks for the 'bad tenant' grounds such as
rent arrears, but longer (normally two months) for the other grounds.
If the tenancy is periodic you will need to provide the required period of
notice, and the notice must expire on the last day of a period of the tenancy.
Q. What if
the property is mortgaged?
A. Most mortgage deeds prevent you from letting without your lender's consent.
Ask him before taking on a tenant.
Q. What if I
am leaseholder?
A: You should check the terms of your lease, and if necessary ask your
landlord's permission.
Q. Who pays
for what?
A. If you grant a tenancy for a period of less than seven years - and this
includes those tenancies which are not granted for a fixed period but run from
week to week or month to month - then you are by law responsible for certain
basic repairs, including those two:
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the structure and exterior of the dwelling basins, sinks, baths and other sanitary installations in the dwelling
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and installations for heating water and space heating in the dwelling
In addition, if you grant a lease of less than seven years on a maisonette or a
flat you are required by law to repair any parts of the building, or any
installations in part of the building, which you own or control, whose
disrepair affects the comfort of your tenant.
You cannot make your tenant responsible for carrying out these repairs unless
the court agrees that you can, nor can you pass on their cost to him in the
form of a service charge. But you will, of course reflect the cost to you of
carrying out these repairs in the rent you charge.
Responsibility for carrying out other repairs depends on what you and your
tenant agree.
If you have repairing obligations as described above, your tenant must allow
you or your agent access to the property to inspect it, provided you give him
twenty-four hours' written notice.
Q. What if
the tenant is on housing benefit?
A. Housing benefit is money paid by the state to help tenants with their rent.
Tenants may receive assistance towards all or part of his rent. Your tenant
must pay you whatever rent he owes you, whether or not he receives benefit. In
some circumstances housing benefit can be paid direct to a recipient's
landlord. If your tenant falls behind with his rent and is on benefit you may
like to approach your local authority housing benefit department to see whether
direct payment would be possible in your case.
Q. What if
there are Problems with the Tenant ?
A. The law protects you against being stuck with a bad tenant. Your tenant must
pay his rent promptly, take care of your property and avoid causing a nuisance
to his neighbours or using the property for illegal or immoral purposes. He
must obey any rules of the tenancy agreement, such as not keeping pets or
taking in lodgers. If he does not, he will probably lose his home.
It is worth taking precautions against bad tenants. If you have used a letting
agent you will have a properly drawn up tenancy agreement and also a deposit.
It is particularly important to have a written tenancy agreement to end the
tenancy on 'bad tenant' grounds which are specified in the agreement between
you and your tenant. Make sure your agreement is clear about what will happen
if the tenant does not keep his side of the bargain.
Rent arrears should be tackled as soon as they arise. Your agreement should
provide for rent to be paid regularly on a particular day of the week, month or
year. If a payment is missed, notify the tenant straightaway and ask him for
the money. If there are serious rent arrears, then the law enables you to get
your property back. You can get it back in the following circumstances:
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If there are very serious rent arrears - 8
weeks' rent in the case of a tenancy for which rent is payable
weekly and 2 months rent where the rent is payable monthly - you can
apply to the court for possession and the court must grant you
possession if the arrears are still outstanding. It will also
normally order the tenant to pay off his arrears.
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If the tenant has persistently delayed paying his rent, or if rent was owing
when you gave the tenant notice of your intention to take proceedings for
possession against him and was still owing when those proceedings started, then
the court may grant you possession. The court may also in these circumstances
grant you a suspended order of possession - the tenant will only have to leave
if he does not pay off his arrears as ordered by the court.
Potential landlords are sometimes afraid that any tenants they might take may
damage their property or furniture, or be bad neighbours. You can, however,
control this since the law allows you to get the property back if the tenant
damages it or your furniture, or if he is a nuisance to neighbours. If your
tenant is convicted of using the property for illegal purposes, or immoral
acts, you may have him evicted as well. You can also ask the court to grant you
possession if the tenant has broken any other obligation of his tenancy
agreement.
If you are letting on a fixed term contract, you will only be able to use these
'bad tenant' grounds for possession during the fixed term if the agreement says
that you can. So make sure your agreement is clear on these points.
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General Info
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Buying?
Revenue Guide
How are non-resident landlords taxed?
On receipt of the annual tax return, profit rent, i.e,. rent received less
allowable expenses. will be assessed. The landlord is entitled to claim relief
for expenses, which are usually allowed in arriving at the rental profit. The
landlord is also entitled to a credit for the tax deducted by the tenant. Form R
185. should be submitted by the landlord with the tax return to obtain credit
for the tax retained. How are foreign rents taxed?
In general, income from foreign property is computed on the full amount of
the income arising. irrespective of whether the income has or will be received
in the State. In the case of foreign rental income this income is charged under
Case III of Schedule D and the same deductions and allowances are available as
if the income had been received in the State. Deductions are also normally
available in respect of such income for sums in respect of foreign tax paid.
This income should be included in an individual's tax return on the Foreign
Income panel.
These rules do not apply to a person who is not domiciled in the State or who
is an Irish citizen not ordinarily resident in the State. In such cases, income
tax is computed on the full amount of the actual sums received in the State from
such remittances, etc. without any deduction or relief given. Rent allowance
Tax relief. may be claimed by a tenant paying rent to a landlord for private
accommodation by completing Form Rent I. This form is available at
www.revenue.ie. Revenue's Forms and Leaflets Service at LoCall 1890 30 67 06 or
from any Revenue office. The annual maximum relief allowable is given on Form
Rent I. Keeping records
You must keep full and accurate records of your lettings from the start. You
need to do this whether you send in a simple summary of your profit/loss.
Prepare the accounts yourself, or have an accountant do it. All supporting
records such as invoices, bank and building society statements, cheque stubs,
receipts etc.. should also be retained. You must keep your records for six years
unless your Revenue office advises you otherwise. What if Rents are payable to a non-resident landlord?
If a landlord resides outside the country and rent is paid directly to
him/her or to his/her bank account either in the State or abroad, tax must be
deducted by the tenant at the standard rate of tax (currently 20%) from the
gross rents payable. Failure to deduct tax leaves the tenant liable for the tax
that should have been deducted.
Example:
Gross rent per month €1000
Deduct tax (1000 x 20%) €200
Pay to Landlord (1000-200) €800
The tenant must also give a Form R185* to the landlord to show that the tax
has been accounted for to Revenue.
Where an agent resident in the State is appointed by the non-resident
landlord to manage the property and the agent is collecting the rents, the rents
must be paid gross to the agent. The agent is then chargeable to tax on the
rents as Collection Agent for the landlord and is required to submit an annual
tax return and account for the tax due under Self Assessment. leaflet IT10 Guide
to Self Assessment- provides more detailed information.
Note: The agent appointed need not to be a professional person, i.e.,, it can be
a family member or other person prepared to take on the responsibility and
undertakes to make annual tax returns and account to Revenue for the tax
due.
* (Available from www.revenue.ie, Revenue's Forms and leaflets Service at
LoCall 1890 306706 or your local Revenue office)
Certain mortgage protection policy premiums with effect from 1 st January
2002. Refer to Appendix I.
Capital Expenditure on certain properties under the various Incentive
schemes.
What is the position with regard to interest paid on borrowings?
Certain restrictions were introduced on the deductibility of interest on
borrowed money used on or after 23/4/1998. in the construction, purchase or
repair of rented residential premises in the State, or 7/5/ 1998 in the case of
foreign residential premises. However the relief for interest on borrowed money
was restored for such interest accruing on or after 1 January 2002. There were
some transitional arrangements in place in the interim period.
Relief is disallowed as respects interest accruing on or after 6 February
2003 where the let premises was purchased from the spouse of the person
chargeable in respect of the rental income. However, the disallowance of
interest relief does not apply in the case of legally separated or divorced
persons. What expenses can be claimed for Wear and Tear?
If a premises is let for residential purposes and it is furnished, a claim
can be made for a wear and tear allowance based on the cost of the furniture and
fittings. It will be necessary to retain an itemised list of expenditure
incurred each year.
With effect from 4 December 2002 the allowance is 12.5% per year over 8
years.
For the period between 1 January 2001 and 3 December 2002 the allowance was
20% per year over 5 years.
Prior to 1 January 2001 the allowance was 15% per year for the first 6 years
and 10% in the 7th year. What expenses can be claimed?
Broadly speaking, in calculating your rental expenses you can deduct expenses
so long as they-
- Are incurred wholly and exclusively for business purposes, and
- are not of a capital nature.
The following are examples of the type of expenses that may be claimed
for:
- Rents payable by the landlord in respect of the property, i.e., ground
rent
- Rates or levies payable on the property, i.e., water rates, refuse collection
etc.
- Cost of any service or goods provided by the landlord, i.e., gas,
electricity, central heating, telephone rental, cable television etc. for which
they do not receive a separate payment
- Maintenance, i.e., cleaning and general serving of the premises
- Insurance of the premises against fire.,public liability insurance, etc.
- Management, i.e., actual cost of collection of rents, advertising, etc.
- Legal fees to cover the drawing up of leases or the issue of solicitors
letters to tenants who default on payment of rent.
- Accountancy fees incurred for the purposes of preparing a rental income
account.
- Wear and Tear on furniture and fittings, i.e., carpets, cookers, central
heating etc. (See page 4).
- Interest paid on monies borrowed for the purchase, improvement or repair of
certain properties. This is covered in more detail overleaf.
- Repairs, i.e., decorating and general upkeep of the property. A 'repair'
means the restoration of an asset by replacing subsidiary parts of the whole
asset. Examples of common repairs which are normally deductible in computing
rental profits include:
- Exterior and interior painting and decorating
- Damp and rot treatment
- Mending broken windows, doors, furniture and machines, replacing roof slates.
However, landlords may not claim a deduction for their own labour.
Landlords' Rights and Obligations
The purpose of this leaflet is to inform landlords of their rights under
legislation and to make them aware of their obligations. This leaflet is a
general guide only and not an interpretation of the law or a summary of all
relevant provisions.
- Landlords' Obligations
Certain minimum obligations are laid out in the Residential Tenancies Act
2004. There may be other obligations arising from other legislation, housing
regulations and the letting agreement signed by the parties.
Under the Residential Tenancies Act 2004 landlords must:
- Register the tenancy with the Private Residential Tenancies Board
- Charge a rent that does not exceed the appropriate market rent for the dwelling
- Provide tenants with 28 days notice of any rent review
- Serve tenants with a valid notice of termination
- Repairing and maintaining the structure of the premises
- Repair and maintain the interior of the dwelling to the standard which existed at the
commencement of the tenancy
- Allow the tenant to enjoy peaceful and exclusive occupation
- Provide the tenant with information about any person who is authorised to deal on the
landlord's behalf and ensure the tenant is able to contact the landlord or agent at
reasonable times
- Return any deposit due (unless the tenant has not paid the rent or has caused damage to
the dwelling)
- Reimburse tenants for expenditure on repairs that should have been carried out by the landlord
- Ensure that the tenants comply with their obligations - third parties adversely
affected by a failure will be able to make a complaint to the Private Residential
Tenancies Board against the landlord.
Regulations under the Housing (Miscellaneous Provisions) Act 1992 oblige
landlords to:
- Comply with the minimum statutory standards which govern the quality and condition of
the accommodation, facilities and appliances
- Provide tenants with a rent book containing the prescribed information about
the tenancy and rent payments.
Landlords are not allowed to:
- Seize the goods of a tenant to secure recovery of rent unpaid
- Penalise tenants who have referred a dispute to the PRTB
- Vary or restrict the basic landlord and tenant obligations. (Additional obligations
can be imposed but only in so far as they are consistent with the Residential Tenancies
Act 2004.)
- Set the rent higher than the market rent or review it more than once a year unless
justified by a substantial change in the accommodation
- Insist on an increased rent being paid (unless agreed to by the tenant) until a dispute
concerning the amount sought has been determined by the PRTB
- Terminate a tenancy except in accordance with the provisions of the Act
- Discriminate against any of the nine protected groups under the Equal Status Act 2000
- Landlords' Rights
Landlords are entitled to:
- Receive the correct rent on the due date
- Receive other charges or taxes as they fall due in accordance with the lease or
tenancy agreement
- Review the rent annually
- Review the rent within a year if justified by a substantial change in the nature of
the accommodation
- Refer disputes about the tenancy to the PRTB provided it is registered
- Receive notification of any repairs required and be allowed to carry out
repairs and (by appointment) routine inspections
- Repair damage resulting from the tenant's actions and recover the costs from the tenant
- Decide whether to allow the tenant to assign, sub-let, alter, improve or change the use
of a dwelling (Note: refusal of consent to assign or sub-let will entitle a tenant to terminate a
fixed term tenancy before its expiry date)
- Be informed by the tenant of anyone ordinarily residing in the dwelling (not including
casual guests or visitors)
- Be informed by the tenant of a fixed term tenancy expiring after the tenancy has lasted
more than 6 months, if he/she intends to remain in the dwelling after the end of the fixed
term
- Terminate a tenancy that has lasted less than 6 months without providing a reason and
terminate a tenancy that has lasted more than 6 months for one of the grounds listed in
section 34 of the Act (see PRTB leaflet 'Terminating a Tenancy' for further information
on the grounds and terminating generally)
- Receive valid notice of termination from the tenant when the tenant is vacating the
dwelling
- Recover possession of the dwelling without giving notice in circumstances where the tenant
has vacated the dwelling and the rent is at least 28 days in arrears
- Contact Details
Private Residential Tenancies Board
Canal House
Canal Road
Dublin 6
Tel: +353 1 8882960
Fax: +353 1 8882819
e-mail: Tenancies_Board@environ.ie
web-site: www.environ.ie
A
Revenue Guide to Rental
Income
Introduction
The purpose of this leaflet is to answer as many of the frequently asked questions
about Rental Income as possible. It is aimed at the individual who is in receipt of
income from lettings, whether it is from a house, flat, factory or office etc.
Hopefully it will make the taxation of Rental Income easier to understand and be
of assistance in working out Profit Rent and allowable expenses. While this
leaflet may not cover all situations more detailed information is available from
your own Revenue office.
What types of rental
income are there?
- The most common type of rental income is from letting a house, flat,
apartment, office, building and from bare land.
- Income from an easement, i.e., if payment is received for the right to
erect advertising signs, communication transmitters, or the grant of a right of
way or a way-leave.
- Income arising from the grant of sporting rights, such as fishing and
shooting permits.
- Payment made by a tenant to defray the cost of work of maintenance
or repairs to the premises, which is work not required by the lease to be
carried out by the tenant.
- Certain reverse premiums.
- Income arising from a conacre letting.
- Service charges in respect of services ancillary to the occupation of property.
- Insurance recoveries under policies providing cover against non-payment of rent.
- Premiums and other similar sums received on the grant of certain leases,normally on non-residential
property, i.e., a shop or warehouse that requires the payment of a premium by the tenant to the
landlord. Where a lease of less than 50 years is granted some of the premium
charged will be treated as rent. (See section on 'How are Premiums on Leases
treated for tax purposes').
What expenses can be claimed?
Broadly speaking,in calculating your rental expenses you can deduct expenses so long as they-
- are incurred wholly and exclusively for business purposes, and
- are not of a capital nature.
The following are examples of the type of expenses that may be claimed for:
- Rents payable by the landlord in respect of the property, i.e., ground rent
- Rates or levies payable on the property, i.e., water rates, refuse collection etc.
- Cost of any service or goods provided by the landlord, i.e., gas, electricity, central heating,
telephone rental, cable television etc. for which they do not receive a separate payment
- Maintenance, i.e., cleaning and general servicing of the premises
- Insurance of the premises against fire, public liability insurance, etc.
- Management, i.e., actual cost of collection of rents, advertising, etc.
- Legal fees to cover the drawing up of leases or the issue of solicitors letters to tenants who
default on payment of rent.
- Accountancy fees incurred for the purposes of preparing a rental income account.
- Wear and Tear on furniture and fittings, i.e., carpets, cookers, central heating etc.
- Interest paid on monies borrowed for the purchase, improvement or repair of certain properties.
- Repairs, i.e., decorating and general upkeep of the property. A 'repair' means the restoration of an
asset by replacing subsidiary parts of the whole asset. Examples of common repairs which are normally
deductible in computing rental profits include:
- exterior and interior
- painting and decorating
- damp and rot treatment
- mending broken
- windows, doors, furniture and machines
- replacing roof slates.
- Certain mortgage protection policy premiums with effect from 1 January 2002. Refer to Appendix 1.
- Capital Expenditure on certain properties under the various Incentiveschemes.
However, landlords may not claim a deduction for their own labour.
What is the position with regard to interest paid on borrowings?
Certain restrictions were introduced on the deductibility of
interest on borrowed money used on or after 3/4/1998, in the construction,
purchase or repair of rented residential premises in the State, or 7/5/1998 in
the case of foreign residential premises. However, the relief for interest on
borrowed money was restored for such interest accruing on or after 1 January
2002. There were some transitional arrangements in place in the interim period.
Relief is disallowed as respects interest accruing on or after 6 February
2003 where the let premises was purchased from the spouse of the person
chargeable in respect of the rental income. However, the disallowance of
interest relief does not apply in the case of legally separated or divorced
persons.
What expenses can be claimed for Wear and
Tear?
If a premises is let for residential
purposes and it is furnished, a claim can be made for a wear and tear allowance
based on the cost of the furniture and fittings. It will be necessary to retain
an itemised list of expenditure incurred each year.
- With effect from 4 December 2002 the allowance is 12.5% per year over 8 years.
- For the period between 1 December 2001 and 3 December 2002 the allowance was 20% per year over
5 years. Transitional provisions apply allowing the rate of 20% per year over 5
years if the item was acquired under a written contract before 4 December
2002 and the expenditure was incurred before 31 January 2003.
- Prior to 1
January 2001 the allowance was 15% per year for the first 6 years and 10% in the
7th year
Relief for refurbishment of certain rented accommodation,
effective from 6 April 2001.
Tax relief can be claimed for capital expenditure incurred, on or after 6 April 2001, on the
refurbishment of rented residential accommodation.
The expenditure is allowed as a deduction over a 7 year period, i.e., the expenditure is allowed
at the rate of 15% per annum for the first 6 years with the balance, 10% allowed in year 7.
To qualify, the premises must be used as a dwelling and from the date
of completion of the refurbishment must be let in its entirety under a
qualifying lease throughout the relevant period, i.e., 10 years from the date of
completion of the work or if later, the date of first letting. A lease is not a
qualifying lease if it enables any person to acquire an interest in the premises
for a consideration less than the market value. The lessor must comply with the
regulations in relation to standards for rented houses, rent books and
registration of rented houses.
Where a premises ceases to be a qualifying
premises or the lessor passes his or her interest in the premises to another
person, the relief will be clawed back from the person who had been entitled to
the relief.
Where the lessor passes on his or her interest in the premises by
sale or transfer then the person who becomes owner of the premises is treated as
having incurred the relevant expenditure.
If relief is given under any other
section of the Tax Act, then no relief will be given under this section.
What expenses cannot be claimed for?
- Pre-letting expenses, i.e., expenses incurred prior to the date on which the
premises was first let apart from auctioneer's letting fees, advertising fees
and legal expenses incurred on first lettings.
- Post letting expenses i.e.,
expenses incurred after the period of the last letting are not allowable.
- Capital expenditure incurred on additions, alterations or improvements to the
premises unless allowable under an Incentive scheme
- A deduction can be
made only once. If a deduction has already been made in a person's tax
computation, the amount will not be allowed as a deduction in arriving at the
person's net profit/loss rent, i.e., you cannot obtain relief more than once for
the same expense.
- Expenses incurred in the letting of premises on an
uneconomic basis are not deductible.
Expenses incurred between lettings
Expenses incurred in the period between lettings are
deductible provided the landlord was not in occupation of the premises during
the period and a new lease is granted.
Rent a Room Relief
From 6 April 2001, where an individual rents a room
(or rooms) in a "qualifying residence" and the gross rent received, including
sums arising for food, laundry or similar goods and services and the income does
not exceed €7,620 this income will be exempt from income tax by including it in
the individuals tax return. Where more than one individual is entitled to the
rent, the limit is divided between the individuals concerned.
The relief is available to individuals only. It does not apply to companies
or partnerships. However, it can apply where individuals have the income jointly
(for instance husband and wife where there is no partnership), there the limit
can be divided between the individuals concerned. Individuals who rent as well
as individuals who own their own home may avail of the relief.
A "qualifying residence" is a residential premises in the State, which is
occupied by an individual as his/her principal private residence during the year
of assessment.
Room rentals coming within the scope of this scheme will not affect the
person's entitlement to mortgage interest relief or the capital gains tax
exemption on the disposal of a principal private residence.
There is no deduction for expenses made in ascertaining the rental income
received and if the income does not exceed the limit in the year then those
profits/losses are treated as "nil" for the year of assessment.
This income is not liable to either PRSI or the 2% Health Levy but it must be
included on an individuals annual income tax return.
An individual may, if they wish, elect to have any income/losses from this
source assessed under the normal rules for rental income, e.g., if there is a
rental loss on the room(s). To elect, complete the relevant section on your
annual income tax return.
What if a premises is only partly let?
If part of a premises is let, only expenses incurred on that part of the premises are
available for set off against rental income.
For example, if rooms are let in a private house and the income received
exceeds the limits of the "Rent a Room" relief, the expenses for gas,
electricity, etc., are shared by all the occupants of the house, expenses
applicable to that part of the house which is let are only available for set off
against profit rent. Expenses should be apportioned based on the occupancy of
the house, i.e., the number of rooms occupied by tenants.
How are Premiums on Leases treated for tax purposes?
Certain premiums on
leases are taxable. If a premium is paid on the granting of a short lease, i.e.,
if the duration of the lease is less than 50 years, the following formula is
applied to calculate the amount that will be assessed as rent in the first year
of letting:
P - (N-1) x P
50
Where P = Amount of the Premium paid
N = The length of the lease
This amount will be assessed in addition to any profit rent.
Example: A premises is let for a period of 18 years at an annual rent of €15,000.
A premium of €50,000 is paid.
Tax will be charged on the following amount:
Premium: €50,000 - (18-1) x €50,000 = €33,000
50
Rent €15,000
Total €48,000
How is profit/loss rent calculated?
The rental profit or loss is
calculated by reference to the rent or total receipts to which the person
becomes entitled to in any tax year (as opposed to the period to which the
income relates).
Example:
Mr. White began leasing a house from Mr. Brown on 1 December
2003. Mr.White pays rent of €2,000 in 4 annual instalments on 1st of each
quarter. He paid €2,000 on 1 December 2003. His landlord Mr. Brown became
entitled to receive the quarters rent on that date, therefore the entire €2,000
is taxable income for 2003. It is important to note that the €2,000 is not
apportioned as to make two thirds of it taxable in the tax year 2004.
A separate rental computation is prepared for each property whereby the
rental expenses for each property are deducted from the related rental income
for the same property in order to arrive at a surplus (i.e., income greater than
expenses) or a deficiency (i.e., expenses greater than income) for each property.
The total of surpluses and deficiencies are then aggregated to arrive at profits
or gains arising in the year, i.e., taxable rent.
What if a loss is made?
A loss will arise if
total allowable expenses are more than the rents received. This loss can be set
against any other profit rent made by the landlord or carried forward against
future rental profits. Such losses cannot be carried back or used to shelter
non-rental income.
How is the tax due on rental income
collected?
Profit rent is taxed on an actual tax year basis. For
individuals taxed under the PAYE system with rental profits that are relatively
small it can be arranged to have the tax collected by reduction of their tax
credits and standard rate cut-off point. Otherwise, the tax due will be
collected under the Self Assessment system. Leaflet IT 10 Guide to Self
Assessment gives full details. This is also available from Revenues Forms and
Leaflets Service at LoCall 1890 30 67 06 or any Revenue office.
Example Rent account
A residential premises is
first let at an annual rent of €15,000. The Insurance premium on the premises is
€800 p.a. and Ground rent of €300 is payable. The landlord is responsible for
the payment of electricity and central heating which cost €1,200. It was also
necessary to carry out repairs which cost €1,900. The premises is furnished and
the value of the fixtures and fittings is €7,000. Assessable rents are
calculated as follows:
Gross rent €15,000
Less:
Insurance € 800 +
Ground rent € 300 +
Electricity/Heating €1,200 +
Repairs €1,900 +
Wear and Tear
7,000 x 12.5% € 875 = €5,075
Profit rent = €15,000-€5,075=€9,925
The taxable rental income is €9,925.
Keeping Records
You must keep full and accurate records of your
lettings from the start. You need to do this whether you send in a simple
summary of your profit/loss, prepare the accounts yourself, or have an
accountant do it. All supporting records such as invoices, bank and building
society statements, cheque stubs, receipts etc., should also be retained. You
must keep your records for six years unless your Revenue office advises you
otherwise.
What if Rents are payable to a non-resident
landlord?
If a landlord resides outside the country and rent is paid directly
to him/her or to his/her bank account either in the State or abroad, tax must be
deducted by the tenant at the standard rate of tax (currently 20%) from the
gross rents payable. Failure to deduct tax leaves the tenant liable for the tax
that should have been deducted.
Example:
Gross rent per mnth €
1,000
Deduct tax (1000 x 20%) € 200
Pay to Landlord (1,000-200) €
800
The tenant must also give a Form R185* to the landlord to show that the
tax has been accounted for to Revenue.
Where an agent, resident in the State, is appointed by the non-resident
landlord to manage the property and the agent is collecting the rents, the rents
must be paid gross to the agent. The agent is then chargeable to tax on the
rents as Collection Agent for the landlord and is required to submit an annual
tax return and account for the tax due under Self Assessment. Leaflet IT10 Guide
to Self Assessment* provides more detailed information.
Note: The agent appointed need not be a professional person, i.e., it can be
a family member or other person prepared to take on the responsibility and
undertakes to make annual tax returns and account to Revenue for the tax
due.
* (Also available from Revenue's Forms and Leaflets Service at LoCall 1890 30
67 06 or your local Revenue office).
How are non-resident
landlords taxed?
On receipt of the annual tax return, profit rent, i.e., rent
received less allowable expenses, will be assessed. The landlord is entitled to
claim relief for expenses, which are usually allowed in arriving at the rental
profit. The landlord is also entitled to a credit for the tax deducted by the
tenant. Form R185, should be submitted by the landlord with the tax return to
obtain credit for the tax retained.
How are foreign rents taxed?
In general,
income from foreign property is computed on the full amount of the income
arising, irrespective of whether the income has or will be received in the
State. In the case of foreign rental income this income is charged under Case
III of Schedule D and the same deductions and allowances are available as if the
income had been received in the State. Deductions are also normally available in
respect of such income for sums in respect of foreign tax paid. This income
should be included in an individual's tax return on the Foreign Income panel.
These rules do not apply to a person who is not domiciled in the State or who
is an Irish citizen not ordinarily resident in the State. In such cases, income
tax is computed on the full amount of the actual sums received in the State from
such remittances, etc. without any deduction or relief given.
Rent allowance
Tax relief may be claimed by a tenant paying rent to
a landlord for private accommodation by completing Form Rent 1. This form is also
available at Revenue's Forms and Leaflets Service at LoCall 1890 30 67 06 or
from any Revenue office. The annual maximum relief allowable is given on Form
Rent 1.
Capital Gains Tax
Where a property that has
been let is disposed of, Capital Gains Tax may arise on the disposal. The
chargeable gain is calculated by deducting any allowable expenditure from the
amount realised on the disposal.
The allowable expenditure may include:
- The cost of acquisition of the property and any costs of acquisition such as solicitors/auctioneers fees
- Any costs incurred in improving the value of the property
- Any costs of disposal such as solicitors/auctioneers fees.
Expenditure on costs of
acquisition and improvement may be adjusted to take account of inflation. Where
a disposal is made on or after 1 January 2003, the indexation relief will only
apply for the period of ownership of the asset up to 31 December 2002. No relief
is due if period of ownership is less than 12 months.
Further information on Capital Gains Tax generally is contained in Booklet
CGT 1, Guide to Capital Gains Tax, and Leaflet CGT2 - Capital Gains Tax -
Revised due dates for 2003 and following years. Both guides are also available
from Revenue Forms and Leaflets Service at LoCall 1890 30 67 06 (within ROI
only) or from any Revenue office.
This leaflet is for general information only.
Revenue
Revised August
2004.
Appendix 1
The text of the Article in Tax
Briefing, Issue 53 on Mortgage Protection Policy Premiums is as follows:
Allowable deductions under the tax law relating to rental income are provided
for in Section 97(2) TCA 1997. Section 97(2)(d) authorises a deduction in
respect of "the cost of ...management of the premises borne by the person
chargeable and relating to and constituting an expense of the transaction or
transactions under which the rents or receipts were received, not being an
expense of a capital nature".
In strictness mortgage protection policy premiums are arguably not part of
the cost of management of the premises but relate more to the management of the
landlord's financial affairs than to the management of the premises. Such
expenditure could also be argued to be capital in nature. However, Revenue
recognise that financial institutions insist that such policies are put in place
when sanctioning borrowings. Accordingly, Revenue, having reviewed the position,
is prepared to treat mortgage protection policy premiums paid as an allowable
deduction in computing rental income for income and corporation tax purposes.
The new treatment applies to returns submitted after 1 January 2002. Returns
already submitted will not be reopened.
Practitioners should note that this treatment only applies to mortgage
protection policy premiums. Such a policy is aimed at covering the full amount
left outstanding on a person's mortgage should they die. It is often called
decreasing term insurance, as the amount that needs to be covered reduces every
time a payment is made, with the result that premiums are lower than those for
straight insurance. This type of policy should not be confused with other
products often offered by life assurance companies such as mortgage payment
protection policies, keyman insurance or endowment policies. These are a form of
short/straight term insurance which pay out if an individual becomes unemployed
or ill and are not normally linked to a person's life. Revenue does not allow
this latter type of policy premium as a rental income deduction.
Practitioners should also note that mortgage protection plan policies linked
to a person's life are life assurance policies, the proceeds of which are taxed
in accordance with Section 593 TCA, 1997.
7 Ways to Rent Your House or Apartment for More
Have you ever watched a car slow down in front of a property for rent, stop,
back up, pull forward again, then speed off? The occupants' first impression
told them that that was someplace they didn't want to live.
People rent property on first impressions. Believe it or not, prospective
tenants have pretty much decided whether they want to live somewhere before they
ever get out of their car.
The way to get more rent and better quality tenants is to make your rental
property look as if it ought to rent for more money. What follows are ten ways
to do just that.
1. Plant flowers, clean up the yard and trim the shrubs. Make it look crisp
and clean from the street.
2. Hang drapes and curtains. They don't have to be expensive, just in the
windows.
3. Put in a dishwasher, washer and dryer.
4. Write an effective ad. Sell the property to the tenant before he or she
sees it
5. Detail the front entrance. Just outside the front door and inside the
first room you see as you enter should sparkle from extra attention.
6. Roll out or blow in insulation. Wrap the pipes. Make the house more
energy efficient. That is just as important if the tenant is paying the power
bills as it is if you are.
7. Wax the floors and polish the chrome. If anything is supposed to shine,
make it shine.
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