Registration of Tenancies and Property-based Incentive Schemes

Section 11 Finance Act 2006 inserted a new provision (Section 97(2I) TCA 1997) making entitlement to an interest deduction against rental income on money borrowed for the purchase, improvement or repair of a rented residential premises conditional on a chargeable person having complied with the requirements of Part 7 of the Residential Tenancies Act, 2004 (the RTA). The measure has effect from the year of assessment 2006 and for accounting periods beginning on or after 1 January 2006.

Part 7 of the RTA requires a landlord of dwellings to register the tenancies of those dwellings with the Private Residential Tenancies Board (PRTB). Revenue has been asked about the effect of the new provision on investors who purchase and let property under the various property-based incentive schemes where the investor does not directly deal with the tenant but, instead, enters into a lease with a management company which in turn leases the property to the tenant. The Revenue view is that the use of a management company does not remove the obligation on an investor-landlord to register tenancies of his or her dwellings entered into by the management company. As the person who will be claiming an interest deduction, an investor-landlord will not be entitled to such a deduction if he or she merely registers, as a tenancy, the lease arrangements with a management company. The investor-landlord must, therefore, ensure that all tenancies of dwellings in respect of which he or she will be claiming an interest deduction are registered with the PRTB either directly by him or her or on his or her behalf by a management company where a management company is involved.

The RTA is primarily concerned with the obligations of landlords and the protection of tenants’ rights in residential tenancy situations. It does not cater specifically for the use of management companies other than where a management company is the company in which functions are vested with respect to the management of an apartment complex. The use of an agent authorised by the landlord to act on his or her behalf is, however, envisaged. The RTA defines a tenant as the person who is entitled to the occupation of a dwelling. A management company cannot, therefore, be a tenant as it does not actually occupy the dwelling. A tenancy includes a sub-tenancy and thus the sub-tenancy between the management company and the ultimate tenant is covered. In the context of the RTA provisions, the person who is entitled to receive the rent is the investor-landlord, whether or not he or she has authorised an agent to act on his or her behalf. The obligations in relation to the registration of tenancies with the PRTB, therefore, fall on the investor-landlord.

It should be noted also that under Section 97(2I) TCA the evidence required to show compliance with the requirements of Part 7 of the RTA for interest deduction purposes is a written communication from the PRTB to the chargeable person confirming registration of a tenancy. Therefore, Revenue regards the investor-landlord as the landlord for RTA purposes with the obligation to register all of the tenancies created in respect of his or her particular property. A management company may, as the landlord’s agent, deal with the actual registration process. However, where the management company fails to ensure that the registration requirements are met, it is of course the investor-landlord, and not the management company, that will suffer the loss of an interest deduction.

Late Registration

Certain time limits are specified in the RTA within which an application for the registration of a tenancy should be made. For instance, new tenancies should be registered within 1 month of their commencement. However, provision is also made for the late registration of tenancies at double the normal registration fee. An acknowledgement from the PRTB confirming registration in the case of a late registration will be accepted by Revenue as evidence that a chargeable person has complied with Part 7 of the RTA. However, a chargeable person claiming an interest deduction in his or her annual return must be in a position to indicate compliance with the Part 7 requirements at the time of making the return.

Student accommodation

The RTA does not require tenancies to be registered in the case of dwellings that are let by or to a recognised educational institution. Therefore, where student accommodation is owned by an educational institution, there is no requirement for that educational institution to register student tenancies with the PRTB. Where student accommodation is owned by private persons and is let to an educational institution, there is no requirement for that person to register the student tenancies with the PRTB. The exemption applies whether the accommodation is let directly by or to the educational institution or through a management company appointed by that educational institution. However, where student accommodation is owned by private persons and is not let to an educational institution, those persons must register student tenancies with the PRTB.

Contact details

Information about the RTA and the registration requirements is available at www.environ.ie or www.prtb.ie. Enquiries about the registration requirements should be addressed to the PRTB and not to Revenue. The contact details are:

Private Residential Tenancies Board
Canal House
Canal Road
Dublin 6

Tel: 8882960
Fax: 8882819

E-mail: prtb@environ.ie
Website :www.prtb.ie