# How do the new rent controls affect selling and  buying a rental property?



## Brendan Burgess (16 Dec 2016)

Le's say I want to buy a property to rent. 

*If it is already being rented out *
I will need to verify the actual rents being paid recently as I won't be able to charge more than 4% above these levels. 

I will always be vulnerable to my new tenant making a claim that I was overcharging them and that the rent was actually lower. 


*If a decent Landlord has not been charging full market rents...*

If I want to buy this, I will pay a lot less than I would pay for a property which has not been let in the last two years.

Or, I could buy it and keep it empty until the two years have elapsed 

Certain rental properties within a Rent Pressure Zone will be exempt –
(a) those that are new to the rental market (i.e. they have not been rented at any time in the last two years), and

*Maybe sellers should keep their properties empty if they are trying to sell them *
A property which has not been let in the last two years will be worth more than a property which has been let. So if it has been empty, maybe keep it empty before selling it.


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## Brendan Burgess (16 Dec 2016)

It will definitely push decent landlords out of the market. 

Or it may turn decent landlords into profit maximising ones. 

Brendan


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## cremeegg (16 Dec 2016)

I would think that the major issue for potential new landlords, is that fact that the political class have shown that they are wiling to ride roughshod over the interests of landlords to offer sweeties to tenants. Its not so much the numbers as the atmosphere.

The fact that only a limited % of interest is tax deductible, that LPT is not tax deductible as an expense, that new user charges on property, water, must be paid by the landlord not the occupier, all show that the government  has no regard to any principal in thus area other than do down the landlord.

The discussion on AAM when this was announced was how unjust towards landlords the measure was. Elsewhere the discussion was, 4% is too high and why just Dublin and Cork. Its not just the government that is against landlords, the public buy into this too.

The position of landlords who have been under renting to keep good tenants, is particularly unfortunate. It reminds me of the old saying, no good deed goes unpunished.


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## cremeegg (16 Dec 2016)

Brendan Burgess said:


> It will definitely push decent landlords out of the market.
> 
> Or it may turn decent landlords into profit maximising ones.
> 
> Brendan



Even you buy into this bad landlord idea. You would never contrast, decent shopkeepers with profit maximising ones, or decent mobile phone companies with profit maximising ones, or decent car manufacturers with profit maximising ones.

Any business that is not profit maximising is not a good business. It leads to sub-optimal utilisation of resources, and in the case of a company at least, a failure in the fiduciary duty of the directors toward the shareholders.

You know all this Brendan, and yet some one as economically literate as you, is not only making a distinction between decent landlords and profit maximising ones but suggesting that the two are mutually exclusive.

Potential landlords run away, there is nothing here for you save opprobrium.


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## Brendan Burgess (16 Dec 2016)

cremeegg said:


> You know all this Brendan, and yet some one as economically literate as you, is not only making a distinction between decent landlords and profit maximising ones but suggesting that the two are mutually exclusive.



Hi cremeegg 

When I first wrote it, I had "it may turn decent landlords into indecent ones" 

Agreed that there is no contradiction between decency and profit maximisation. 

In my experience, there are many private landlords who do not charge the maximum rent for a number of reasons 

they know that their tenant can't afford it 

They are good tenants and they don't want them to move (although this is not much of a fear these days)
They have become friendly with their tenants 

They just want a good return and don't need to max out on the return.
Maybe "generous" would be a better word than decent. 

But my point is that these people will think twice before accepting anything less than the maximum.  I could offer you a good deal because you are a friend of mine or have been a good tenant. But that deal passes over to the next tenant who might be much more difficult.

Brendan


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## LS400 (16 Dec 2016)

Brendan has nailed this one big time.

And the proof here is, colleague of mine has been a terrific LL, he hasn't under charged his Tenants, he has charged them a fair rate, under market rate. They too have been great tenants, so for the past number of years, all has been good.
This is the first time I have heard of him now talking about maximizing his returns. He is been driven to become what he has always detested, a greedy LL.  

We all know there have been excellent LL, and truly shockingly bad ones, the balance will now tilt towards the latter I believe.


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## noproblem (16 Dec 2016)

I can imagine accidental landlords meeting up with other likeminded individuals in the pub, house parties, etc, over Xmas and deciding that in  their situation, a bird in the hand may be worth 2 in the bush and stay with a goodish tenant who gives them no hassle, pays on time, etc, etc, but the professional landlord will max out on his profits at every opportunity, ie, no sympathy in business mindset. As with everything else in this country, we're going to have a "them" and "us" situation. So, as this business plays out with goverment intervention, new tricks will be thought up and implemented, then start to enter the equation. How all this love in with goverment and tenant ends up is anyone's guess. One can see tears and turmoil eventually as a plentiful supply of houses begin to come on the market and  eat into the rental  market. 
One thing that never ceases to amaze me is the rather large refusal rate of acceptance of social housing in a scarce market. There are plenty of apartments for sale around central parts of Dublin city, at not unreasonable prices, yet no goverment or housing agency attempt to purchase same for tenants.  I still think the market itself would have found its own floor, Mr Coveney thinks otherwise. We'll see?


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## Rory_W (17 Dec 2016)

So a property that has market rent of 1500 is rented for say 1300. LL will now be locked to 1300 + 4% pa. His generosity is being forced upon him to continue. If his circumstances change and he can no longer afford to be generous he is stuck.

If he decides to sell his property, a purchaser (who wants to be a LL) will be locked to his rent so would pay less for the property. Even if the person buys the property to live in, their circumstances may change and they may want to rent the property out as they have to work abroad or they move to a larger house (or smaller house). Or they may wish to sell and the "pass the parcel" continues. In such circumstances the rent they can charge will be capped at the 1300 in my example + 4% pa for the number of years that have elapsed. So again the impact of the good deed of the landlord is passed to the next owner(s).

This has to impact the value of the property negatively. 

Or am I missing something. (with all the Amendment to Amendment to Amendments, it is possible)


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## Sarenco (17 Dec 2016)

Brendan Burgess said:


> I will need to verify the actual rents being paid recently as I won't be able to charge more than 4% above these levels.



One obvious practical problem with the legislation is that there is no way for a purchaser to independently verify what rent was set in any prior tenancy.  Do you simply rely on the word of the vendor?


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## Thirsty (17 Dec 2016)

Has this daft proposal become legislation then? 

When/how do you find out if your property is impacted?

I can see myself getting out.


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## carbine (17 Dec 2016)

I'm in the unhappy position of having my apartment rented out at about 20-25% less than the market rate.  A friend of mine asked me before about renting my apartment for the purpose of him subletting it on airbnb.  If I can get the current tenant to leave (i'm in a position to move in myself for a period), can I effectively take my apartment out of the long term rental market for 2 years by turning it into short term airbnb rentals (via my friend) and then in 2 years return to the long term rental market if I wish at market rates at that time?


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## cremeegg (18 Dec 2016)

1


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## cremeegg (18 Dec 2016)

carbine said:


> I'm in the unhappy position of having my apartment rented out at about 20-25% less than the market rate.  A friend of mine asked me before about renting my apartment for the purpose of him subletting it on airbnb.  If I can get the current tenant to leave (i'm in a position to move in myself for a period), can I effectively take my apartment out of the long term rental market for 2 years by turning it into short term airbnb rentals (via my friend) and then in 2 years return to the long term rental market if I wish at market rates at that time?





carbine said:


> I'm in the unhappy position of having my apartment rented out at about 20-25% less than the market rate.  A friend of mine asked me before about renting my apartment for the purpose of him subletting it on airbnb.  If I can get the current tenant to leave (i'm in a position to move in myself for a period), can I effectively take my apartment out of the long term rental market for 2 years by turning it into short term airbnb rentals (via my friend) and then in 2 years return to the long term rental market if I wish at market rates at that time?



Excellent question. In my opinion short term rental, e.g. Airbnb, is not renting it is a completely different trade and subject to tax as earned income. This would suggest that you could do as you suggest.

I should point out that Ernst and Young have offered advice to Airbnb which contradicts this, i.e. the say that Airbnb is rental income. In my view they are flat wrong, but hey I'm just an anonymous internet poster and they get the big bucks. They are still wrong though.  Here is their opinion. http://assets.airbnb.com/eyguidance/ie_new.pdf


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## Brendan Burgess (18 Dec 2016)

cremeegg said:


> In my view they are flat wrong, but hey I'm just an anonymous internet poster and they get the big bucks. They are still wrong though.



Brilliant!


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## carbine (19 Dec 2016)

If I went the airbnb route, how long would I need to move in myself to the apartment, for the purpose of removing the tenants, before I can start renting it out on airbnb?


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## triggs (20 Dec 2016)

Lets just say a rented property is rented to a family member at half the going rate for similar properties in neighbourhood,in my reckoning this would constitute a benefit-in-kind with tax implications for family member.If the same property is let to some other tenant[unrelated]-is this also a benefit-in-kind?Rental caps on properties priced at levels well below market rates must mean a benefit-in kind is inevitably being  passed onto tenant,now have I got it totally wrong or should this not also be taxable?


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## Bronte (20 Dec 2016)

Sarenco said:


> One obvious practical problem with the legislation is that there is no way for a purchaser to independently verify what rent was set in any prior tenancy.  Do you simply rely on the word of the vendor?



The PRTB has this information.  Having said that, if you've increased your rent, or decreased it, you're supposed to update the PRTB information.  Their online system is to horrendous I doubt many would both to though.  They are working on a new system.


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## T McGibney (20 Dec 2016)

triggs said:


> Lets just say a rented property is rented to a family member at half the going rate for similar properties in neighbourhood,in my reckoning this would constitute a benefit-in-kind with tax implications for family member.If the same property is let to some other tenant[unrelated]-is this also a benefit-in-kind?Rental caps on properties priced at levels well below market rates must mean a benefit-in kind is inevitably being  passed onto tenant,now have I got it totally wrong or should this not also be taxable?



Benefit in kind does not exist as a concept outside the realm of an employment.


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## Bronte (20 Dec 2016)

carbine said:


> If I went the airbnb route, how long would I need to move in myself to the apartment, for the purpose of removing the tenants, before I can start renting it out on airbnb?



I don't think this is correct behaviour by a landlord.


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## Bronte (20 Dec 2016)

Brendan Burgess said:


> Brilliant!



Aren't there a bunch of medical consultants suing their accountants as they ended up paying a load of tax having received advice on a tax scheme to reduce tax that revenue deemed to be tax avoidance.


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## T McGibney (20 Dec 2016)

Bronte said:


> I don't think this is correct behaviour by a landlord.


If legal, why not? Property owners are entitled to maximise the return on their assets.


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## Bronte (20 Dec 2016)

But you can't just kick out tenants for this reason.  She's not genuinely going to live there.  That exemption is for cases where landlords decide to move back into their properties.


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## T McGibney (20 Dec 2016)

Which she's doing.


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## Bronte (20 Dec 2016)

I don't consider someone moving back in for a week and then making a bnb out of it to be anything other than playing the system.  But I guess the system doens't have a length of time of how long you move back in for.

Citizen's advice:

If the landlord *needs the property for their own use or for an immediate family member*, you must be given the following information in writing, along with the notice of termination: the person’s name; their relationship to the landlord; and how long they will occupy the dwelling. The notice must also include a statutory declaration stating that the landlord needs the property for their own use or for an immediate family member

*Redress*
Under section 56 of the 2004 Act, you can complain to the RTB in the following situations:


If your landlord has ended your tenancy for one of the 3 reasons specified above, the property becomes available for re-letting and they do not offer you a tenancy
If they did not carry out the intention stated in the notice of termination – either one of the above 3 reasons or sale of the property
If the RTB upholds your complaint, it may direct the landlord to pay you damages or to reinstate your tenancy, or both.


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## T McGibney (20 Dec 2016)

She never mentioned moving in for a week. If she has to move in for 3 years, it's still a rational decision and she's well entitled to protect her interests by doing so.


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## Bronte (20 Dec 2016)

She never said for a week, but she did ask how short a time does she need to live there.  I agree that if she moves in for 3 years she'll be grand. But she could get caught under section 26 if the tenant finds out she moved out again after a month.


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## T McGibney (20 Dec 2016)

You condemned her idea by saying 



Bronte said:


> I don't think this is correct behaviour by a landlord.



 without enquiring from her what timeframe she was proposing.  If she lives in the property for the minimum period permissible, she's okay regardless of whether that minimum period is a short or long time.


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## Bronte (20 Dec 2016)

I still don't think it's correct behaviour and the it seems to me the PRTB would throw the book at her.  You can't evict someone because you want to change business.  Which is what she is at.  I don't see any reason for her not to change the business as long as she complies with the rules on evicting tenants.


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## T McGibney (20 Dec 2016)

Bronte said:


> I still don't think it's correct behaviour and the it seems to me the PRTB would throw the book at her.  You can't evict someone because you want to change business.



You can though, if you live there first.


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## Gordon Gekko (20 Dec 2016)

It's amazing how the rights of (often) transient tenants are suddenly trumping the rights of people who actually own the asset.

It's also gas how everyone wants wages at 2007 levels but not rents.

Landlords are being rogered with this ridiculous populist legislation. I have always been overly generous to my tenants. My reward? Getting shafted. It's now all about protecting my position and maximising returns.


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## Sarenco (20 Dec 2016)

Bronte said:


> The PRTB has this information.  Having said that, if you've increased your rent, or decreased it, you're supposed to update the PRTB information.  Their online system is to horrendous I doubt many would both to though.  They are working on a new system.



The RTB does indeed have that information (at least for registered tenancies) but a purchaser of a property can't access the information - it's not publicly available.

So how can a purchaser ensure he is compliant?  It's impossible.


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## dubliner2k15 (2 Jan 2017)

Gordon Gekko said:


> Put another way, both properties in the above example might have been worth €200k a couple of weeks ago.
> 
> Now one is potentially worth only €140k based on a 6% yield.
> 
> ...



The law has a provision in that, if the existing rent results in the market value of the property being undervalued by more than 20% than you are allowed to evict the tenants. The RTB has to decide this. But if the RTB is as 'efficient' as they usually are you could be looking at waiting 6-12 months for them to decide this, probably a lot longer. I think it is rather disturbing that the state acknowledges in this law, that rent caps will undervalue property and they are comfortable with this as long as it is only undervaluing the property by up to 20%. 

The biggest change with the new rental laws is tenancies duration. When you hear people banging on about how Ireland doesn't offer long term renting as a viable option, they are generally incorrect. Tenancies used work in 4 year period. If you rent a property and lived there for 6 months or more, by law you were entitled to part IV rights which meant you were allowed to reside in the property for 4 years. So if you had a year long lease, you could live there for another 3 years. After the 4 years, your landlord could evict you.

A lot of landlord were burned with bad tenants who initially got a year long lease and used part IV rights to stay there for another 3 years. So a lot of landlords were giving 5 month leases. So after the 5 months you could evict a bad tenant and not be stuck with them for 4 years. You didn't have to give a reason for eviction within 6 months of a tenancy. 

The Government has changed this completely with the new laws and most people don't realise this. All new tenancies had part IV changed to 6 years. The Government has abolished the right to evict tenants within the first 6 months with no reason and you can no longer evict tenants after the 4 years (now 6 years without reasons). So basically the Government has decided that tenants can basically indefinitely reside in a rental property.


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## Gordon Gekko (2 Jan 2017)

How will that work? (the 20% reduction in value / eviction piece)

Can you set out a theoretical example?

Many thanks.


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## Thirsty (3 Jan 2017)

dubliner2k15, can you provide a link to the relevant legislation?

edit: found it The Planning and Development (Housing) and Residential Tenancies Act 2016 extends the period of a Part 4 tenancy from 4 years to 6 years._ This applies to all tenancies created from 24 December 2016, the day after the signing of the Act. (my italics)_


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## Sarenco (3 Jan 2017)

dubliner2k15 said:


> The law has a provision in that, if the existing rent results in the market value of the property being undervalued by more than 20% than you are allowed to evict the tenants.



That provision only relates to the so-called ‘Tyrrelstown Amendment’, i.e. where a landlord proposes to sell 20 or more units within a single development, at the same time, the sale will be subject to the existing tenants remaining in situ, other than in exceptional circumstances.  It's not relevant to most private landlords.


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## gar32 (3 Jan 2017)

I  have just read this.

http://www.citizensinformation.ie/en/housing/renting_a_home/rent_increases.html

It states I must give 90 day notice in writing to my tenant about an increase. The lease is up at the end of march. Does this mean I can not and 4% for this coming year or can I start charging 4% more in April if I give notice now?


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## Sarenco (3 Jan 2017)

The whole process has become ridiculously complicated but I'm pretty sure the situation is as follows:-

Assuming it was a one-year lease and the tenants decide to stay put, you can't review the rent before March 2018.  Then you have to give 90 days' notice of the increased rent before it takes effect (bringing you to June 2018) and any increase is subject to the new 4% cap, where applicable.

Thereafter, you can review the rent on an annual basis (subject to the 4% cap for as long as it lasts), giving 90 days' notice each time.


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## gar32 (3 Jan 2017)

The tenants will be starting their 3rd year so Can I not review the rent during the following months or does it have to be on renewal of contract ?


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## Sarenco (3 Jan 2017)

gar32 said:


> The tenants will be starting their 3rd year so Can I not review the rent during the following months or does it have to be on renewal of contract ?



It doesn't really matter when the tenancy started or when any fixed-term contract is renewed - it really turns on when the rent was last reviewed.

Currently a rent review can only be carried out every two years.  So, if you last reviewed the rent in March 2016, the next time you can review the rent is March 2018 (and that is subject to the 4% cap if applicable) and you have to give your tenants 90 days' notice of any change following the review.

If you hadn't reviewed the rent in over 2 years, then you could have issued a 90-day notice before Christmas to avoid the 4% cap.  Too late now I'm afraid.


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## Dermot (3 Jan 2017)

Sarenco said:


> The whole process has become ridiculously complicated but I'm pretty sure the situation is as follows:-
> 
> Assuming it was a one-year lease and the tenants decide to stay put, you can't review the rent before March 2018.  Then you have to give 90 days' notice of the increased rent before it takes effect (bringing you to June 2018) and any increase is subject to the new 4% cap, where applicable.
> 
> ...



I am confused by above as I thought that while you could raise the rent subject to the 4% annual cap that this could only be done every two years.  ie 8% with 90 days notice every two years.  I am only asking the questions in order to learn. 

It would be great if someone could start a thread that would put together all the changes that are in the legislation and then do a comprehensive summary of it in lay terms following contributions from all the knowledgeable posters that are out there


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## Sarenco (3 Jan 2017)

Dermot said:


> I am confused by above as I thought that while you could raise the rent subject to the 4% annual cap that this could only be done every two years.  ie 8% with 90 days notice every two years.



Hi Dermot

That was the way the Minister's amendment was originally drafted.  Apparently that wasn't what he actually intended so he amended his own amendment at the 11th hour - see page 4 of this thread:-

http://www.askaboutmoney.com/threads/government-to-introduce-rent-caps-in-dublin-cork.201713/page-4

I would imagine that the RTB will publish a comprehensive summary of the up to date position in short order.


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## Dermot (4 Jan 2017)

I have a property where I last increased the rent from 01 July 2015 and I intend to increase the rent on the 01 July 2017.  It is not in the Cork or Dublin zones so not capped by the 4% rule.  I have the property currently let at about 30% below market rate because I was very happy with the Tenants who will be with me 4 years on 01 July 2017 and I was prevented from increasing the rent on 01 July 2016 because the 2 year rule for increases prior to that.  I had only intended to raise it by a modest amount at that time.
I now feel that I have no choice but go for the full market rate because of the new legislation and no doubt worse to come down the road.  I intend to issue a notice of a Rent review in late March 2017 so as to give the required number of days notice. Am I correct in the timing of my notice.


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## Gordon Gekko (4 Jan 2017)

Given that the geographical scope of the new rules could be broadened to include your property, my view is that you would be mad not to increase the rent to market value.


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## valery (4 Jan 2017)

I agree with the above poster, increase to the full market value while you still can.
On the PRTB website, there is a sample of the notice that you have to send.  It's very detailed.

[broken link removed]


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## Dermot (4 Jan 2017)

Thanks Gordon & valery


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## banchang (19 Jul 2018)

Where does it say, if anywhere, that short term lets are outside the scope of rent control ?


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## cremeegg (20 Jul 2018)

banchang said:


> Where does it say, if anywhere, that short term lets are outside the scope of rent control ?



Renting is a thing. There is a landlord and a tenant. It is "regulated" by the RTB.

Letting is a different thing. It is what hotels and B&Bs do. There is no landlord and tenant relationship. It is not regulated by the RTB. 

Mostly the difference between a rental and a letting is clear, if the person staying in the property is on holidays it's letting, if they are living there it's rental.

Sometimes there may be a grey area. A property owner may wish to portray something as a letting when the person staying may wish to portray it as a rental.

The length of time involved is one of the markers which can distinguish letting from renting.


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## banchang (20 Jul 2018)

cremeegg said:


> Renting is a thing. There is a landlord and a tenant. It is "regulated" by the RTB.
> 
> Letting is a different thing. It is what hotels and B&Bs do. There is no landlord and tenant relationship. It is not regulated by the RTB.
> 
> ...



I can't see any rules/guidance on this on RTB - is there any ? I would have thought they would be defining their scope, which would cover things like length of time etc ?


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