# Can I give tenants a discount of the amount increased by rent review?



## Arnie Hammer (12 Apr 2022)

I have tenants in my apartment for a little over a year at €2,000 pcm. Rents in the area were hit by Covid in 2020 but properties are like hen's teeth now and I would get €2,300 now without difficulty. 

The RTB rent calculator is saying I can up the rent by 2.5% or €50. I don't want to do so as they are good tenants. On the other hand it's an RPZ so if I don't increase I'll be stuck at a lower rent for the next tenant or if I want to sell up down the road. The complex is mainly rented and most properties that change hands seem to be to other landlords.

So I was wondering about the following. I notify the tenant of an increase in rent of 2.5% using the RTB template. At the same time I tell them that the increase would be offset by a "discount" of the same amount. They would pay me rent of €2,050 per month and I would make a transfer of €50 back to them separately.

The rent review would be in writing, discussions about "discount" would be in person and I would reserve the right to withhold it at any point. 

Is this reasonable? Legal? Are there tax implications? I have a management agent in place whose advice I'd need to seek as well.


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## T McGibney (12 Apr 2022)

A €50 per month discount every month sounds both hooky and an obvious attempt to circumvent the law. I'd suggest perhaps increasing the rent as allowed and giving them some vouchers, for much the same overall value but not as a quid pro quo, 2 or 3 times a year.


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## Zenith63 (12 Apr 2022)

Another option might be to increase the rent but include some common services, for instance provide broadband (~€50/month).  You could include TV the year after if you're doing it again.  TV license, contents insurance, electricity/gas if you really trust them not to abuse it.  These kinds of things are sometimes included when renting, so it's less hooky looking.


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## Thirsty (12 Apr 2022)

Increase the rent & allow a one month rebate say for December.


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## paper-folder (12 Apr 2022)

Could you increase the rent but apply a 'lease renewal' discount?  When you factor in the normal costs associated with finishing with one tenant and taking on new ones including letting agent fees, void time between leases and possibly cleaning, decorating or new mattresses, there is certainly a benefit to the landlord when the sitting tenants renew, and which could justifiably be passed on to them.


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## Arnie Hammer (13 Apr 2022)

Thanks for all the answers.



T McGibney said:


> A €50 per month discount every month sounds both hooky and an obvious attempt to circumvent the law.



But what law is being broken here? If I was obliging tenants to pay me an extra €50 a month that's clearly a breach of rent control law but not sure how a discount would be.



Thirsty said:


> Increase the rent & allow a one month rebate say for December.


It's a good idea but I can only increase rent by 2.5% so I won't be giving them 8% back at the end of the year.




paper-folder said:


> Could you increase the rent but apply a 'lease renewal' discount?



Maybe I could do this. But I think the lease renews automatically and it's become a Part 4 tenancy.




Zenith63 said:


> Another option might be to increase the rent but include some common services, for instance provide broadband (~€50/month).



That's a good idea! At the same time I don't want the hassle of being the account holder, but it sounds best.


How would this work for tax purposes, would the broadband cost just be an allowable expense? So assuming I increase the rent by as much to cover the cost of broadband my taxable profit just stays the same, right?


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## Zenith63 (13 Apr 2022)

Arnie Hammer said:


> How would this work for tax purposes, would the broadband cost just be an allowable expense? So assuming I increase the rent by as much to cover the cost of broadband my taxable profit just stays the same, right?








						What expenses are allowed?
					

This page outlines the expenses you can deduct from your taxable rental income




					www.revenue.ie
				



Allowable expenses include: cost of any service or goods you provide that are not repaid by your tenant (such as electricity, central heating, telephone, service charges, water and refuse collection).​


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## Leo (13 Apr 2022)

Why go to the hassle and a clear attempt to circimvent the RPZ law? 

You don't have to increase the rent every year, and the cap of 2% per annum is just that, per annum and calculated since the last review. If you don't increase this year you don't re-fix the maximum rent allowed.


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## Arnie Hammer (13 Apr 2022)

Leo said:


> You don't have to increase the rent every year, and the cap of 2% per annum is just that, per annum and calculated since the last review.


Thanks really important, thanks. I had in mind the old 4%-at-a-time rule but that seems gone now. 

So suppose I leave the rent unchanged for the next four years. For sake of argument 2021-2026 HICP increases 10%. I can still increase by 10% in 2026. Same would go for a new tenancy at any point if existing tenants leave me - either 2% pa pro rata or HICP increase, whichever is lower.

So the only way the theoretical maximum rent achievable can "fall behind" is *if I don't impose the maximum increase possible *at any point when I carry out the rent review, right?


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## Leo (13 Apr 2022)

Arnie Hammer said:


> So the only way the theoretical maximum rent achievable can "fall behind" is *if I don't impose the maximum increase possible *at any point when I carry out the rent review, right?


Yes, unless of course they infroduce further legislation that might limit such increases, but I havn't seen any suggestion they might consider that.


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## T McGibney (13 Apr 2022)

Arnie Hammer said:


> Thanks for all the answers.
> 
> 
> 
> But what law is being broken here? If I was obliging tenants to pay me an extra €50 a month that's clearly a breach of rent control law but not sure how a discount would be.


Circumvent, not break.


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## PebbleBeach2020 (13 Apr 2022)

if your rent is €2000 and the tenant pays you €1800 and doesn't pay anymore, what's the difference? You declare rental income of €1800. If anyone asks, the amount on the details/registration with the RTB is €2000. You are not dogy tax or doing anything illegal.

I don't see any issues whatsoever in applying the rental increase to €2,050 say and telling the tenants to continue to pay €2000 regardless.

I see no difference with this notion of giving them the month of December for free. If they pay €2050 then you pay tax on the basis of rental income eahc month of €2050. If you decide to gift them €50 a month back, or €600 a year, that's under the annual gift threshold of €3,000 but you are declaring that you are receiving €600 in rental income which you are not, so you will be approximately €300 in additional income tax as a result of doing this method.


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## Arnie Hammer (13 Apr 2022)

PebbleBeach2020 said:


> I don't see any issues whatsoever in applying the rental increase to €2,050 say and telling the tenants to continue to pay €2000 regardless.


I don't think the tenants would be too happy with this as they might think I was coming to look for rent arrears.

Anyway @Leo has settled the issue for me. I wont be carrying out any rent review any time soon. I had a bad experience with last tenants and the best tenant is one who pays up every month so I'll let sleeping dogs lie.


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## AlbacoreA (13 Apr 2022)

LL should increase the rent to the market rate as soon as the windows opens to do so. 

It makes no sense to do otherwise.


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## bipped (19 Apr 2022)

So true. Rules change and landlords get caught out if they don't increase when they can. Nothing to do with excellent tenants, that's just the way the system is for the past few years. 

Can landlords give an early payment discount? I've seen lease agreements with late payment fees or admin charges for unpaid standing orders, so why not a discount if rent is in the landlords bank a few days or a week before it's due. 

Are there Revenue implications?


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## Leo (19 Apr 2022)

bipped said:


> Can landlords give an early payment discount?


You can, but for the purposes of RPZ legislation the discounted rate is what you'll be bound by.


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## bipped (19 Apr 2022)

How does that work?

If the agreed rent notified to the RTB is €2000 and the tenant gets a 2% discount for early payment then landlord gets €1960. Which amount is reported for tax, the charge or the receipt?

As far as RPZ is concerned, do you mean that the next rent review would be based on the amount received rather than the registered rent? Does that happen when a tenant has unpaid rent, that a future rent review is based on what the tenant actually paid.


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## Thirsty (19 Apr 2022)

Leo said:


> You can, but for the purposes of RPZ legislation the discounted rate is what you'll be bound by.


Are you certain about that?  do you have a link?

I've given a 'month free' discount in the past where tenant has agreed to do deep clean/ garden work, certainly never said anything to RTB about it.


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## NoRegretsCoyote (19 Apr 2022)

Leo said:


> You can, but for the purposes of RPZ legislation the discounted rate is what you'll be bound by.


I can't see anything in Part 3 of the Residential Tenancies Act that makes this explicit one way or the other.

If a valid rent review has been served and the tenant in situ hasn't challenged it then surely that is the anchoring rent for the purposes of a new tenancy, no? If a discount is small and discretionary then would the landlord be legally bound by it for setting a new rent?

In any case in practical terms it would be very difficult to for the RTB and/or a new tenant to challenge a landlord once they produce a valid historical rent review set in line with the correct parameters.

The tax is another question and shouldn't be confused here.


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## Leo (19 Apr 2022)

NoRegretsCoyote said:


> I can't see anything in Part 3 of the Residential Tenancies Act that makes this explicit one way or the other.


The risk (and it is a small one) is that the tenant reports the rents paid to the RTB if you ever tried to increase the rent. I can't see the  RTB accepting that a notional rent that only exists on paper and is not matched by the actual rental payments is the actual rent.  

There's even a lower risk that at some point the RTB will seek access to Revenue records if there is widespread reporting of gaming the system to try circumvent RPZ controls.


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## T McGibney (19 Apr 2022)

Leo said:


> There's even a lower risk that at some point the RTB will seek access to Revenue records if there is widespread reporting of gaming the system to try circumvent RPZ controls.


Revenue guarantee taxpayer confidentiality at all times except in very limited situations eg publication of defaulters lists, and don't share their records with other state agencies or anyone else.


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## Baby boomer (19 Apr 2022)

As far as I know, there is a specific provision in the Residential Tenancies Act to allow the RTB to pass data onto Revenue including details of tenancies, rents and landlords.  Obviously, that's one way traffic, and Revenue can't pass taxpayers' details to the RTB.


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## PebbleBeach2020 (19 Apr 2022)

Leo said:


> The risk (and it is a small one) is that the tenant reports the rents paid to the RTB if you ever tried to increase the rent. I can't see the  RTB accepting that a notional rent that only exists on paper and is not matched by the actual rental payments is the actual rent.
> 
> There's even a lower risk that at some point the RTB will seek access to Revenue records if there is widespread reporting of gaming the system to try circumvent RPZ controls.


That's why each of the parties signed a document or lease stating the rent.


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## Leo (20 Apr 2022)

PebbleBeach2020 said:


> That's why each of the parties signed a document or lease stating the rent.


But if practice shows the tennant is paying less and you haven't challenged them on arrears, then it doesn't matter what was written in a contract some time previously.


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## PebbleBeach2020 (20 Apr 2022)

Leo said:


> But if practice shows the tennant is paying less and you haven't challenged them on arrears, then it doesn't matter what was written in a contract some time previously.


so explain to me if a tenant does pay any rent or pays a token €100 a month and refuses to pay anything else. Does that mean after two years when the landlord gets such a tenant out of the property, that the new rent is €100 a month (cause that's what the practice shows the previous tenant is paying)


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## NoRegretsCoyote (20 Apr 2022)

PebbleBeach2020 said:


> so explain to me if a tenant does pay any rent or pays a token €100 a month and refuses to pay anything else. Does that mean after two years when the landlord gets such a tenant out of the property, that the new rent is €100 a month (cause that's what the practice shows the previous tenant is paying)


No. Because the landlord would have challenged them on arrears.

What I think @Leo means is that if you set a contractual rent of €1000 and give a discount of €100 every month consistently then the _de facto_ rent is €900, not €1000.


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## Leo (20 Apr 2022)

NoRegretsCoyote said:


> What I think @Leo means is that if you set a contractual rent of €1000 and give a discount of €100 every month consistently then the _de facto_ rent is €900, not €1000.


Exactly that. The RTB won't be fooled by any discount scheme designed to circumvent the legislation.


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## PebbleBeach2020 (20 Apr 2022)

Ye are really creating a problem here. The RTB can't be ar$ed checking two addresses and seeing a rental increase of 40+% from tenancy to tenancy. I know this because of know of properties where this occurred and nothing happened. If the RTB cant even check a property using a simple Eircode or address match and see the rental price history, then they are not going to go to the lengths of the "he said - she said" that ye are suggesting above. Sign a tenancy agreement for €1000 a month. If you receive €900 a month, declare this to Revenue and pay tax on it. 12 months on, re-register with RTB at €1,020 (or whatever permitted increase) and repeat above. Simple as. Anything other than that, please supply links to legislation or court reports that show RTB will do what you are suggesting.


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## bipped (20 Apr 2022)

Leo said:


> But if practice shows the tennant is paying less and you haven't challenged them on arrears, then it doesn't matter what was written in a contract some time previously.




But there wouldn't be any arrears, quite the opposite if payment was made early.

Its a common enough practice to encourage settlement so why couldn't it be used to reward good tenants.  If a similar term was included in a lease agreement is there anything in the rta legislation that would make it illegal?

If the tenant paid early they get a small reduction. If the rent is paid on the due date, no discount. If the rent is late, then a late payment fee is applied. So it is in the tenants interest to pay early to avail of the lower rent and a landlord's interest to be paid.

If the initial rent was set at market rate and all rent reviews were in compliance with regulations, correct % and notified to RTB, how could they have an issue?

So landlords would maintain the rent threshold for any future tenancies or sale, at the same time recognising and rewarding a current tenant who keeps to the contract terms, rather than the current situation, where rents are not increased for valued tenants and then the rules change and a landlord is forever stuck at below market rates.


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## Leo (20 Apr 2022)

bipped said:


> If the rent is late, then a late payment fee is applied.


Show me where in the tenancy legislation allows for late payment penalties.


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## bipped (20 Apr 2022)

Leo said:


> Show me where in the tenancy legislation allows for late payment penalties.



I've seen several lease agreements in the past few years with a clause about late payment fees and also admin fees for unpaid standing orders.

Does the RTA say that cant be done?

I know a few tenants that would be interested in this, one guy had questioned it before and was told the legislation restricts deposits to the equivalent of one months rent and the amount of rent increases, but that's it. So if you have specific info it would be helpful.


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## Leo (20 Apr 2022)

bipped said:


> Does the RTA say that cant be done?


The legislation deals with arrears procedures and the landlord is limited to claiming for arrears, expenses 'reasonably incurred' in pursuing the
arrears, and/or costs for damage / repairs.


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## bipped (20 Apr 2022)

Leo said:


> The legislation deals with arrears procedures and the landlord is limited to claiming for arrears, expenses 'reasonably incurred' in pursuing the
> arrears, and/or costs for damage / repairs.



That guy just told me Threshold said it was not illegal that his lease included terms for admin fees, no pets, no smoking, no carrying on a business, allowing viewings if house was for sale or for new tenants, or several others.


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## Leo (21 Apr 2022)

bipped said:


> That guy just told me Threshold said it was not illegal that his lease included terms for admin fees, no pets, no smoking, no carrying on a business, allowing viewings if house was for sale or for new tenants, or several others.


No mention of late fees there. Don't confuse admin fees with late payment penalties.


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## lff12 (13 Jun 2022)

Its not a bad idea - you could offset it for them by offering to put 600 euro into their ESB account or something. Or include bins/tv license.


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## moneymakeover (13 Jun 2022)

Leo said:


> No mention of late fees there. Don't confuse admin fees with late payment penalties.


If landlord doesn't pay rtb on time each year  there's a late fee
Is that legal?


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## Leo (13 Jun 2022)

moneymakeover said:


> Is landlord doesn't pay rtb on time each year  there's a late fee
> Is that legal?


Yes, the Act allows them to apply late fees.


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## lff12 (23 Jun 2022)

bipped said:


> But there wouldn't be any arrears, quite the opposite if payment was made early.
> 
> Its a common enough practice to encourage settlement so why couldn't it be used to reward good tenants.  If a similar term was included in a lease agreement is there anything in the rta legislation that would make it illegal?
> 
> ...


Would still suggest doing it a different way - eg, you pay for broadband or bins or some other sweetener that doesn't effect the headline rent.


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## bipped (23 Jun 2022)

lff12 said:


> Would still suggest doing it a different way - eg, you pay for broadband or bins or some other sweetener that doesn't effect the headline rent.


You're right, it's probably easier that way and less admin for a landlord.


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