Neil Molyneux | Published Jul 23, 2012 at 8:00 am
The objectives of Bermuda’s rent control regime are to provide tenants with security of tenure so that a court order is required to evict a tenant and also to prevent landlords from arbitrarily and unfairly increasing a tenant’s rent payments. In this column, I will address the latter objective.
Currently, residential properties with an annual rental value (“ARV”) threshold of $27,000 or less fall under the rent control regime. Previous AVR thresholds have been set at $24,000 or less, $16,200 or less and $9,900 or less.
A property can easily fall into or out of rent control, either when the threshold itself is altered, or when the ARV of a property is altered. The best way to check if a property is or has ever been rent controlled, is to contact the Office of the Rent Commissioner.
A property rented for the first time (eg a newly-constructed unit), may be rented for any amount, even if the property falls under rent control. Subsequent rent increases, whether to the same or to a different tenant, are restricted. In those cases, rent should not be higher than the rent charged to the first tenant of a rent-controlled property (even if by a previous owner/landlord) unless:
– the landlord and tenant have agreed an increase, following which the landlord has lodged notice with the Rent Commissioner, and the landlord holds a copy of such notice, duly endorsed by the Rent Commissioner, and
– the landlord has received the Rent Commissioner’s approval for an increase.
If a landlord applies for an increase to a tenanted, rent-controlled property, the Rent Commissioner consults with the tenant. If there is no tenant, then the landlord simply makes application to the Rent Commissioner, who makes the determination.
If a landlord or a tenant is dissatisfied with the Rent Commissioner’s determination, either may lodge an application for review by the Rent Commissioner. In such a case, the Rent Commissioner shall consult the Rent Increases Advisory Panel and then make his final determination.
A prospective tenant cannot agree a rent increase to a rent-controlled property. In such a circumstance, a landlord should lodge an application for increase with the Rent Commissioner.
Often a landlord does not know of the last authorised rent because the landlord is a new owner, or has simply lost track (eg with the property falling into and out of rent control over time). In the former case, a new landlord must beware if a previous landlord unlawfully increased rent, the current landlord may be penalised, even where he had no knowledge of the unlawful increase.
Contravention of rent control can result in criminal prosecution, or in a tenant’s claim for up to two years’ rent paid in excess of the controlled rent.
A seller of rent-controlled property may have to make concessions to a purchaser if the purchaser cannot be satisfied that rent control has been observed.
Purchasers of tenanted, rent-controlled property, or who intend to let rent-controlled property, are advised to contact the Rent Commissioner, for details of the authorised rent prior to purchase.
During this period of depressed rents, now may be a good time for landlords to discover the controlled rent of a property, and to rectify any infringement.
The Rent Commissioner’s commendable and informative FAQs and forms can be found on Government’s website (www.gov.bm) by searching for “Rent Commissioner”.
Once an infringing position is rectified, a landlord should be able to apply for an increase when the rental market for landlords improves.
Attorney Neil Molyneux is a member of the Property Practice Group at Appleby (Bermuda) Limited. A copy of this column is available on the firm’s web site at www.applebyglobal.com.
This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.