Build-to-rent excluded from interest limitation rules

New legislation has confirmed a permanent exclusion for build-to-rent developments from the interest limitation rules. This is a significant incentive for investors looking to expand their property portfolios with medium-to-large-scale, multi-unit residential housing developments designed for long-term rental accommodation.

What Are Build-to-Rent Properties?

Build-to-rent properties are multi-unit residential housing developments that offer tenants secure, long-term rental options. They cater to the growing demand for quality rental accommodation with added tenant benefits, such as the option for personalized tenancy agreements and long-term housing stability.

Key Features of Build-to-Rent Tenancies

1. 10-Year Fixed-Term Tenancy Option:
   • Landlords must offer tenants a 10-year fixed-term tenancy agreement (or longer).
   • Tenants can negotiate a shorter fixed-term or opt for a periodic tenancy instead.
   • Only tenants agreeing to the 10-year fixed-term tenancy can terminate with 56 days’ notice.
2. Flexibility for Tenants:
   • The legislation ensures tenants are not bound to long-term agreements unless they choose to be, providing security while maintaining flexibility.

Eligibility for Interest Limitation Exclusion

To qualify for exclusion from the interest limitation rules, properties must meet strict criteria outlined in the Income Tax Act 2007:

• The development must consist of 20 or more dwellings on a single block or adjacent blocks under one or more titles.
• All dwellings must be owned by the same person or legal entity.
• Each dwelling must be prepared for use, available, or occupied under a residential tenancy.
• Tenancy agreements must offer a 10-year term and include a provision allowing tenants to terminate with 56 days’ notice.
• Agreements must include a personalisation policy or clause.

Why Build-to-Rent is an Exciting Opportunity

Build-to-rent properties not only provide long-term stability for tenants but also create attractive opportunities for investors. The exclusion from interest limitation rules significantly enhances the financial appeal of these developments, allowing investors to:

• Deduct interest expenses from taxable income.
• Secure stable rental income over the long term.
• Cater to a growing segment of renters seeking high-quality, long-term housing.

Harcourts Patras & Co: Your Partner in Property Investment

If building 20+ dwellings on a single block feels out of reach, there’s still room to grow your portfolio! At Harcourts Patras & Co, we can connect you with skilled sales consultants who will help you find the right investment opportunities. From managing properties to expanding portfolios, Harcourts Patras and Co is your trusted partner in property investment.

Learn More

For additional details on build-to-rent tenancies and the permanent exclusion from interest limitation rules, visit TenancyServices’ Build-to-Rent Guide or contact Harcourts Patras & Co today.