CONSIDERING BUYING A RESIDENTIAL PROPERTY? TIPS TO PREPARE YOU FOR THE PROCESS

  1. Budget for All “Hidden Costs”

Many prospective purchasers know that they need to save for a deposit, secure a mortgage if needed, and pay legal fees but they are not aware of other costs associated with buying a house.  Ensuring that you have enough funds to pay for the following “hidden costs” will help make buying your new home that much easier:-

  • A Valuation Report (if mortgage needed)
  • Mortgage Protection Policy (if mortgage needed)
  • A structural survey
  • Home Insurance
  • Commissioner for oaths fees (generally between €30/€40)
  • Property tax (varies hugely depending on value of property)
  • Property Registration Authority fees (usually between €3000 and €700)
  • Removal fees
  • Stamp Duty (1% of the value of property up to €1m
  • Service Charges (vary hugely depending on property)
  • ESB, Bord Gais and UPC connection fees
  1. Have a “Loan in Principle”

Before you place offers on properties, secure a “loan in principle” from one or more lending institutions.

A “loan in principle” (an LIP”) (also called “mortgage in principle” or “agreement in principle”) is an agreement to lend based on an initial assessment of your circumstances, which includes your  income, outgoings and your credit score among other things.  Being offered a “loan in principle” forms part of the initial consultation phase of the mortgage application process.  Once your offer has been accepted, you could then complete the mortgage application process and a letter of offer could issue to you faster than had you not instigated the process at the outset.

Not only will you know the price range of properties you should be viewing but having an LIP could in theory make you a more attractive buyer and stand you apart from other prospective buyers during the bidding process.

Good to Know

At present in Ireland banks are restricted from lending more than 90% of the value of the property.

  1. Plan Your Negotiations

Once you have found your perfect property, you need to decide how to bid for it.

Firstly, before placing a bid, make sure that if contents are to be included in the sale, a list is agreed and that the vendor acknowledges that any offer you make is subject to a satisfactory structural survey having been carried out.

Some general tips for bidding and negotiating are:-

  • When first meeting the estate agent/seller, downplay the amount of money you have to spend as s/he will inevitably show you properties which are outside your initial quoted price range.
  • If you fall head over heels for a property, downplay your interest. Draw the attention of the estate agent to work that needs to be done and the estimated cost of same (obtain a quote from a contractor if necessary).
  • Maintain close surveillance of the property market and, in particular, be aware of how much properties in the area are selling for and how quickly. If they are moving very slowly and selling for below the asking price, you are in a better position to make a low offer.
  1. Beware of the “Buyer Beware” Principle

The “buyer beware” or “caveat emptor” principle operates to place the burden on a buyer to ensures that there are no defects in the property which would have been disclosed had a reasonable inspection been carried out and that the property meets his/her expectations.  It is for this reason that buyers must do the following before making an unconditional offer and/or signing a contract to buy any property:

  • Obtain, review and consider a structural survey of the property and ensure you are happy with same.
  • Ensure that the map of the property (which will be provided to you by your solicitor) corresponds with the boundaries as they appear “on the ground”.
  • Research the area surrounding the property and ascertain from the local planning authority whether or not there are plans to carry out large development, including road construction which might affect your enjoyment of the property.
  1. Choose your Solicitor wisely!

Once your offer has been accepted, the vendor’s solicitor will prepare draft contracts based on the heads of terms that have been agreed and will send them to your solicitor.

Your solicitor will raise queries and ensure that the vendor has proved or will be in a position to prove that “good marketable title” to the particular property is capable of being shown on the proposed date of completion.

The conveyancing process can seem complicated as it involves a number of steps.  It is therefore important that you choose a solicitor with whom you communicate well and who is easily approachable.

Solicitors’ fees vary greatly and the format of their estimated bill of costs and outlay do too.  For example, some may not include the cost of stamp duty or property registration fees in their initial quote whilst others (including Amorys) do – so make sure you are comparing “like with like” before making your decision.

 

Amorys Solicitors is a boutique private client and commercial law firm with more than 30 years’ experience acting for clients in residential conveyancing matters.  To request a quote, please contact Wendy O’Brien of Amorys Solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 18.  Tel 01 213 59 40, or your usual contact.

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ARE YOU A NON RESIDENT THINKING OF BUYING PROPERTY IN IRELAND? – HERE IS WHAT YOU NEED TO KNOW

  1. There are no restrictions on foreign nationals buying property in Ireland. This means that both EU/ EEA and non-EU/ non-EEA nationals can purchase property here without limitation.
  2. Owning residential property in Ireland does not entitle the owner to a right of residence here. Residence and/ or the right to remain in Ireland are treated separately to property ownership and depend on each individual’s personal circumstances. For further information please see Irish National and Immigration Service.
  3. Similarly, owning commercial property here does not generally  entitle a non-EEA national to operate a business out of that property – permission from the Minister for Justice Equality and Law Reform is required. Conversely EU/ EEA nationals may operate a business and reside in Ireland without restriction by virtue of the general principles of EU law.   A company, once it has one director that is resident in Ireland, may operate a business out of that property.  The right of residence of each director and employee will be treated according to each individual’s circumstance however.
  4. It is important to note that a tenant of a non-resident Landlord in Ireland is obliged under current tax legislation (section 1041 Taxes Consolidation Act 1997) to withhold 20% of the annual rent and pay same to the Revenue unless that non-resident landlord has appointed a ‘Collection Agent’ to be assessed for the tax on the rent from that particular rental property. A collection agent is usually an estate agent, accountant or solicitor but could be any person who is resident in Ireland.  Once a collection agent has been appointed a tenant will be entitled to pay the full amount of the rent to the Irish resident agent.  Appointing a collection agent is relatively straight forward and can be effected by completing an Income Tax Registration Form for Collection Agents and submitting it to Revenue.  First the Landlord will need to register his/her tax or PPS number for income tax.  The Collection Agent will then need to apply to the Department of Social Protection for a separate Personal Public Service or tax Number which will be linked to the landlord’s tax number in Ireland.  Once a Collection Agent has been acknowledged by Revenue as such, the tenant can pay the rent to the Collection Agent without deduction of tax.
  5. Stamp duty at 6% of the market value of commercial property transactions must be paid by a purchaser. Stamp duty on a residential property transaction is payable at 1% of the market value up to €1m and at 2% on the value in excess of this amount. In both cases stamp duty must be paid by a purchaser within 30 days of completion of the transaction. In order to file a stamp duty return a PPS or tax Number will be required which will take some time (currently up to 8 weeks) to issue from the Department of Social Protection if a purchaser does not have one already which could potentially delay completion of the transaction.  Individuals or companies who have never been resident or carried on business in Ireland are unlikely to have a PPS or a Tax Number and may therefore be subject to this delay.
  6. The conveyancing process in Ireland can generally be divided into three stages: negotiation stage (where solicitors are generally not involved); pre-contract stage (solicitors are involved) ; and completion (Solicitors are involved). The negotiation stage usually involves private individuals and/or their estate agents or representatives negotiating the sales price and “heads of terms”. In Ireland, the vast majority of the legal work is carried out by solicitors at “pre-contract stage” so that once a contract has been signed by both parties, it is usually possible to complete soon after that.  The length of time it takes to complete a purchase will however depend on each transaction and in particular whether the purchaser is buying with cash only or with both cash and the benefit of a mortgage.  All going well, it should be possible to complete the conveyancing transaction within 4 weeks of exchange of contracts.
  7. There is an annual charge of up to 15% of the market value of a residential property in Ireland (also called “local property tax”) which must be paid to the Revenue on or before 31st January of every year which is something that a prospective investor will need to bear in mind prior to purchasing on a ‘buy to let’ basis. The percentage rate may fluctuate.  Further details of the local property tax charge are available
  8. Rates are payable on commercial property to the local authority for the area in which the property is situated. The amount payable will depend on the size of the property and other factors.
  9. Service charges may be payable to a management company where the property, residential or commercial, is located within a serviced estate.
  10. Ireland has signed comprehensive double taxation agreements with 73 countries which generally speaking result in a non-resident landlord paying no more tax than they would in their own country of residence.

A non-resident individual or business looking to purchase property in Ireland can benefit from experienced property solicitors in a myriad of ways: from identifying the need to apply for a PPS or Tax Number at an early stage to drafting a Lease after the transaction has completed and advising him/her of the potential tax liabilities and obligations in respect of any rental income.  Experienced solicitors assist with ensuring a transaction proceeds quickly and seamlessly.

Amorys solicitors is a boutique private client and commercial law firm experienced in all aspects of a property transaction.  For further information please contact Deirdre Farrell of Amorys Solicitors at Tel 00353 1 2135940 or your usual contact at Amorys.

This article is provided for information purposes only and is not intended to be legal advice.  Specific advice should be sought in each situation.

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Recent Supreme Court Ruling re Repossession Proceedings relating to Residential Property

Lender cannot repossess where breach of the moratorium required by the code of conduct on mortgage arrears, supreme court says

 

The Supreme Court has said failure to comply with the moratorium provisions of the Central Banks Code of Conduct on Mortgage Arrears by a lender can prevent a home being repossessed in a recent decision of Irish Life and Permanent Plc, Gemma and Kevin Dunne and Dylan Dunphy [2015] IESC 46.

The Supreme Court heard appeals of two cases against Irish life and Permanent Plc which were referred by the High Court Judge. The Dunnes had defaulted on repayments due to Irish Life and Permanent Plc and it appeared that Irish Life and Permanent Plc were entitled to recover possession of the property. As the Dunne were not legally represented and did not enter an appearance to the proceedings, there would be no enquiry that the lender had complied with the Code of Conduct on Mortgage Arrears. Judge Hogan referred these 2 cases on appeal due to various different views taken by High Court Judges on the question of legal status and consequence of compliance by lenders with the Code of Conduct on Mortgage Arrears in relation to repossession.

The Supreme Court was asked to consider:-

  1. As there is no sanction for failure by a lender to comply with the Code of Conduct on Mortgage Arrears does non-compliance with the Code affect a lenders entitlement to obtain repossession of a property
  2. If a lender has not complied with the Code of Conduct on Mortgage Arrears, depending on the type of breach can the Court refuse to make an Order for repossession and can any breach be rectified by a period adjourning or postponing the proceedings.

The Supreme Court said that regulated financial institutions must obey the Code of Conduct on Mortgage Arrears which forms part of the law pursuant to Section 117 (1) of the Central Bank Act 1989. When a lender is applying for a Court order for repossession of a private residence of a homeowner the Court may have to consider a situation where a lender is in breach of the Code. The Court said if an application for repossession brought by a lender is in clear breach of the moratorium that a Court could not aid the lender in these actions which are clearly in unlawful and in breach of the Code of Conduct on Mortgage Arrears and could not make an order for repossession in those circumstances. However the Court clarified that it will not have a role in deciding whether particular proposals should be accepted by the lender or in formulating a lenders policy in relation to mortgage arrears and in applying these or assessing as to whether these are reasonable as this is not its role. All proceedings for repossession should now contain a statement that the proceedings were commenced outside of the moratorium period. If the moratorium does not apply then this should be explained and a Court can consider what evidence it needs to be satisfied that there was no breach of the moratorium by a lender.

 

This is a summary of a recent decision and does not constitute legal advice. If you require any further information in relation to this matter please contact Davnet@amoryssolicitors.com.

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Revenue Clampdown on Gifts to First Time Purchasers – How could this affect you?

There has been much comment in the media recently about how Revenue intends to tax gifts made by parents to their children towards the purchase of their first home.

Amorys have come across a number of scenarios relating to this new move.  The following answers to frequently asked questions may be helpful.

 

Q.1     

My parents are giving me €20,000 towards the purchase of my first home, will I have a tax liability?

 

A.

The amount of tax to be paid depends on the total value of gifts or inheritances you receive from your parents during your lifetime.  At present children are entitled to receive a maximum of €225,000 from their parents (including gifts and inheritances) tax free.  This is called a ‘capital acquisitions tax group threshold A amount’.  Any amount received over and above that is subject to capital acquisitions tax at 33%.

 

Q.2.    

How do I know what gifts are taken into account during my lifetime?  I went to one of the highest fee paying schools in Ireland, will that be taken into account? 

 

A.

No.  There is an exemption from capital acquisitions tax in respect of gifts made by a donor for the maintenance, education and support of their child during that donor’s lifetime, provided that expenditure is reasonable having regard to the financial circumstances of the donor.  The Finance Act 2014 restricted this exemption to gifts made for the support, maintenance and education of the donor’s child as long as the child is under 18 OR under 25 and in receipt of full time education OR permanently incapacitated by reason of physical or by mental infirmity from maintaining himself or herself.

 

Items that would not come within the above exemption would be 1,000 shares in Facebook bought in your name during 2012 for example or university fees paid for you now at the age of 27 to go to Harvard Medical School.  The market value of the gift on the date you acquire an interest therein is the value to be taken into account.

 

Q.3.       

My partner and I are purchasing a property worth €1,000,000. My  parents are wealthy and gave me €300,000 towards a deposit.  The remaining amount of the purchase price will be funded by our joint savings which come to €300,000 in total and the proceeds of a mortgage of €400,000.  We will both be named jointly on the title deeds.  Will either of us have a tax liability?  I ‘used up’ my capital acquisitions tax threshold A amount a long time ago, but my partner has not received a gift or inheritance from anyone during her lifetime.

 

A.            Scenario 1

Whether or not you or your partner will have a tax liability depends on what beneficial interest either of you has in the €300,000 that your parents kindly gave you towards the purchase of your home.  If your parents intended the gift to go towards your interest in the property alone, you would have a tax liability of €99,000 (i.e. 33% of the gift) as you have already used up your capital acquisitions tax group threshold amount.

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Total tax to be paid if you receive the full amount of the gift = €99,000

 

A. Scenario 2

 

If however your parents intend to gift €300,000 to you and your partner in equal shares, you would have a tax liability of €33,000 (33% of €150,000).

In this situation, your partner would be deemed to receive a gift from a stranger in blood and capital acquisitions tax group threshold amount C of €15,075 would apply.  Anything above that amount is taxed at 33%.   Accordingly your partner would have to file a tax return and pay €44,525.25 to the Revenue calculated as follows:-

Market value of Gift                                       €150,000

Less:

Capital Acquisitions Tax

Group  Threshold Amount C                         (€15,075)

Taxable balance                                            €134,925

 

Tax at 33% to be paid                                 €44,525.25

 

Total tax to be paid if you and your partner receive the gift in equal shares = €77,525.25 (€33,000 + €44,525.25).

The foregoing amount of tax will need to be paid out of your own resources as if your parents were to fund the tax payment this would also be considered a gift for tax purposes and further tax liability would arise.

 

Summary

In summary receiving a gift can be expensive!

If any of the above circumstances apply to you or a variant of them, you should seek expert advice as further legal and taxation issues may well arise other than those explained above.

We hope the above is helpful however please note the foregoing should not be considered as comprehensive legal or taxation advice and should not be used to replace consultation with a legal professional or any other qualified expert.  If the reader has any queries in relation to any aspect of the above scenarios, please contact Deirdre Farrell at 01 213 59 40 or email us at info@amoryssolicitors.com.

 

© January 2015

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Budget Highlights for Property Owners and First Time Buyers

Property Owners and First Time Buyers might like to note the following proposals contained in the recently published Finance Bill 2014 (“the Bill”) that will be of relevance to them.

 

1.Home Renovation Incentive Scheme extended to include Rental Properties

The Home Renovation Incentive Scheme which operates by way of an income tax credit @ 13.5% on qualifying expenditure on repair, renovation or improvement works carried out to a qualifying property is to be extended to include expenditure on rental properties on or after 15th October 2014.  A tenant must occupy the rental property at the time the works are carried out or within six months of that time and the landlord must be subject to income tax on the rental receipts in order to claim the credit.  Any unused tax credit may be carried forward for use in future years.

 

2.  Capital Gains Tax Exemption Not Extended. Property must be acquired on or before 31st December 2014

The capital gains tax exemption for land or buildings acquired between 7 December 2011 and 31st December 2014 and owned for seven years will not be extended beyond 31st December 2014.  Whilst the purchase of the property should ideally have been completed by 31st December 2014 in order to claim the relief, if an unconditional contract for the disposal of the property has been signed before the end of 2014, the exemption should be available even if the sale does not close until after that date.

 

3.  Abolition of Windfall Tax

It is proposed that the 80% windfall tax arising on the rezoning of land will be abolished with effect from 1st January 2015.  This will no doubt push many property owners with sites for sale into the property market.

 

4. Rent a Room Relief Increased to €12,000 per annum

The threshold for exempt income under the Rent a Room Scheme is being increased to €12,000 per annum from the current amount of €10,000.

 

5.  Refund of DIRT @41% on interest on savings for First Time Purchasers

The Bill introduces new provisions for a refund of DIRT (currently at 41%) that has been deducted from interest on savings used by first time purchasers to buy a house or apartment for use as their place of residence. A  First time purchaser is defined as an individual who has not either individually or jointly, previously purchased or built any other house or apartment.  The legislation provides for a refund of DIRT to be made to the purchaser on making a claim. Details of how to make a claim will be published shortly by Revenue.  The refund applies to DIRT deducted from interest paid on savings by the first time purchaser (up to a maximum of 20% of the consideration paid for the dwelling) at any time up to a 48 month  period up to the date of the conveyance to the purchaser.  The relief will be available from 14th October 2014 until 31st December 2017 and does not apply to self builds or sites.

 

6. Income tax Credit for Payment of Water Charges

It is proposed that an income tax credit @ 20% of expenditure incurred on water charges (up to a maximum of €500) per annum will be available for water charges paid during any period of assessment.

 

For more information on the above please contact Deirdre Farrell, Solicitor and AITI Chartered Tax Consultant (CTA)

 

Amorys Solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 18 © November 2014

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Capital Gains Tax Exemption extended to 2014 – Good News for Property Purchasers

The reader will be aware that an Irish tax resident individual or company is liable to Irish tax on worldwide income and gains. This means that a gain arising on the disposal of property by an Irish tax resident, wherever situate, is liable to Capital Gains Tax (CGT), the rate of which currently stands at 33%.

In an attempt to stimulate the Irish property market the Government has introduced a CGT exemption for all properties that were purchased between the Finance Act 2012 budget date i.e. 7 December 2011 and 31st December 2013.  This relief has now been extended by the Finance (no.2) Act 2013 41/2013 to cover all purchases bought up to and including 31st December 2014.

 

Tax Free Sale

It will be of interest to investors to note that where a property is purchased between the above mentioned dates and such property is held for a period of greater than seven years, the gains attributed to that seven year period will be exempt from CGT.

There is no obligation for the investor to sell the property after seven years. Where such property is held for a period of greater than seven years, any chargeable gain arising in subsequent years will be reduced in the same proportion that 7 years bears to the period of ownership of the land or building.

For example, if a building which has been held for 10 years is disposed of, the chargeable gain in respect of that that building will be reduced by seven-tenths.

 

Property within the EEA – 30 Jurisdictions

The relief applies to “land or buildings” i.e. residential or commercial properties within countries of the EEA (i.e. the countries of the European Union, Lichtenstein, Iceland and Norway) Presumably for reasons to do with EU rules against state aid, the relief applies to all such property located in the European Economic Area, including Ireland.

 

Limitations

In order for the relief to apply the property must be acquired for a consideration equal to the market value, or if acquired from a relative, not less than 75% of the market value on the date acquired.  It should be noted that new legislation underpinning the relief contains anti-avoidance measures and provisions designed to guard against artificial arrangements.

 

Update

Following last week’s Budget 2015 announcement, Minster for Finance Micahel Noonan has confirmed that the CGT relief is to expire on 31 December 2014. Investors should be aware that there is now only a limited window of opportunity to avail of this incentive.  We offer a fast and efficient conveyancing service should you wish to acquire a suitable property

For more information on the above please contact Deirdre Farrell, Solicitor and AITI Chartered Tax Consultant (CTA), Amorys Solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 1. Tel: 01-213 59 40 

© January 2014 and October 2014

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AIB Mortgage Information Evening

A Sign of “Green Shoots”?

AIB Sandyford recently held a very informative mortgage information evening to which we were invited to “set out our stall”.  Happily, recent trends appear to suggest that property sales and prices in Dublin are at last on the up with green shoots finally appearing within the property sector.

We are pleased to say that as a result of our advertising campaign at the mortgage evening we are now representing a number of AIB clients in the purchase of their new home and we would like to take this opportunity of thanking AIB Sandyford for their support. You can read more here http://issuu.com/robheigh/docs/dundrum_d5aa57751b0923/7

If you are thinking of buying a property, whether residential or commercial, contact us for a very competitive quote.  We will be very happy to assist.

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HOMEOWNERS THREATENED WITH LEGAL PROCEEDINGS FOR DEVELOPER’S FAILURE TO PAY FINANCIAL CONTRIBUTIONS

Wicklow County Council (WCC) is pursuing 24 homeowners at Meadow Brook estate in Avoca for unpaid financial contributions required by the planning permission that approved the estate development. A financial contribution is a condition in a planning permission that requires the payment of a sum calculated pursuant to that local authority’s Development Contribution Scheme.  The payment is designed to compensate the local authority for the benefit that a proposed development would gain from using the roads, services and sewerage facilities within that local authority area.

Financial contributions imposed as a condition of a planning permission are generally required to be paid prior to the commencement of construction work.  However agreements can be reached between the developer and the planning authorities for phased payment of the financial contributions but they generally include a considerable upfront payment. In the past such agreements had the effect of enabling the developer to sell properties without having to discharge the full amount of the financial contributions. Serious problems have now arisen for local authorities where developers have become insolvent leaving the issue of unpaid financial contributions outstanding.

Failure to pay a financial contribution means that the planning permission has not been complied with.  Failure to comply with a condition in a planning permission affords a local authority grounds to serve an enforcement notice which in some cases could lead to the demolition of a property.  However there is no express legal provision which would entitle a local authority to recover unpaid financial contributions from the developer’s successor in title.  Planning legislation is unclear as to where the ultimate liability lies: is it on the property or on the developer to whom the planning permission was granted?

WCC is of the opinion that unpaid planning contributions are a charge on the property itself and not on the developer and has issued letters of demand to a number of the homeowners of the Meadow Brook estate for a portion of the unpaid financial contribution. The total amount claimed by WCC is just over €65,000.00 in total.

The issue of unpaid financial contributions is a matter for each local authority. Financial contributions are a source of significant funding for local authorities and given that there are reportedly €300 million in unpaid financial contributions in respect of planning permissions nationwide it is likely that WCC will not be the only local authority adopting this approach in such circumstances.

Dublin City Council has however recently stated that its policy is not to pursue householders.  Both Dun Laoghaire Rathdown and Fingal County Council are reported to have stated that they were unable to be definitive about their approaches to the issue. However whether or not local authorities adopt a policy of pursuing home and property owners the problem is likely to rear its head on a sale or remortgage when a purchaser or his solicitor will immediately seek clarity from the local authority concerned.

Given the history of insolvent developers in the Sandyford and surrounding areas local home and property owners may not be immune to this problem.

The precise legal basis for the actions of WCC in issuing these letters of demand to the homeowners of the Meadow Brook estate is unclear and may soon become the subject of a test case.  The matter may well have broader implications for all property owners both residential and commercial in circumstances where financial contributions remain unpaid.

The outcome of this move by WCC will be awaited with great interest by property owners, investors, lawyers, banks and insolvency practitioners.

 

12/02/13

Deirdre Farrell, Solicitor and AITI Chartered Tax Adviser, Amorys Solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 18. Tel: 01- 213 59 40