If you’re considering a property transaction in Ireland, there are a number of things you need to consider
At Kevin O’Donovan Solicitors, we are experienced in helping local and international buyers as they make their way through the property purchase process in West Cork.
If you are a party interested in purchasing property in the Republic of Ireland, you will most likely either have come across the property on some property website or alternatively have viewed same while visiting Ireland having first come across same in some auctioneer or estate agent’s website or window display.
If you subsequently are interested and wish to proceed with the property transaction, you will obviously make an offer and if that is accepted by the seller as the case may be then it is “sale agreed”. If the purchase is done through an auctioneer/estate agent, the regular practice that has grown up over time is that a purchaser will pay what is called a “booking deposit” to the estate agent and that on receipt of same, the agent will mark the property on their website and property details as “sale agreed” and will take it off the market pending the completion of the transactions.
This booking deposit is not legally binding on either the seller or the buyer but it is generally seen as a gesture of good faith on the part of the purchaser and signals their real intent to purchase the prospective property. The amount paid as a booking deposit varies considerably but as a rule of thumb, it is generally in the region of 5% of the sale price. This is therefore held by the estate agent/auctioneer until the sale closes and in the event that the sale does not proceed or falls through, this is a fully refundable deposit to the purchaser in this event.
In the case of where a private purchase or sale is agreed i.e. without an auctioneer/estate agent being involved, there generally wouldn’t be a booking deposit paid and instead, the full contract deposit which is usually 10% of the overall purchase price would be paid when the purchaser decides to proceed with sale by signing contracts and paying the 10% deposit.
In any event, once the sale has been agreed and the vendor and purchaser details are to hand, it will then be up to both the vendor and the purchaser to furnish details of their respective solicitors that will deal with the transaction on their behalf. If the sale is done through an auctioneer/estate agent, this sale memorandum is generally forwarded to the respective solicitors and it is then left up to the solicitors to correspond directly in order to progress the sale transaction.
In a typical sale transaction, the solicitor for the vendor will prepare a contract and will furnish this to the solicitor acting on behalf of the purchaser together with title details as well as any planning permission and other relevant details as may pertain to the property in sale. It will then be up to the purchasing solicitor to raise whatever queries he/she deem necessary and at this stage, a purchasing solicitor will often advise the purchaser to arrange for a survey to be carried out on the property which is being proposed to be purchased.
A survey can take many forms but can generally be broken down into three main components. One can request an engineer or architect to carry out a structural survey in which case the engineer or architect will go to the property, inspect it from a structural point of view and issue a report based on same.
A second component of a survey would be a boundary check. This involves the engineer or architect obtaining the most up to date title map for the property in sale and checking the boundaries as shown on this title map against the actual location of the boundaries as they exist on the ground so as to ensure that there is no discrepancy between both.
The third aspect of a survey is a planning check. This will often take the form of an engineer or architect perusing the planning conditions attached to the permission granted on foot of which the property has been constructed and determining whether the property has been built in compliance with said conditions or at least in substantial compliance with same.
There are very few properties that are built and completed absolutely and completely in total compliance with the plans upon which the permission was granted but it will be the responsibility of the engineer/architect to advise a purchaser as to what important issues need to be considered by the purchaser from a planning and building regulations point of view.
It is completely up to a purchaser whether they wish to carry out a full survey which would include all three of the above components or alternatively either one aspect or two aspects of the property survey or indeed to decide that they won’t carry out any survey on the property.
Once the engineer or architect has completed the survey as chosen by the purchaser, the solicitor acting on behalf of the purchaser may raise additional queries based on matters that may have arisen as a result of this survey. The costs of a survey vary considerably depending upon the extent of the survey required and the type of property being surveyed.
Exchange of Contracts and Closing of Sale
If a purchaser having carried out the necessary checks is happy to proceed with the purchase, he/she will need to give their solicitor the contract deposit which would typically be 10% of the overall purchase price or (if having already paid a booking deposit to the estate agent or auctioneer, the balance of the contract deposit less the booking deposit already paid). The purchaser then signs the contracts and the purchaser’s solicitor forwards the signed contracts with the deposit cheque to the vendor’s solicitors and a binding contract is then in place once the vendor signs the purchase contracts. One part of the signed contract is generally held by the vendor’s solicitor with the other part being returned to the purchaser’s solicitor.
The respective solicitors will generally at that stage, prior to exchanging contracts, have agreed either a specific date as to the date of the completion of the sale or alternatively an event which will trigger a closing date i.e. if a sale depends upon a Grant of Probate having issued, the closing date may, for example, be agreed as being seven or fourteen days after the date of the Grant of Probate issuing from the Probate Office. Whichever is the case in any event, the purchasing solicitor will in advance of the completion date furnish to the solicitor for the vendor a list of the closing documents which they will require before agreeing to complete the sale and release the balance of the purchase monies which in most cases is the balance 90% of the purchase price.
Once these closing requirements have been prepared and completed by the vendor, the closing of the sale takes place by means of the vendor’s solicitor giving the purchasing solicitor the “completion documents” and the purchasing solicitor in return furnishing the vendor’s solicitors with the balance purchase monies. Once the solicitors agree that the sale has been completed, the keys would be released to the purchaser either directly through the purchasing solicitor or alternatively through the auctioneer/estate agent.
What is a PPS Number and why do I need one?
Any vendor or purchaser involved in the purchase or sale of property in Ireland will need what is called a PPS Number in order to complete the transaction. A PPS Number (Personal Public Service Number) will be assigned to every person that is now born in Ireland or who either works or has a health services card in Ireland. This is used by you in respect of the payment of tax, the obtaining of any public healthcare and basically in any interaction by you with the State. If however you are non-resident or have never resided in Ireland, in order to proceed with either the sale or purchase of property in Ireland, one will now need to apply for a PPS Number either to complete the sale of the transaction or in the case of the purchaser, to complete the stamping of the purchase deed which will thereby allow you to apply to be registered as owner of the property which you have purchased. The body that is charged with assigning PPS Numbers is known as Client Identity Services and in the case of a foreign or non-residential seller or buyer, their solicitor would normally arrange the completion of the required documents and evidence of identity and address so that an application can be made by the prospective vendor or purchaser for a PPS Number.
Stamp Duty and Registration Fees
Stamp Duty is a purchase tax paid by the purchaser in a property transaction only. At present, the stamp duty rates applicable are 1% of the overall purchase price if it is a residential property or 2% of the overall purchase price if the property is non-residential i.e. consists of either land or commercial property. If the property in question has mixed use, the applicable rate will be apportioned between the residential part of the property purchased and the non-residential part purchased. If you are purchasing a property and the property comprises of furniture/contents, the value of these contents would be included in the sale price but stamp duty will not be payable on the proportion of the overall price attributed to the contents and so there would be a saving for the purchaser in this regard. The actual stamping of the purchase deed is now done electronically and is the responsibility of the purchaser through their solicitor and it must be done within a period of thirty days from the date of completion of the sale in order to avoid penalties for late stamping and additional interest charges. Once the purchase deed has been stamped, it can then be lodged for registration with the Property Registration Authority. The fees for same vary considerably depending upon the type of title that is being registered and also the value of the property in question. One will need to clarify with their solicitor in advance of the completion of the sale in order to obtain an exact figure as to the registration fees applicable in the individual transaction concerned. There will also be some other miscellaneous outlays and expenses including final searches and again, confirmation of these can be sought by the purchaser or the seller through their own solicitor. Finally, in respect of the solicitor’s professional fee for dealing with the transaction, this varies from firm to firm and in respect of the type of transaction involved and may be agreed with the solicitor at the time the solicitor is instructed at the commencement of the transaction.
For a vendor of property in Ireland, there are currently a number of property taxes that need to be deal with as part of any sale transaction. First and foremost, for non principal residences, there was a Non Principal Private Residence Tax introduced in 2009 which was levied at €200.00 fee each year per non principal residence and this if unpaid, mounts on a cumulative basis and can be a considerable sum of money if not discharged in a prompt fashion. This tax was actually abolished earlier this year 2013 as part of the overhaul which took place prior to the introduction of the new Local Property Tax . However, in 2012, a €100.00 Household Charge was introduced in respect of all dwellings in the state whether owned or resided in as principal residences or otherwise and this tax if not already paid at this stage has now been capped at a total sum of €200.00.
Finally and most recently, the Local Property Tax was introduced for the second six-month period of the current year and will now operate on a full yearly basis from the beginning of next year onwards. The property tax to be paid is based on value bands which rise progressively and any purchaser of a property must ensure that the Local Property Tax has been paid up to date by the vendor when purchasing a property. In fact, due to the Revenue Commissioners putting the valuation date for liability for the payment of the 2014 Local Property Tax as being the 1st of November, 2013, some vendors will be left in the unenviable position of disposing of their property within the calendar year 2013 and yet being made liable to pay the full 2014 Local Property Tax on the property. On the plus side for purchasers in this regard, any purchaser of a residential property in the calendar year 2013 who intends to use the property either as owner occupier or as a first time buyer, will not only be exempt from the requirement to pay Local Property Tax for 2014 but will also be exempt for the years 2015 and 2016. Again, the applicability of the taxes and what taxes need to be paid can be verified through one’s solicitor.
Sale Tax for a Vendor
It is important for any vendor of properties in Ireland to realise that depending upon whether they have made a capital gain in the value of their property between the sale price now being achieved and the purchase price paid by them whenever acquiring same, what is called “Capital Gains Tax” may be due on the amount of the gain attained by the vendor. There is an allowance for inflation which is important especially if you have purchased the property in the 1970s or 1980s.
There are also some deductions allowed for legal and auctioneering expenses in the purchase and sale of the property as well as any improvements carried out by the vendor owner during their period of ownership of the property.
There are also some exemptions from the requirement to pay this Capital Gains Tax and one of the main exemptions in this regard is where the property is the principal private residence of the vendor. In such a situation, the vendor is entitled to a full relief from the payment of any Capital Gains Tax in such an event. However, if Capital Gains Tax is applicable, the tax is, subject to some small annual exemptions, liable at a rate of 33% on the net gain. Again, it is advisable to take advice either from your solicitor or tax advisor/accountant in order to ascertain the position in this regard.
For further enquiries please contact Kevin O’Donovan & Partners, Solicitors at 027 51440 or firstname.lastname@example.org