Property Review - Highlights of 2019Tuesday, 17 December 2019
In our Property Review 2019, we highlight some key legal developments that impacted upon Irish real estate this year:
Pre-Contract Investigation of Title
The process by which property is bought and sold in Ireland was fundamentally changed by the introduction of Pre-Contract Investigation of Title (“PCIT”) with effect from 1 January 2019. This means that sellers' solicitors must provide full title packs at the outset of the transaction and buyers’ solicitors must investigate title and raise any queries pre-contract. The move to PCIT is intended to create efficiencies and streamline conveyancing. It is another step on the long road towards eConveyancing.
See further insight from Head of Property Michael Walsh in Streamlined conveyancing kicks in for New Year (published 1 January 2019) and Welcoming the new lean, mean, conveyancing machine (published Sunday, 27 January 2019).
The Local Government Rates and Other Matters Act 2019 was enacted in July 2019 to modernise the law governing commercial rates and enhance the rates collection powers of local authorities.
Key provisions include:
- Interest is payable on unpaid rates from 1 January of the following year
- Unpaid rates and interest will be a charge on the property, with no expiry date
- Local authorities can introduce targeted schemes for abatement of rates on vacant commercial properties. The Minister for Housing, Planning and Local Government, Eoghan Murphy, T.D. is expected to make regulations requiring payment of minimum rates on vacant properties
Concerns have been raised by the legal profession that the Act requires landlords and banks (selling as mortgagee) to discharge arrears of commercial rates accrued by tenants before a commercial property can be sold. The Department of Housing, Planning and Local Government has confirmed that this was not intended and the legislation will be amended before it is brought into force.
Vacant Sites Levy
The vacant sites levy came back on the agenda this year following the issue of demands for payment of the levy. The vacant sites levy is charged at 3% of market value for 2018 (the first year of the charge), and increases to 7% of market value from (and including) 2019.
As the levy is payable annually in arrears the first demands (in respect of 2018) were received in 2019.
The levy was introduced by the Urban Regeneration and Housing Act 2015 to help address the housing crisis by incentivising the development of housing on vacant sites in urban areas. Property owners who received a demand in 2019 are now considering what steps they can take to have their properties removed from the vacant sites register to avoid imposition of the levy in future years.
There has been significant reform of the residential rental sector in 2019. The Residential Tenancies (Amendment) Act 2019 was enacted in May 2019 and most of its provisions are now in force. This Act brought in additional protections for tenants, including longer notice periods for termination of tenancies and powers for the Residential Tenancies Board (“RTB”) to investigate and sanction landlords.
Student specific accommodation has been brought under the remit of the RTB. Both licences and tenancies of student accommodation created after 15 August 2019 must comply with rent controls if they are located in a rent pressure zone (“RPZ”), and are subject to RTB registration requirements and dispute resolution procedures.
See our Update for Residential Landlords and Student Accommodation Providers for further information.
During 2019 the Minister for Housing, Planning and Local Government designated 23 new RPZs and extended the designation of existing RPZs until the end of 2021.
New rules regulate short-term lettings (including licences) of residential property in an RPZ. Subject to limited exceptions, short-term lettings of residential property in an RPZ are deemed to be a change of use requiring planning permission. This is intended to encourage landlords to make rental stock available to the housing market rather than create short-term holiday lettings.
Home Building Finance Ireland
Home Building Finance Ireland (“HBFI”) opened for business in January 2019, with an initial fund of €750 million from the Irish Strategic Investment Fund. It provides financing on commercial, market equivalent terms and conditions to developers who may be experiencing difficulty securing funding from banks or other funders, to enable them to build viable small and medium sized residential development projects in Ireland. In its first nine months, HBFI approved €102 million in funding for the construction of 513 new homes.
Finance Bill 2019
The Finance Bill 2019 is due to be enacted before the end of December 2019, to legislate for the changes to the tax code announced in Budget 2020. Key provisions for real estate are:
1. Stamp Duty
In Budget 2020 the Minister for Finance, Paschal Donohoe T.D., announced the increase in the rate of stamp duty applying to transfers and lease premiums of non-residential property from 6% to 7.5%. The increase took effect from 9 October 2019. The 6% rate will continue to apply for purchasers or lessees with binding contracts in place before 9 October 2019 where the deed of assurance or lease is executed before 1 January 2020.
2. Extension of Tax Relief Schemes
Three time-limited tax relief schemes are being extended, namely:
- The Help to Buy scheme, which provides income tax relief to assist first-time buyers with obtaining the deposit required to purchase or build their first home
- The property incentive scheme known as the Living City Initiative
- Capital gains tax relief for farm restructuring
3. Irish Real Estate Funds and Real Estate Investment Trusts
A number of new anti-avoidance measures have been introduced for Irish Real Estate Funds (“IREFs”) including new limitations on interest expenses to prevent over-leveraging.
Targeted amendments are being made to the Real Estate Investment Trusts (“REITs”) framework to ensure that the appropriate level of tax is being collected, particularly in relation to capital gains. An existing provision whereby a deemed disposal and re-basing of property values occurs should a company cease to be a REIT is being limited to apply only where the REIT has been in operation for a minimum of 15 years, in line with the original policy intention of encouraging stable long-term investment in the rental property market.
Note: This Review 2019 contains selected legal developments. It does not purport to be comprehensive or exhaustive and there will be other legal developments that are not included. It is for information purposes only. This Review is furnished without liability for ByrneWallace its partners and staff. It does not constitute legal or other advice.