1.1 Main Sources of Law
The main source of real estate law is statute, with the key legislative provisions set out in the Land and Conveyancing Law Reform Act 2009 (the "2009 Act"), the Landlord and Tenant Acts 1967-1994 and the Residential Tenancies Act 2004 to 2016 (the "RTA").
The other main source of real estate law in Ireland is case law, which is derived from the judgments of the Irish courts.
1.2 Main Market Trends and Deals
2017 was a very positive year in the Irish Commercial Real Estate market. Strong investor demand was evident throughout the year, although with the deleveraging programmes of both NAMA and the Irish banks largely completed, this resulted in sourcing product becoming increasingly challenging. Notable deals in the investment sector included the sale of 13-18 City Quay to Irish Life, the sale of No. 1 Dublin Landings to Triuva, the acquisition of a large Build to Rent scheme in Dun Laoighaire by Patrizia, and Deka's acquisition of The Gibson Hotel. Yields in the investment sector remain attractive compared to other European capitals, and this bodes well for continued investor activity in 2018.
The office sector performed very strongly in 2017, with considerable occupier demand underpinned by Brexit-related transactions, such as the acquisition by JP Morgan of One Capital Dock. Other notable transactions in the office sector include the letting of over 200,000 sq ft by Indeed at Capital Dock, the NTMA's lease of significant office space at No. 1 Dublin Landings, and the letting at One Molesworth Street in Dublin 2 to Barclays. Office development continued at pace in 2017 and it is clear the development pipeline is controlled in this cycle, as the majority of new office supply in Dublin was accounted for by the end of the year.
The trend in the retail sector was largely focused on take up at the prime shopping centres, high streets and retail parks. While the ever-increasing move to online retailing remained a focus, consumer spending remained strong and retail sales activity was quite healthy as a result. The most notable deal in the retail sector from an investment perspective was the acquisition by Oaktree of The Square Town Centre in Tallaght, Dublin 24.
The industrial and logistics sector continued to be the focus of increased activity in 2017 with prime rental values increasing by more than 6% year on year. A notable trend was the increase in planning applications for new logistics buildings in 2017 which points to key developments in this sector in 2018.
1.3 Proposals for Reform
There are no current proposals for reform that would have a significant impact on the real estate sector in Ireland.
2. Sale and Purchase
2.1 Categories of Property Rights
The categories of property rights that can be acquired in Ireland are freehold title, which confers absolute ownership, or a leasehold title, which confers ownership for the period of years granted by the relevant lease and held from the owner of the freehold or the owner of the superior leasehold title in the relevant property. A leasehold interest is based on a contractual relationship between the lessor and the lessee.
2.2 Laws Applicable to Transfer of Title
The 2009 Act reformed Irish real estate law, replacing much of the old law and modernising this area of law and conveyancing practice. Historically, Irish law was based on old legislation, pre-dating the establishment of the Irish State. There is modern legislation governing the registration of title (the Registration of Title Act, 1964, which was modified by the Registration of Deeds and Title Act, 2006), to facilitate the increasing computerisation of the property registration system in this jurisdiction and succession law (Succession Act, 1965).
Extensive statutory protection is afforded to family property in particular, which affects conveyancing practice (eg, the Family Home Protection Act, 1976). Ireland has a written Constitution which enshrines certain fundamental rights that override any other law, including legislation.
2.3 Effecting Lawful and Proper Transfer of Title
The Property Registration Authority (the "PRA") is the body responsible for the registration of title to real estate in Ireland. The PRA is a statutory body which was established on 4 November 2006 under the provisions of the Registration of Deeds and Title Act 2006 (the "2006 Act").
The primary function of the PRA is to manage and control the Land Registry and the Registry of Deeds, and also to promote and extend the registration of ownership of property in Ireland.
The Land Registry was established in 1892. When ownership of property is registered in the Land Registry, the deeds are filed with the Land Registry and all relevant particulars concerning the property and its ownership are entered on folios, which form the registers maintained in the Land Registry. In conjunction with folios, the Land Registry also maintains maps (referred to as filed plans). Both folios and filed plans are maintained in electronic form.
The Registry of Deeds was established in 1707 to provide a system of voluntary registration for deeds that affect property, with the intention of giving priority to registered deeds over unregistered but registrable deeds. There is no statutory obligation to register a deed in the Registry of Deeds but failure to do so may result in a loss of priority. The effect of registration is to govern the priority between deeds affecting the same property. When a document is lodged with the Registry of Deeds, it must also be accompanied by an application form containing a summary of the information set out in the deed.
The quality of the title to registered land generally falls into four categories, namely:
- absolute title: this is the best type of title to land that can be acquired in Ireland;
- possessory title: this category of title is granted where an applicant does not have paper title to land but is in occupation of the land and/or in receipt of the rents and profits issuing from the land;
- qualified title: this category of title is granted where an applicant can only establish title for a limited period and/or where the title is subject to reservations; and
- good leasehold title: this category of title applies where the Land Registry has not investigated the title of the lessor to grant the lease to the applicant. Note that the lessee will be registered with an absolute title if the superior title is already registered.
The use of title insurance in property transactions is not widespread in Ireland. Typically, title insurance is used where there are missing title deeds (which may include insuring against unknown covenants in missing documents) or where there are identified defects on title (such as restrictive covenants affecting the development potential of property).
2.4 Real Estate Due Diligence
A buyer's lawyer will investigate the seller's title to the relevant property, to ensure the buyer acquires a good marketable title. The underlying principle is one of caveat emptor (buyer beware). The buyer must be satisfied from its own due diligence that good marketable title to the relevant property is being offered by the seller.
To ensure consistency in drafting and to avoid protracted negotiations, the Law Society of Ireland produces a template contract for sale for property transactions, in an attempt to give a fair balance of rights between buyers and sellers.
This contract for sale contains a memorandum of the agreed terms of the sale (parties, price, description of property, and completion date). The document also requires the seller to list the documentation and searches to be provided in relation to the property, and incorporates the Law Society of Ireland General Conditions of Sale (the "General Conditions"). These General Conditions make a number of assumptions about the property and place certain disclosure obligations on a seller, which the seller can only exclude by inserting a bespoke special condition in the contract for sale. This way, the buyer should be on notice of any deviations from the template document. The General Conditions were updated in 2017 for use on or after 3 January 2017. These General Conditions deal with formalities such as:
- the seller's title;
- the identity and condition of the subject property;
- possession of the subject property;
- the disclosure of notices by the seller;
- planning and development of the subject property;
- completion of the sale, completion notices and interest due if completion is delayed;
- rescission of the contract;
- forfeiture of deposit and resale of the subject property;
- risk between exchange and completion of the sale; and
- boilerplate issues such as time limits, arbitration, notices and apportionment.
The General Conditions can be excluded or amended by agreement between the parties by way of a specific special condition, which will generally be negotiated between the parties to reflect the nature of the particular transaction. For commercial property transactions, it is normal for the seller to seek to limit the warranties being provided. Where the seller's knowledge of the property is limited, for example in a sale by a receiver, liquidator or mortgagee, it is usual to exclude or limit many of the warranties contained in the General Conditions.
The buyer's lawyer also carries out a number of searches against both the seller and the property. The seller must explain and/or discharge any adverse matters resulting from the searches that affect the seller and/or the relevant property before the completion of the sale can occur.
Another formality that will need to be adhered to is the Conveyancing Conflict of Interest Regulation, which prohibits the same legal office or firm acting for both the seller and the buyer in real estate transactions, with very limited and defined exceptions.
2.5 Typical Representations and Warranties
As outlined above, the principle of caveat emptor is diluted somewhat by the General Conditions, which place a number of disclosure requirements and warranties on the seller, relating to matters such as notices, planning compliance, boundaries, easements and identity and the existence of any other interest in the relevant property. These warranties can be excluded or amended by agreement between the parties. In addition to any specific disclosures, sellers often limit the warranty provided in respect of planning and building control compliance by reference to documentation and opinions/certificates of compliance in the seller's possession and provided to the buyer. Where the property is being sold in an enforcement scenario (by a receiver, a liquidator or a mortgagee), it is usual that many of the warranties contained in the General Conditions are expressly excluded or varied/limited by reference to the knowledge of a receiver, a liquidator or a mortgagee in connection with the property. The warranties had a radical overhaul in 2017 as sellers were routinely excluding important conditions or varying the conditions to such a degree that, in effect, no warranty was being given. The new wording provides that a seller only warrants compliance with matters of planning and building control compliance in respect of its period of ownership.
There are also implied covenants as to ownership contained in a purchase deed (which are detailed in the 2009 Act). However, a buyer's lawyer will fully investigate the seller's title to the relevant property in order to ensure the buyer acquires a good marketable title.
A seller can be liable for misrepresentation. General condition 33 of the General Conditions provides that a buyer shall be entitled to compensation for any loss suffered in respect of the sale as a result of an error that involves any non-disclosure, misstatement, omission or misrepresentation made in a contract for sale. However, as outlined above, a seller may seek to exclude or vary this condition by inserting an appropriate special condition in the contract for sale stating that the buyer shall not rely on any representations made by the seller.
Statutory protection from fraud is also provided in the 2009 Act, which provides that it is an offence for a seller to fraudulently conceal or falsify material information relating to their title to the property.
2.6 Important Areas of Law for Investors
It is worth noting that Ireland offers a range of tax-efficient regulated investment vehicles and structures to international investors for acquiring and holding real estate. Provided certain criteria are met, the investment vehicle will not be subject to Irish tax on income such as rent.
Typically, rent paid in respect of Irish real estate will be subject to Irish taxation on account of it having an Irish source, regardless of the identity or location of the landlord. An Irish resident company, or a foreign company that holds real property as part of or on account of a trade carried on in Ireland, will be subject to Irish corporation tax on the rental profits. Income tax is applied to rent received by individuals.
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Originally published by Chambers And Partners
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.