Ireland: Real Estate Country Comparative Guide 2018

1. Overview

Stamp duty for commercial property was increased from 2% to 6% last year for Budget 2018 however this does not appear to have had a significant impact on investment in commercial property over the past year and the Irish property market continues to perform very strongly with strong international investor demand allied to Irish REIT and institutional demand underpinning performance.

The 4% stamp duty rebate scheme that was introduced last year in respect of land purchased to develop residential property has encouraged residential development, particularly in the PRS Sector. Approximately €400 million of development land sales were completed in the first half of 2018. Co-living concepts and PRS/Build to Rent schemes are becoming increasingly mainstream, accounting for 25% of investment spend in the first half of the year, with a strong appetite to forward fund/forward commit. A major deal in this sector was Kennedy Wilson's acquisition of 247 apartments and 3.97 acres of development land at the Grange, Stillorgan, Dublin from NAMA-appointed receivers for a reported €160 million.

The introduction of a vacant site levy, in order to promote the development of vacant under-utilised sites in urban areas has led to an increase in the disposals of sites for development.

Ireland's 12.5% corporate tax rate on residential construction profits has led to an increase in the number of international investors establishing residential development companies, particularly in the Dublin area.

The Dublin office market continues to benefit from relocations due to the uncertainty around Brexit with particular growth in the serviced office sector.

The introduction of tax reforms in 2017 and 2018 which negatively impacted Irish regulated funds focused on Irish property (so called Irish Real Estate Funds or "IREFs") has led a decline in the popularity of such structures. There are now fewer tax advantages to larger non-Irish investors which has, together with the recovery of the domestic investor sector, led to an increase in the number of Irish based buyers of Irish property.

2. How is ownership of real estate proved?

The Property Registration Authority (the "PRA") is the State body responsible for the registration of property transactions in Ireland and the system of registration of title (ownership) to land in Ireland.

The main functions of the PRA are to manage and control the Land Registry and the Registry of Deeds and to promote and extend the registration of ownership of land.

The Land Registry was established in 1892. When ownership 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 maps are maintained in electronic form. Owners of registered real estate generally prove their title via the Land Registry folio, which is prima facie evidence of title. The legal owner of the registered property is recorded in part 2 (the ownership section) of the folio. However, mapping is not definitive as the Land Registry operate a non-conclusive boundary system.

The Registry of Deeds was established in 1707 to provide a system of voluntary registration for deeds affecting land and to give priority to registered deeds over unregistered but registrable deeds. There is no statutory requirement to register a document in the Registry of Deeds, but failure to do so may result in a loss of priority. The effect of registration is generally to govern priorities between documents dealing with the same piece of land. The primary function of the Registry of Deeds is to provide a system of recording the existence of deeds affecting unregistered property. When a deed is lodged in the Registry of Deeds it must be accompanied by the relevant application form (in a prescribed form) which is a summary of the essential information of the relevant deed. The registration of a deed in the Registry of Deeds alone is not proof of ownership. The underlying title must also be fully investigated to determine ownership.

Any unregistered property (Registry of Deeds) purchased in the State after 1 June 2011 is subject to compulsory first registration in the Land Registry. Registration is also compulsory where land is bought under the Land Purchase Acts or where land is acquired after 1 January 1967 by a statutory authority.

3. Are there any restrictions on who can own real estate?

There are no legal restrictions on the ownership of real estate in Ireland. However, anti-money laundering legislation requires that a number of checks be carried out on a potential buyer, and the identity of the buyer, the source of funds and the ability to fund the acquisition of real estate will need to be verified.

4. What types of proprietary interests in real estate can be created?

Irish property can be held under 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/landlord and the lessee/tenant.

5. Is ownership of real estate and the buildings on it separate?

Real estate in Ireland comprises all immovable property. This includes land and any buildings or fixtures on the land. No distinction is made between title to land and title to buildings where they are in the same ownership. Typically, the owner of land is also the owner of any buildings erected on the land.

6. What are common ownership structures for ownership of commercial real estate?

Ownership structures for commercial real estate in Ireland range from private individuals, corporate entities, co-ownership structures and limited partnerships.

The most popular structure for international investors in recent years is an Irish Collective Asset-management Vehicle (ICAV) – a vehicle designed for investment funds and attractive to investment managers seeking to market their funds in the U.S. The introduction of tax reforms in 2017 and 2018 which negatively impacted Irish regulated funds focused on Irish property (so called Irish Real Estate Funds or "IREFs") has led a decline in the popularity of such structures. International investors are increasingly using non-Irish resident structures, such as Luxembourg companies.

Irish resident investors will typically utilise Irish resident companies, or limited partnerships.

Real Estate Investment Trusts (REITS) were introduced in 2013 as a new vehicle for investment. Subject to meeting certain criteria, a REIT will not be liable to either Corporation/ Income Tax on its property rental income or property profits, or Capital Gains Tax on disposals of assets of its property rental business.

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Originally published by The Legal 500 & The In-House Lawyer.

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