Buying Real Estate In Ireland And Obtaining Residency

Agreements for the sale of land are generally carried out in a form of contract which has the approval of the Law Society of Ireland. This is a standard form document which contains many pages of printed standard conditions which have been drawn by the Conveyancing Committee of the Law Society to achieve a sense of balance between vendor and purchaser. These standard conditions may be amended by special conditions to meet the necessities of the particular case. The contract is complex because land law in Ireland is a complex subject governing the balance between the competing interests of adjoining owners and occupiers of various differing types and seeking to balance the interests of the vendor and the purchaser. In this, I do not believe it is any more complex than the land law of other western jurisdictions.

The most important thing to note about a contract for the sale of land in Ireland is that it must be evidenced by writing and that that writing must include all of the salient terms. Generally those terms are:-

(1) The parties to the transaction,

(2) The identity of the property,

(3) The nature of the interest being sold, and

(4) The price being paid.

This written memorandum may be a series of documents which are connected and the final document must have been signed by the party who is alleged to be a party to the contract. It is not necessary that both parties sign, merely the other side. The standard form document to which I have referred incorporates these features and much more.

Traditionally in Ireland, negotiations for the purchase of a property take place in two stages. Firstly, there are negotiations directly between the prospective purchaser and the vendor generally through the vendor's estate agent. Secondly, there are the legal negotiations on the small print of the actual contract itself between the parties' lawyers.

Of course, in the case of an auction, there are no negotiations as all persons bid on the terms which are read to the auction by the auctioneer having carriage of the sale. Remember the estate agent is the agent of the vendor whether the sale is by private treaty or by public auction. He is not a broker or an independent facilitator. He is not your agent. His job is to sell the property for its owner who is his client. The owner will pay him for securing a successful sale. That said, you can engage an acquiring agent to act on your behalf and his fees will be for your account.

These terms and supporting documentation will have been available for days prior to the auction together with the supporting documents and should be reviewed by the bidder's solicitor before the auction. Any correspondence with the estate agent should be marked as "subject to contract/contract denied". This formula is adopted by the solicitors who generally will add that the parties will not be bound until such time as the contract has been signed by both parties and the full deposit paid.

A survey is required in order to determine the conditions of the building. There are in all three types of survey:-

(1) Survey of buildings

(2) Survey of land boundaries

(3) Valuation survey

The building survey is of considerable importance as it is a professional verification by a building surveyor, an architect, or in some cases by an engineer to verify that the premises appears to be in good condition. It will address issues such as construction of the roof, the evidence of dry or wet rot, particularly important in a temperate maritime climate, the standard of construction and patent defects in the building. Obviously, a survey cannot take account of latent defects or work covered up. Generally a vendor will not permit explorative work on his building.

It is wise to make a planning search in conjunction with the survey. This will be dealt with elsewhere in this paper but for the moment it is necessary only to note that the standard contract contains a warranty that since October 1964 all development has been authorised and implemented in compliance with conditions imposed. If the warranty is restricted by the contract or by the disclosure of documents, the restriction and document should be referred to the surveyor. Generally it is worth arranging a planning search to establish the development which has been authorised and the zoning of the property to establish the development which will be permitted. This search should be done by the surveyor or given to him by your solicitor prior to the inspection.

A survey of boundaries is not as important with urban property as with rural property. In the case of a rural property it is wise for the boundaries to be walked in conjunction with the title map. The standard contract does not oblige the vendor to define exact boundaries or to state where the party walls etc. are. With large holdings, it has been known for there to be an incursion from an adjoining owner or for a laneway to have been constructed at a point where the boundary of the property is not clear. There may be rights-of-way which affect the property that have not been adverted to in the particulars, as for instance where cattle from a neighbouring farm may cross a field to drink water from a river. There may also be a necessity to verify timber standing on the property and to ensure that no felling is taking place. Access should also be checked from all points and the best way is to exercise each suggested right of access from the public road onwards in as open a manner as possible. If the Vendor shows concern about your doing this, he must have a reason.

The standard form contract puts the purchaser on constructive notice of what he would see if he inspected the property. This is an aspect of the doctrine of caveat emptor -"let the buyer beware". It is for the buyer through his own inspection of the property which may be carried out by himself or his agent, to establish that he is acquiring what he believes he is acquiring. This doctrine, however, is not a licence to the vendor to misrepresent the position to the purchaser but it requires the purchaser to ask the requisite questions to which he is entitled to fair answers; if he is given answers.

The final survey is one of valuation. Often this can be referred to as a "drive-by valuation". It is important that the valuer inspecting the property should be aware of the nature of the interest being acquired. There is a vast difference between the acquisition of a 10 year lease of a suburban residence at a full market rent of IR£10,000 per annum and the outright purchase of that property in fee simple or freehold, which is an estate forever without any obligation to pay rent.

This simple valuation is a confirmation to the purchaser that he is paying market value for the property or, that, if he is paying in excess of market value for it, he is aware of the position.

The final formality in forming the contract for the sale of property is payment of a deposit, generally 10%. Often this is done in two parts with what is referred to as a booking deposit typically 5% being paid to the estate agent before the negotiations between lawyers commence. This should be refundable although some times it is in the nature of an option fee and provides an opportunity for the negotiation of a contract which is credited towards the deposit if the negotiations are successful. The balance of the deposit is payable on the signing of the contract, generally to the vendor's solicitors. The current edition of the contract provides that no matter to whom the deposit is paid it is paid as a stakeholder. The stakeholder is obliged to hold the deposit for the duration of the contract and to pay it to the party entitled to it following the outcome of the contract. Thus on a successful completion of the contract the deposit would be paid to the vendor while if the contract is validly terminated due, say, to a defect in the vendor's title, the deposit will be refunded to the purchaser. On the other hand, if the purchaser has defaulted generally because he cannot fund the balance, the stakeholder will pay the deposit out to the vendor.

A period elapses between contract and completion in Ireland. Generally this is 5 to 8 weeks but this may be altered to meet the requirements of the parties. This period allows for the formal investigation of the vendor's title by the purchaser and the purchaser's finance house. It allows for the agreement of the text of the deed to transfer the property from the vendor to the purchaser and for the vendor to make his arrangements to vacate the property. The vendor must obtain a clearance certificate from the Irish Revenue Commissioners in the case of sales in excess of:-

(a) IR£100,000 in respect of Capital Gains Tax; and

(b) IR£115,000 in respect of Residential Property Tax.

If these certificates are not forthcoming then the purchaser must lodge, in the case of Capital Gains Tax, 15% of the purchase price with the Irish Revenue and the Revenue's receipt is a good discharge of the purchaser's obligation under the contract in respect of their portion of the purchase price. In the case of Residential Property Tax, calculation of the lodgement is complex but cannot exceed 7.5% of the sale price net of the last annual exemption. Again payment to the Revenue is a good receipt.

The purchaser must put his solicitor in funds to pay the balance of the purchase monies or have made arrangements for the necessary borrowing. There is no longer any exchange control in Ireland with the result that there is no difficulty about repatriating funds from Ireland or taking them to another jurisdiction at some stage in the future when the property has been sold. One point should be mentioned; exchange risks can be expensive. If you agree to buy a property for IR£250,000 and the rate against the U.S.$ alters from $1.50 to $1.65 it will increase the real price by US$37,500. In the last year the Irish Pound has moved by over 10% against sterling. It may therefore be appropriate to buy your Irish Pounds forward and think carefully before buying a property in one country and funding it with borrowings in another, bearing in mind where the income to meet the repayments will be earned. For most people, certainty on exchange rates is more important than trying to fine tune the timing.

There is generally no necessity for the purchaser or the vendor to attend the completion although it is not unknown and sometimes is helpful for this to happen. The purchase deed can be signed by the purchaser after completion. This may be done abroad but not so as to delay stamping.

Formerly fire insurance was taken out by the purchaser once the contract was signed. This was found to be unsatisfactory and the standard form of contract now provides for the risk attaching to the property to remain with the vendor until completion. It is therefore important to have your insurance ready in time and to have cover in place before your solicitor hands over the balance of the purchase money in exchange for the title documents. It is at that point that the risk passes to you unless an alternative has been agreed.

The next formality is for the purchaser's solicitor to stamp and register the deed. Stamp duty is payable on documents based upon the consideration expressed in them and I have set these out in a table at the end of the paper. An important point to note is that with residential property having a value in excess of IR£170,000 the rate of duty is 9%. Property which is not residential in character is subject to a maximum rate of 6% where the consideration exceeds IR£60,000. This duty is payable within one month of the date of the deed and in the event of non-payment there are stringent penalties with fixed fines depending upon the period of delay and an additional interest charge of 1¼% per month.

The purchaser's solicitor will proceed to register the deed in one of the two registries. Registration fees are nominal in the case of the Registry of Deeds being limited to IR£26 and in the case of the Land Registry to the sum of IR£250, plus ancillary fees in both cases.

The period for completion of registration varies partly depending on the time of year and the level of activity in the property market. In a straightforward case, the registrations should be completed by a diligent solicitor within six months from the closing of the sale.

Where a property has been mortgaged, the deeds are held by the financial institution involved but if the purchaser has paid cash so that there is no mortgage then the purchaser is free to make his own arrangements for the custody of the documents. The solicitor is entitled to a lien on the documents and to detain the documents until such time as his fees have been paid.

Once the documents are delivered to the purchaser it is important that he should retain them safely as, without their production, a subsequent sale of the property will be delayed.

The standard scale fee for the purchase of property is 1% although on a case by case basis this may be negotiated. From a purchaser's point of view it is important to agree with his solicitor at the outset the basis upon which costs will be charged. If the solicitor seeks to charge on an hourly basis which may or may not be agreed to be subject to a limit, it is important that the purchaser obtains from the solicitor a letter specifying the hourly rates which will be charged by the solicitor and for different members of his staff. Professional fees are liable to VAT at 21% and there is no export relief when the fees are incurred in relation to land.

Having paid his purchase price, stamped and registered his purchase deed and paid his solicitor the new property owner may relax from the formalities to enjoy his acquisition or can he?

In outlining the procedures which are followed on the acquisition of a property I have not referred to a number of issues which will concern a purchaser in enjoying his new property. They also require to be considered by a purchaser both in deciding to make a purchase in Ireland and the manner in which the property will be acquired.

The first point to note is that residency and tax are intertwined in all jurisdictions and that there will be two types of tax; capital taxes and income taxes. This paper will not review the taxation but indicates different approaches to a purchase which are open and which may have different consequences.

Ireland is a country which has experienced emigration for 150 years and its culture is not one which is restrictive of people entering the country, although visas are required from some jurisdictions. It has been a country of small farmers with concerns to ensure a market in land for farmers. Consequently, with the exception of Dublin City and County and certain specified towns, there are throughout the 26 county jurisdiction, restrictions on the acquisition of property by non-Irish citizens. These restrictions have gradually been relaxed since they were last codified in 1965. The relaxation has been in respect of EU citizens seeking to establish a residence, to establish a business or, being bona fide farmers to relocate in Ireland. Until recently, a formal consent was required from the state authorities in respect of the acquisition by bodies corporate including Irish companies outside certain specified urban areas. This has now been relaxed so as to enable a company incorporated in the European Economic Area to acquire real property without restriction. It is not necessary to show that the company is beneficially owned by a category of person who is not restricted from acquiring land. Thus, a US citizen may acquire land in Ireland through an Irish company or a company incorporated in the European Economic Area, which includes the tax havens such as the Isle of Man and the Channel Islands. In acquiring the property through a company, the purchaser will put himself in a position where he can structure the basis upon which the property comes available to him and this can be done on a short-term let with market value being paid in respect of the period. This may be important so as to demonstrate that the individual

(a) does not have a place of residence available to him in the state and

(b) is not in receipt of a benefit in kind from the company.

Sometimes in respect of larger acquisitions, a second company is inserted to ensure that there is no Irish aspect to inheritance and gift taxes. The shares of an Irish company are an Irish asset and an inheritance or gift of the shares will attract Irish capital tax. The insertion of a second or buffer company can lead to flexibility in this regard but this flexibility does not extend to Capital Gains Tax. Where this is done the choice of location for the buffer company is determined by the most advantageous tax considerations.

If you adopt the approach of purchasing in your own name then, unless you qualify for Irish citizenship or buy in an exempted area you must obtain consent from the Department of Agriculture to your purchase. Remember a consent to the acquisition of the land is not a work permit which is a totally separate area of law with which we are not concerned this morning.

The owner of property in Ireland needs to be aware of various restrictions on the development of his property which generically might be referred to as environmental law.

All material development requires planning permission. Development includes not only the construction of a new building or an extension to an existing building but also a change in use. There are certain classes of exempted development but where an extension to a dwelling is concerned, it is limited to an extension of a 125 square metres to the rear of the property. The planning authority, which is usually the local authority, has a period of five years in which it can act in respect of a contravention and its powers include the right to seek an injunction for the removal of the unauthorised development or cessation in the case of a change of use.

Planning is a very complex area and delays in obtaining approval can arise. The more scenic the area in which the property is located the more difficult it will be to obtain planning approval. The application must be advertised not only in the local press but also by placing a notice on the property which must be there for two months and must be legible from the public road. A period of two months will elapse before the decision to grant permission will issue and this can be extended on more than one occasion for a further two months by a request for additional information. Following the decision a period of 4 weeks must elapse before the grant of permission will issue. In the event of an appeal, the procedure should complete in a further 4 months although this may be prolonged particularly if an oral hearing is involved.

The difficulties which can emerge in seeking planning permission are such that the planning status of the property should be investigated carefully in advance of signing the contract to buy. There may indeed be cases in which the contract to buy would be conditional upon planning approval being granted for a particular type of development envisaged by the purchaser. If a particular form of development of the property following its acquisition is of material importance then you should weigh this very carefully with professional advice from an architect experienced in the area before signing the contract. The architect will be able to discuss the position in principle with the planner and provide some guidance as to the likely outcome of an application but of course he will have to take into account third party objections which he can only anticipate.

Overseas buyers are often shown what might be described as "heritage houses". They need not be grand palladian mansions to attract the attention of the planner who may be concerned with anything from street scape to the preservation of examples of particular types of property. In addition to being listed for preservation under the planning acts, a building may also be protected under the National Monuments Acts.

The ambit of the National Monuments Acts has been extended so that any building prior to 1700 is regarded as an historic monument. Some historic monuments are also classified as national monuments. A national monument is granted a specific protection because of the historical, architectural, traditional, artistic or archaeological interest attaching to it and includes the traces or remains of it. A national monument may be anything from a souterrain or a megalithic tomb consisting of a mound of stones covered by grass to a Celtic monastic ruin or a house built shortly after the Jacobean wars in the 1690s. With such buildings, you will not be permitted to do any work to the building without the consent of the Commissioners for Public Works in addition to the planning authority. With an historic monument, the Commissioners for Public Works must be given 2 months notice before any work on the building can commence. This affords them an opportunity to inspect the building and to determine if it is of such national importance as to be declared by them to be a national monument.

To carry out work to an historic building without observing the provisions of the National Monuments Acts is an offence. You should also bear in mind that the millennium may lead to the 1700 date being brought forward to 1750 or even 1800.

Domestic property is unlikely to be affected by environmental regulations which are emanating from the European Union and are primarily directed at agricultural and commercial concerns but it is quite possible that you will be introduced to a property which will include or be in an area of scientific interest. As such, the habitat will have particular protection. You may expect to find these in upland areas and along the western seaboard but this is not to rule out specific areas of protected habitat which occur throughout the country. They can be a particular trap for the unwary particularly those considering forestry development.

In conclusion, one final point in relation to the enjoyment of the property. There is a vast difference between acquiring an urban property in which each property owner is a small part of the local community and acquiring 200 acres of land and 12 miles of river fishing and perhaps a lake. In the latter case, the owner becomes a major player in the community and he comes to a community with its own ways and rhythm of life. The boundaries in Ireland are not often as fixed as they seem and the enjoyment which is to be gained from the larger properties will be enhanced where there is rapport with the local community. The benefits of what is perceived as the informal style of life in rural Ireland bring with them certain costs; a tradition of walking in a particular area or of unauthorized fishing i.e. poaching, none of which will appear on a title and some of which may be illegal, do encroach on privacy and may be a trespass. They do however require to be addressed with care and a sense of the balance of the community. If it is true "no man is an island" it is certainly true that in rural Ireland it is difficult to live in isolation from the local community. The owner who strikes a balance which has regard to his own property and at the same time seeks the goodwill of the community will have little need of lawyers following his purchase.

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.