Declan McHugh – Page 3 – Sweeney McHugh Solicitors

Financial Supports for Building a Home

Financial supports for building a home

There has been a notable increase in the numbers of people who have started the journey towards building their own home. Those have started down this road have many things to consider and organise. There are still quite a few who are unaware of two important schemes which could give them substantial money back at a time when resources are likely to be stretched. At Sweeney McHugh Solicitors we have been assisting many clients in relation to their stage payment mortgages which are traditionally used when carrying out a self-build. As part of this process we have been advising and assisting clients in relation to both the Help To Buy Scheme and the Stamp Duty Refund Scheme.

HELP TO BUY INCENTIVE

This applies both to the purchase of new properties or a new self-build property. If you are hoping to rely upon the incentive for the purchase of a new property you should ensure that the property qualifies before committing to the purchase.

When you are building a new property there are a number of criteria that you must meet to qualify for the relief:

To claim HTB, you must:

be a first-time buyer
buy or build a new property between 19 July 2016 and 31 December 2021
live in the property as your main home for five years after you buy or build it
be tax compliant, if you are self assessed you must also have tax clearance.

To qualify for HTB, the property that you build or buy must be:

your home
newly built with the construction subject to Value Added Tax (VAT) in Ireland.

Purchase value

The purchase value of a new build means the price that you bought it for. For self-built property, the purchase value is the approved valuation by the lender at the time that you took out the mortgage.

If you bought the property between 19 July 2016 and 31 December 2016, the purchase price must be €600,000 or less. If you bought it after 1 January 2017, it must be €500,000 or less.

Mortgage

You must take out your mortgage on the property with a qualifying lender. This loan must be used only for buying or building the property. The loan must be at least 70% of the purchase value of the property. This is known as the loan to value ratio.

You are allowed to have a guarantor on the loan.

How much can you claim?

The amount that you can claim is the lesser of:

€20,000
5% of the purchase price of a new home. For self-builds this is 5% of the completion value of the property
the amount of Income Tax and Deposit Interest Retention Tax (DIRT) you have paid in the four years before your purchase or self-build.

The maximum payment is €20,000 per property. This cap applies regardless of how many people enter into a contract to buy a house.

Universal Social Charge (USC) or Pay Related Social Insurance (PRSI) are not taken into account when calculating how much you can claim.

How will the refund be paid?

If you bought or built the property between 19 July 2016 and 31 December 2016, the refund will be paid directly to you.

If you buy a new build after 1 January 2017, the refund will be paid to the contractor.

If you self-build the property after 1 January 2017, the refund will be paid to a bank account you hold with your loan provider.

How do you apply for Help to Buy (HTB)?

Use myAccount or Revenue Online Service (ROS) to apply for HTB online.

There are two stages to the online process:

the application stage
the claim stage.

Application stage

You can apply as an individual, or part of a group that is buying or building a property. You must complete a declaration and select the years you want to use for a refund. If you are tax compliant, your application will be approved. You will be provided with an application number and a summary of the maximum amount you can claim. You will also be given a 6 digit access code separately through MyEnquiries.

Keep a safe note of both of these codes as you will need to provide them to your lender. If you are buying your home you will also need these codes for your qualifying contractor. If you are self-building you will need these codes for your solicitor. Your contractor or solicitor will require this information to verify what you have submitted.

If you make a HTB application but have not yet made a claim, your application will expire on 31 December. You can then re-apply and make a new HTB application.

Claim stage

You can make your claim once you have either:

signed the contract for your home
drawn down the first part of the mortgage if you are self building.

Step 1

Upload evidence of your mortgage and the following information about your application:

if you are buying a home: a copy of the signed contract
if you are building a home:
- proof of the drawdown of the first part of the mortgage
- a copy of the valuation report from your lender.

Step 2

You will be asked to confirm details about the:

property
purchase price
date of completion
mortgage
amount of deposit already paid.

If you are applying with other people you will also need to confirm the portion of the refund to be refunded to each person. If you are self-building, you will need to provide the BIC and IBAN of the loan bank account.

Once you have submitted your claim you will be provided with a claim reference.

Please ensure that you have carefully checked all the information you input before you sign and submit the claim.

If any of the information you have provided is incorrect, you must:

cancel your claim
submit a new claim with the correct information

This must be done before you continue to step 3.

Step 3

Once you have submitted your claim you should advise your developer or contractor (or solicitor if you are self-building).

Provide them with your claim reference (issued to you after step 2) and access code (issued to you when you submitted your application). Before you receive any refund, the information you have provided will need to be verified by the:

developer or contractor, in the case of a new build
solicitor acting on your behalf, in the case of a self-build.

The refund that you finally receive is limited to 5% of the purchase price of the house. This may mean that it is different to the maximum relief amount that you were given at application stage.

STAMP DUTY REFUND SCHEME

When you build a residential property on previously non-residential land you may qualify for a refund of some of the Stamp Duty paid when the land was purchased or transferred to you.

To qualify you would need to have paid stamp duty at the non-residential rate, currently 7.5% (6% pre 9^th of October 2019). For single property developments the maximum area of your site that you can claim for is 0.4047 hectares (1 acre) therefore if your site was larger than this the relief available will be reduced.

The further requirements to make a claim are:

You must submit a commencement notice for the building of the house and commence development in accordance with this. (NB It is important to keep a copy of the acknowledgement from the Council when you submit your commencement notice)
You must start building within 30 months of the property being purchased or transferred to you.
You must complete the property within 2 years after you commence.

ARE YOU READY TO SELL??

How long will it take?
The common question for solicitors from clients who have either agreed to buy or sell a property is how long the transaction is going to take.

When acting for a purchaser I would normally reply “It depends…”. That may not seem to be too informative for a client but unfortunately the reality is that nobody really knows how prepared the Vendor is to sell a property.

It is quite common for Vendors to concentrate on finding a buyer for their property without checking in with their solicitor at an early stage to ensure they are ready to sell once a buyer is found. It is possible and advisable to do both at the same time. When approaching an auctioneer or placing an advertisement to sell a property ideally a client would also approach their solicitor to check what is needed to sell their property.

What Do I Need?

The documents required to sell a property will vary depending on the type of property e.g. sales of land should have less requirements than a newly constructed dwelling. I would tend to break down the requirements under three headings:

a) Title Documents
It is somewhat obvious that you will need to show title to the property that you are selling. Many clients believe that they hold the title deeds to the property themselves only to be advised that some documents are missing.

When issuing a Contract for Sale a solicitor will also need satisfactory title documents to show not only the clients right to sell the property but proper rights of access to the property and services. There have been changes to the law in recent years with regard to rights of ways and easements which could have implications on a sale of property and a client may not be aware of these until s/he instructs a solicitor to carry out the sale.

Planning documents also form part of the title deeds. It is important to have a copy of all relevant planning permissions and an Architect’s Certificate of Compliance with Planning Permissions and Building Regulations. Further documents may also be required to show compliance with conditions of any planning permission.

Some clients may have constructed a dwelling or building themselves and/or carried out developments to the property since their acquisition. Therefore, the original title documents that they hold for the property may be somewhat outdated and further documents may need to be obtained.

Finally, if a client has an outstanding mortgage on the property the title deeds are likely to be held by their bank. It can take time, sometimes a number of weeks, for deeds to be released by a bank. It may be worthwhile asking your client to take up the deeds to make copies of anything required for a sale to avoid any delays when a buyer is sourced

b) Regulatory Documents

Vendors and property owners have had further obligations introduced in recent years.
It is a statutory obligation before the advertisement for sale of a residential or commercial property for a vendor to obtain a Building Energy Rating (BER) Certificate.
If your property is serviced by a Septic Tank then there is an obligation to register the Septic Tank with Protect Our Water (www.protectourwater.ie). A copy of the Certificate of Registration will be required for a sale.
If selling part of a Folio or an unregistered title it is likely to be necessary to provide a Land Registry Compliant map.

c) Property Taxes
For residential properties there were three separate property taxes which continue to affect property sales:

• NPPR Charge (Non Principal Private Residence) – this has been abolished since 2013. However, it will continue to affect property transactions until 2025. If the charge applied to your property it will be necessary to obtain a Certificate of Discharge from the relevant local authority to show it has been properly paid. If the property was exempt then an application to the Local Authority is made for a Certificate of Exemption. Both types of applications can take time to obtain the necessary documents and there are differing requirements depending on the Local Authority involved.

• LPT (Local Property Tax) – This continues to apply to applicable residential properties. A vendor will be required to show that the LPT has been paid up to date for all years including the year of sale.

• Household Charge – this was a one-off charge in 2012. Evidence of payment is required for sales of residential properties and this is usually available from the LPT property history provided by Revenue.

For commercial properties the issue of rates needs to be examined with evidence of any outstanding rates dealt with before a sale completes.

Failure to Prepare, Prepare to FailTo expand on the answer to initial question of how long is the transaction going to take I would try and explain to clients that if the above documents and information is not readily available matters could be delayed and in some cases the transaction may not be able to proceed at all.

If all documents are readily available and there are no delays in them being provided to the relevant solicitors then a property transaction could be completed within any timeframe agreed by the clients. I have been involved in residential sales which have been completed within two weeks but regularly warn clients that can only occur if both parties are ready and willing to facilitate a quick sale.

If any of the above mentioned documents are unavailable then further time will be required. It may involve in engaging architect’s to prepare Certificates, carrying out searches in planning offices, seeking rights of ways or easements from neighbours or trying to regularise some matter on title. In some cases the issues cannot be resolved or what is more common they cannot be resolved in a timeframe that is acceptable to the proposed purchaser. Some purchasers will wait to matters are regularised because they really want to buy the property. But equally some purchasers will withdraw their offer and seek another property because it does not suit them to wait.

Therefore, to avoid the disappointment of a sale falling through it is important for those thinking or actively selling a property to ask themselves “Am I ready to sell?” If there is any doubt in this regard it would be worthwhile to arrange an appointment with their solicitor to carry out a review of their title.

Please feel free to contact Sweeney McHugh Solicitors in relation to any queries that you may have in relation to a property transaction to include carrying out a review of title.

Have you planned ahead?

Planning ahead

According to a new survey conducted by Red C and released by Safeguarding Ireland:

Just 6% of sampled adults had legally nominated a family member, or friend to be their Attorney (under Enduring Power of Attorney) to make legal and financial decisions should they become unable to do so.
Only 8% had discussed a preferred place of care with family, friends, or an appointed Attorney.
Just 11% were aware of what an advance healthcare directive is.
Just 27% had made a will.

Solicitor and Safeguarding Ireland Chairperson Patricia Rickard Clarke, launching the survey, has stressed the need for Irish people in case a sudden even or illness affects their capacity. “At any time we are vulnerable to not having capacity to make decisions for ourselves due to ageing, illness or an accident. It is when do not have decision making capacity that we become most vulnerable to being abused,” she noted.

“Safeguarding Ireland is recommending that people safeguard themselves for their future by thinking ahead. This involves having in place an Attorney, a care plan, an understanding of an advance healthcare directive, a pension and a will for management of family wealth.” The Law Society is proud support the work of Safeguarding Ireland.

The research clearly shows that the majority of people have not prepared for how they wish their estates to be dealt with upon their death. It is also clear that the vast majority of Irish adults have not taken steps to safeguard their wellbeing due to loss of mental capacity.

As we start into a New Year it is a great time for people to focus on their intentions on both of these areas and to take action for their families and businesses.

If you would like any advice on any of the issues raised in this article then please feel free to contact our office on 0749521115 or by email to declan@sweeneymchugh.ie or info@sweeneymchugh.ie

Christmas Holidays

The offices of Sweeney McHugh Solicitors will be closed from 2 p.m. on Friday the 21st of December 2018 until 9:30 a.m. on Wednesday the 2nd of January 2019.

We would like to take this opportunity to thank all of our clients for their business during the course of 2018 and wish all a Merry Christmas and a happy and peaceful New Year.

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