Buying a House or Apartment in Ireland-From Start to Finish in Plain English

Are you thinking about buying a house or apartment in near future? Are you wondering what is involved in the process?

That is precisely what I am going to look at in this piece, and I am going to explain it in plain English.

Ready?

The first step is to find the right property for you and your particular circumstances. I have looked before at some of the factors you may consider as being the most important for you. (You can read 7 tips to simplify your house purchase here).

Once you have found the property you want and fits in your budget you will need to let the auctioneer and the lender know who your solicitor is. This will allow the auctioneer send out the sales advice note to both solicitors which will set out the basic terms of the transaction. These basic terms will include the price, the vendor and purchaser, any contents, expected closing date, and the solicitors acting for the vendor and purchaser. (When you are negotiating these negotiation tips have served me well over the years).

You will be expected to pay a booking deposit to the auctioneer which will secure the property. This deposit is refundable and is not to be confused with the contract deposit. (You can read about the difference between booking deposits and contract deposits here).

Before paying your booking deposit you should also consider the overall financing of the transaction and ensure you consider certain outlays such as stamp duty and property registration authority fees. (Read about all the costs and outlays involved in your purchase here).

Once the sales advice note is issued by the auctioneer the vendor’s solicitor will draw up a contract and prepare the copy title documents which will be sent to your solicitor for his review and consideration.

Your solicitor will then raise pre-contract enquiries about any issues which arise such as planning permission, building regulations, local property tax, sewerage, water supply, road abutting the property being in charge, and other issues.

It is only when your solicitor has received satisfactory replies to these enquiries that you will be asked to sign the contract and pay the balance of the deposit, assuming you have finance in place and not just approval in principle.

This balance of the deposit will be 10% of the purchase price less any booking deposit you have paid.

For example, let’s say you are buying a house for €250,000. 10% of the purchase price is €25,000 so this is the contract deposit. You subtract whatever booking deposit you paid to the auctioneer (usually €5/6,000) and this is the sum due on signing the contract.

Meanwhile, prior to this point, you should have ensured that the loan offer is issued by your lender and a loan pack goes to your solicitor.

You would also be well advised to have a structural survey of the property carried out because there is no use finding problems with the property after you have signed the contract. If it is a second hand house you buy it in the condition you find it- ‘caveat emptor’ (let the buyer beware). So it is vital to ascertain what condition the house is actually in. (Here’s why a structural survey is essential before you sign the contract).

Once you sign the contracts in duplicate and your solicitor returns them to the vendor’s solicitor a binding contract will come into existence when the vendor signs the contracts and returns one part to your solicitor.

At that point you move towards completion of the transaction. This will mainly involve you checking that the lender has everything they need to allow them to release the loan cheque to your solicitor for completion of the sale. Things that hold up cheque release include failure to ensure that life assurance is in place and the benefit is assigned to the lender, failure to put home insurance in place, failure to submit a completed direct debit mandate.

As closing date approaches, your solicitor will draw down the loan from the lender, ask you for your financial contribution which will include the balance of the purchase price and outlays such as stamp duty, property registration authority fees, and other outlays. The solicitor will probably leave loan drawdown as late as possible because you are paying interest from the date of drawdown and he will be anxious to ensure you do not pay unnecessary interest on your loan.

On closing day you get the keys of your new house and your solicitor transfers the purchase price to the vendor’s solicitor and authorises release of those funds, provided you are authorised to pick up the keys from the estate agent.(Read about what happens on closing day here).

After the sale completes your solicitor will submit the Deed of Transfer, the Mortgage Deed and some other forms to the Property Registration Authority to have you registered as the new owner of the folio and to register the bank’s security.

Once that is completed your solicitor will send in the title documents together with his Certificate of Title to the lender and you start paying off the mortgage and enjoying your new property. Obviously if there is no lender involved and you are a cash buyer you will may get the title documents from your solicitor or leave them with her for safekeeping.

By the way, if you are buying in Ireland from abroad you will need to get a PPS number in order to pay your stamp duty and account for any letting income. (You can read about buying property in Ireland from abroad here).

Why Reviewing a Commercial Lease Alone is Of Limited Value

I am often asked by budding entrepreneurs to review the lease of a commercial premises which is part of a small business they are considering purchasing.

The entrepreneur, understandably, is trying to avoid as much avoidable expenditure as possible and wants the lease reviewed for a competitive fee.

I can do that, of course, without any difficulty but I have to explain that reviewing the lease alone is of extremely limited value.

Because most commercial leases emanate from a standard template or precedent lease which is widely used and accepted by solicitors in Ireland. Therefore any difficulties in the proposed acquisition of the business and taking on of the lease are unlikely to be contained within the terms, covenants, and conditions of the lease which are similar across commercial leases.

What are the dangers?

Potential problems are more likely to appear in relation to other issues outside the lease, issues like

  • Title-is there good legal title to the lease? Was the granting of the lease in the first instance in order?
  • Planning-are there any planning issues arising from the use of the premises? And any development carried out over the years, development that would have required planning permission?
  • Is the premises being used for a use permitted by the lease?
  • Rates/charges-are there any issues in respect of rates or other charges that may attach to the premises and is there any arrears for which the new occupant may become liable?
  • Is there a management company? Are there outstanding charges?
  • What condition is the premises in?
  • Are there any issues likely to arise from a fire safety perspective?
  • If the business is involved in food preparation and sales are the necessary plumbing, electrical, food preparation, refrigeration issues compliant with building regulations and any applicable food regulations?

If you are considering taking on a business in which there is a leased premises you are taking an avoidable, critical risk by not having all aspects of the lease assignment investigated.

This involves pre-lease enquiries about title, planning, rates, and so forth being properly investigated. None of these issues will be dealt with by a review of the lease alone.

Yes, it will cost you more money.

Yes, there may be no further issues.

But checking the lease on its own is of extremely limited value and if your finances cannot stretch to having the transaction carried out property, with the necessary checks and pre-lease enquiries carried out, you should seriously consider your investment.

Because you cannot afford it. You are too early and it is premature.

You might be as well going to a casino and putting all your money on red, or black.

Because the likelihood is that any problems that arise from your purchase of the business will not necessarily be contained in your lease, they will probably lie elsewhere, outside the 4 walls of the lease itself.

 

Can A Deed of Variation Be a Deemed Surrender of an Existing Commercial Lease?

Are you a landlord or tenant of a commercial lease? Depending on when you entered into the lease it may provide for ‘upward only’ rent reviews.

Commercial leases from before February 2010 typically contained upward only rent reviews. This meant that the rent could only increase at each rent review date, and that is what the parties had signed up to in the first instance.

However, the Land and Conveyancing Law Reform Act 2009 introduced a significant change iin respect of commercial leases. Section 132 of the Conveyancing and Law Reform Act 2009, which commenced in February 2010, provided as follows:

132.— (1) This section applies to a lease of land to be used wholly or partly for the purpose of carrying on a business.

(2) Subsection (1) shall not apply where—

(a) the lease concerned, or

(b) an agreement for such a lease,

is entered into prior to the commencement of this section.

(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed

(4) Subsection (3) shall apply—

(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and

(b) only as respects that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.

The vitally important change is contained in subsection (3) which now permits the rent to stay the same or fall at rent review time. This effectively prohibits the use of ‘upward only’ rent review clauses in commercial leases from February 2010.

You will note, therefore, this significant difference between leases which were entered into prior to the Land and Conveyancing Law Reform Act 2009 and those signed after the commencement of this act.

Deed of variation

There is a significant consequence flowing from this act and the granting of a deed of variation between the parties after February 2010. Let me explain.

If the parties agree a deed of variation, which may deal with a reduction in the rent and other terms, it is possible that the granting of this deed will bring about a de facto surrender of the original lease. 

The consequence that flows from this, if it occurs, is that the new lease cannot contain an enforceable upward only rent review clause and the landlord will have a less valuable property interest.

And you need to understand that the intentions of the parties when entering into the deed of variation are immaterial; the fact is that if the lease term is extended you are probably looking at a new interest in the land and you can rest assured you do not have 2 leases as the first one will be a deemed surrender.

Deemed surrender

How could this deemed surrender occur?

One of the ways this can happen is if one of the terms of the old lease which is varied/changed is the term of the lease. If the term is increased, for example, there is decided UK case law which holds that if a term is increased a new legal interest in the land comes into existence and the old one, the original lease, is deemed to have been surrendered.

Conclusion

The law surrounding land and interests in land can be complex and requires professional legal advice. Each case must be looked at on its own particular facts and circumstances.

However, one thing is clear: should you not obtain professional advice you run the risk of making a costly mistake that can greatly affect the value of the interest you hold, either as a landlord or tenant.

The Right to Cross Examine in Debt Cases is Not Absolute

In debt collection cases in the High Court evidence of the debt is adduced by affidavit-that is, a sworn statement by the creditor who claims the money is due. This affidavit will set out the facts of the debt, how it arose and will state that in the belief of the deponent there is no defence to the action.

The debtor then replies, also by affidavit.

The relevant High Court rules are set out in Orders 37 (summary summons procedure) and 38 (special summons procedure) in the Rules of the Superior Courts.

These rules also provide, however, that the debtor can serve a notice to cross examine the deponent of the creditor’s affidavit. To do this he must serve a notice to cross-examine.

If the deponent is not produced for cross-examination his evidence may not be relied on in Court, unless by special leave of the Master of the High Court or the High Court.

Debtors have been known to use this device to try to delay creditors in obtaining judgment against them and to increase creditor’s costs.

But this right to cross-examine is not absolute and Judges of the High Court are experienced enough to recognise when such a request to cross examine is for tactical reasons and to stymie and delay.

The right to cross-examine

The principles surrounding this right to cross-examine were reviewed in an April 2019 decision The Governor and Company of Bank of Ireland v Ward, [2019] IEHC 235. The Judge in this case ruled against the debtor’s application to cross-examine and held

12.          It is clear that in the exercise of its discretion in an application to permit cross examination on the contents of an affidavit, the court must be satisfied that there is a conflict of fact or evidence and that the resolution of that conflict is necessary to dispose of the issues which the court has to determine. Apart from repeating the wording of the rules of court and his interpretation thereof, no particular fact or piece of evidence sworn to by the deponents Mr. Buckley and Ms. Enright is contested.

Reliance was placed upon Irish Bank Resolution Corporation Limited (in special liquidation) and ors v. Sean Quinn and ors [2015] IEHC 134 in looking at the right to cross-examine and paragraph 10 of that judgment stated:

“The test for cross-examination of a witness on an affidavit is set out in the Director of Corporate Enforcement v. Seymour [2006] IEHC 369. In that case O’Donovan J. stated at page 5:

“In my view, it is axiomatic that, when, in the course of applications to the court which are required to be heard and determined on affidavit, as is the situation in this case, it becomes apparent from the affidavit sworn in those proceedings that there are material conflicts of fact between the deponents of those affidavits, the court must, if requested to do so, consider whether or not to direct a plenary hearing of the proceedings or that one or more of the deponents should be cross-examined on his or her affidavit. This is so because it is impossible for a judge to resolve a material conflict of fact disclosed in affidavit. However, while it seems to me, that where it is debatable as to whether or not the cross-examination of a deponent on his or her affidavit is either necessary or desirable, the court should tend towards permitting the cross-examination, at the end of the day it is within the discretion of the court as to whether such a cross-examination should be directed and that discretion should only be exercised in favour of such cross-examination if the court considers that it is necessary for the purpose of disposing of the issues which the court has to determine. That appears to me to be the import of a statement of Keane C.J. in the course of an unreported judgment of the Supreme Court delivered on the 15th December, 2003, in a case of Holland v. the Information Commissioner and represents the current jurisprudence in that behalf in this country.”

In essence, the right to cross-examine will only arise where there is a conflict of facts or evidence between the parties and that conflict must be resolved and Mr. Ward, the debtor in Governor and Company of Bank of Ireland v Ward, [2019] IEHC 235, had failed in his own affidavit to contest any fact or evidence in the creditor’s affidavit.

For this reason, his application to cross-examine the deponent of the creditor’s affidavit was refused.

Vacant Possession in Property Transactions-What Does it Mean?

It is a condition of the standard Law Society condition that vacant possession of the property in sale will be handed over on closing. General conditions 17 states:

17. Subject to any provision to the contrary in the Particulars or in the Conditions or implied by the nature of the transaction, the Purchaser shall be entitled to vacant possession of the Subject Property on Completion.

Vacant possession disputes

Occasionally disputes can arise on handover, however, about vacant possession. It may appear self-evident and obvious what vacant possession means but situations can arise which cause tension, disputes, and bad feeling between the parties.

For example, it is obvious that a property should be clear of people but what about objects such as furniture, appliances, old beds, tables and chairs, curtains, carpets, temporary partitions?

The new owner does not want the hassle and cost of having to remove broken and worn furniture, for example, and the vendor may be happy just to let the whole lot go with the house and avoid the cost of organising a skip.

One of the problems surrounding vacant possession is that it is not defined anywhere in Irish law and there is no settled decided authority on the point.

In the UK the question has been investigated by the Courts from time to time, but each case will be decided on its own particular facts and circumstances. At its essence, however, is agreement that vacant possession means the property is free of people and chattels (objects) and the purchaser will be able to enjoy the property from day one.

It may be the case that some contents are included in the sale, and these should be agreed between the parties in advance. But anything over and above what is agreed must be removed.

The upshot is that if the vendor is not able to give vacant possession the purchaser may refuse to complete the sale. Or he may complete and bear the cost of removing rubbish, old furniture, and so forth and then sue for damages including the cost of removals.

The vendor can sue for specific performance of the contract, and completion, if the purchaser refuses to complete on the grounds that vacant possession is not being hander over. In a worst-case scenario one of the parties may seek to rescind the contract and collapse the deal.

Conclusion

If you are the seller it does not make much sense to allow the issue of vacant possession to scupper a sale or to cause an avoidable row to develop between you and your purchaser.

Especially if a skip or a man with a van will solve the problem.