Side Letters to Commercial Leases-What You Should Know

If you are leasing a commercial property you may encounter a ‘side letter’ in addition to the lease itself.

A side letter in such a situation is used by a landlord and tenant-as it is signed by both parties-to modify the terms of the lease itself, generally on a temporary basis. This would be done to confidentially vary the terms of the lease and prevent any knock on comparable consequences for the landlord from other tenants in a development.

An example of this would be a concession in relation to rent for a temporary period of time.

This concession would not be in the public domain as the rent might be if the lease was lodged in the Registry of Deeds or details registered with the Commercial Lease Register of the Property Services Regulatory Authority.

Some points to consider

  1. The time period or special event which is to be covered by the side letter should be clear if the concession is to be temporary and for the particular lessee
  2. If the lease itself contains an ‘entire agreement’ clause then the side letter should be mentioned in the entire agreement statement
  3. If the side letter is agreed and granted at a different time from the lease itself then there should be some consideration given for the side letter, even a nominal sum
  4. The landlord needs to be careful that the granting of the side letter will not inadvertently let a guarantor off the hook
  5. Is this side letter to be binding on a future landlord if the sells the building? Is the side letter to be personal to the existing lessee and not assignable to a new tenant?
  6. The side letter will be terminated if any provisions of the lease are breached-for example, late payment of rent

A problem may arise if the breach of the lease leads to the side letter being set aside as this may amount to a penalty for the tenant which is disproportionate to the loss suffered by the landlord for the breach. If that is the case the side letter may be unenforceable if challenged.

Provided the penalty is proportionate the side letter is likely to be enforceable, however.

Side letters will usually bind a landlord’s successor in title and should, therefore, be disclosed to a any future purchaser. For this reason any side letter should be kept with the lease so that it is disclosed on sale. If it is not disclosed a future purchaser will probably succeed in a claim for misrepresentation and the cost of complying with what has been agreed in the letter.

The leading case in this area is Vivienne Westwood Limited v Conduit Street Development Limited, a UK case. This decision is not binding on Irish Courts but would probably be persuasive as the Irish and UK landlord and tenant law is broadly similar and the decisions tend to be similar.

Buying Property? Why You Need to Know About Certificate of Title

Certificate of Title

Are you thinking about buying a residential property? Or a commercial property?

If you are you should know about the Certificate of Title system in conveyancing in Ireland.

Let’s take a look at how it works, shall we, and what it might mean for you as a purchaser?

Good marketable title

If you are not a cash buyer and you are borrowing from a bank your solicitor will have to give the bank a ‘solicitor’s undertaking’. This is an undertaking to obtain good marketable title to the property.

Once good marketable title is obtained the sale will complete and the solicitor will send in the title documents to the lender. The solicitor will then give a Certificate of Title and the bank will rely on this rather than the solicitor’s undertaking and the lender will hold onto the documents of title.

Once the bank’s mortgage is secured on the property and good marketable title has been obtained then the bank will be able to move on the property if there is a default on the loan.

It is a rare enough occurrence in Ireland, quite frankly, but when the bank does repossess a property they want to know they can sell it without any major title problems.

And they will already have the solicitor’s certificate, which certifies title, and on which they will rely.

If any problems then arise in relation to the sale of the secured property the solicitor who certified titled will have a major problem as the bank will be able to pursue him/her for professional negligence if he failed to notice a major title defect with the property.

How does this affect you?

You may be happy to proceed with the purchase of a property but your solicitor may not if there is a problem which will affect his ability to give an undertaking to obtain good marketable title and to certify title later on.

Problems which would concern a solicitor would be issues such as easements, rights of way, planning permission issues, building regulation problems, septic tanks on someone else’s property, no certificate of compliance from an architect/engineer, and so forth.

Minor issues which might be flagged up in a structural survey may not cause much concern, but the issues would need to be genuinely minor.

Qualification on title

If any of these serious issues arise the solicitor will write to the lender and state that he proposes qualifying his undertaking and certificate of title due to the problem he has encountered and he will ask the bank to accept this qualification and confirm its approval.

The lender may approve or may not agree. If the lender does not agree then the purchase cannot proceed.

The key point to understand is that if you are buying property and there is a lender involved and there is a problem with the title documents to the property the decision to proceed is not yours alone.

Because the solicitor will also be putting his professional indemnity insurance on the line and will naturally wish to have a say.

Without your solicitor giving an undertaking to the lender in the first place and later providing a certificate of title the lender will not advance your loan for completion.

Buying Property in Ireland from Abroad-What You Need to Know

buying irish property from abroad

Thinking about buying property in Ireland? You are living outside Ireland? Or you are not an Irish citizen?

Firstly, the good news is that there is no restrictions on non Irish citizens buying property in Ireland; and this applies whether you are an EU national or a non-EU national.

The bad news, however, is that ownership of property does not entitle you to reside in Ireland. The whole area of visas, residency, immigration, work permits, asylum is a complex one and you will find more information about these topics on the Irish Naturalisation and Immigration Service website.

If you intend letting the property, and there is a very healthy residential letting market in Ireland in 2018, the tenant is obliged to withhold 20% of the annual rent and pay it over to the Irish tax authorities, the Revenue Commissioners, unless you have appointed a collection agent. The collection agent-someone like an accountant, solicitor, or estate agent-will be liable for making the tax returns on the rental income but you will have been obliged to register with the Revenue Commissioners for tax purposes prior to purchase anyway.

Property taxes

On purchasing a residential or commercial property in Ireland you will have to pay stamp duty. This is currently 1% on residential properties and 6% on commercial properties and for your solicitor to do your stamp duty return he will need a PPS or tax number for you. If you are non resident and have never had a PPS or tax number you will need to apply for one from the Department of Social Protection. You can learn more about applying for a PPS number here.

Once you buy your property you will have Local Property Tax (LPT) to pay; the amount will depend on the value of the property. You can learn more about local property tax here.

If you buy a commercial property you pay commercial rates to the local authority instead of LPT.

Buying a property in Ireland-some practical steps

One of the first things you will need to consider is instructing a solicitor to act on your behalf. Your solicitor will be able to explain how the conveyancing process works in Ireland, the various steps in a conveyance, the legal difference between a booking deposit and contract deposit, and the legal costs and outlays you will encounter.

You will also be advised to engage the services of a structural surveyor to check the structural integrity of the property, check for signs of pyrite, and check the boundaries on the ground as compared to the Property Registration Authority folio map/filed plan.

You should be aware, too, of the differences between buying a house as opposed to an apartment; the most important one will be that a management company will need to be in place to manage the common areas in a multi unit development such as an apartment development.

Property purchase costs and outlays

When budgeting for your purchase you need to account for:

  • Professional legal fee
  • Value added tax on the legal fee
  • Property registration authority registration fees
  • Structural survey
  • Legal searches to be carried out on closing day to ensure there are no judgments or other unexpected burdens registered on the folio
  • Commissioner for Oaths fees
  • Stamp duty on purchase price

Conclusion

There is no difficulty buying property in Ireland but you will need to obtain a PPS/tax number from the Revenue Commissioners and engage the services of a solicitor early in your search.

Make sure you are dealing with a registered auctioneer/estate agent and that he/she is registered with one of the accredited auctioneering bodies in Ireland and he/she is registered with the Property Services Regulatory Authority.

Good luck!

Registration of Ownership of Property Based on Adverse Possession/Squatter’s Title-the Basics

adverse possession ireland

Have you lived in a property for a considerable period of time and now want to be registered as owner of that property with the Property Registration Authority?

Adverse Possession/Squatter’s Rights

One way to do this is by “adverse possession/squatters rights”.

Section 13 of the Statute of Limitations act, 1957 provides that no action to recover land can be taken at the end of a period of 12 years, unless there was established fraud, mistake, or disability.

The two relevant rules are rule 17 and rule 45 of the Land Registration Rules, 2013.

Rule 17 of the Land Registration Rules, 2013 provides:

Application for first registration based on possession

Where an application for registration of ownership of property is based on possession, or where the applicant has no documents of title in his/her possession or under his/her control in relation to such property, and the Authority is satisfied on inquiry or otherwise that the applicant is in possession or in receipt of the rents and profits of the property, the application may be made in Form 5, with such modifications as the case may require.

Therefore, to succeed with an application to the Property Registration Authority you must prove

  • Dispossession or continued dispossession of the owner
  • Adverse possession taken by you
  • Continued adverse possession for at least 12 years
  • No disability, mistake, or fraud exclusion to your claim.

The dispossession of the true owner must show an intention to exclude the true owner from enjoyment of the property and the possession must be inconsistent with the owner’s enjoyment of the land.

Unregistered Land

Applications for first registration of a freehold interest in unregistered land are made in form 5. (Applications in respect of registered land in form 6.)

The application for a freehold interest in unregistered land based on adverse possession/squatter’s title requires documentary title of at least 15 years starting with a good root of title and showing

  • The person entitled to the property on the date of dispossession
  • That person’s interest on that date
  • Evidence that possession taken was adverse.

You must show that the property has devolved to you and if you claim in succession to others you will have to show who they were, how they acquired their interest, and have written documentation to support your assertions. If you claim to have acquired some of your interest by adverse possession you will have to show the names and addresses of the people against whom you make that claim.

Proofs required

A summary of the proofs you will require include

  • Proof of adverse possession for at least 12 years. This will require an affidavit from you, corroborating affidavits from neighbours, documentary records and vouchers, etc
  • A PRA approved map
  • A general valuation office certificate
  • Details of all rated occupiers during the period of adverse possession and details of all persons registered as owners during the period of adverse possession
  • Death certificates, where necessary
  • Tax clearance certificate from Revenue Commissioners in respect of CAT (Capital Acquisitions Tax)

Registered Land

Section 49 of the Registration of Title Act, 1964 allows for this:

Registration of title acquired by possession.

49.— (1) Subject to the provisions of this section, the Statute of Limitations, 1957, shall apply to registered land as it applies to unregistered land.

(2) Where any person claims to have acquired a title by possession to registered land, he may apply to F62 [ the Authority ] to be registered as owner of the land and F62 [ the Authority ], if satisfied that the applicant has acquired the title, may cause the applicant to be registered as owner of the land with an absolute, good leasehold, possessory or qualified title, as the case may require, but without prejudice to any right not extinguished by such possession.

(3) Upon such registration, the title of the person whose right of action to recover the land has expired shall be extinguished.

(4) Section 24 of the Statute of Limitations, 1957, is hereby amended by the substitution, for “section 52 of the Act of 1891”, of “ section 49 of the Registration of Title Act, 1964”.

Rule 45 of the Land Registration Rules 2013 provides:

Title to registered property acquired by possession
45. Pursuant to Section 49 of the Act, any person claiming to have acquired a title by possession to registered property may apply for his/her registration as owner in Form 6 with such modifications as the case may require. The Authority if satisfied that the said person has acquired the title, may register the applicant as full owner with absolute, good leasehold, possessory or qualified title, as the case may require.

Special Cases

Unproved wills

Strictly speaking, possession on foot of an unproven will is not “adverse possession”. Nevertheless, a section 49 application may be accepted by the PRA if possession of at least 12 years is shown.

Spouses

A person cannot be in adverse possession to his/her spouse.

Lost Deed Possession

This is not adverse possession either, but a section 49 application may be used and accepted by the PRA.

Possession by Personal Representatives

A personal representative, since the commencement of the Succession Act, 1965, could bar the beneficiaries by 6 years’ adverse possession.

Action by Personal Representative

An action can be taken by a per rep of a deceased landowner seeking recovery of land has 12 years to bring the action to recover.

Next of Kin

A next of kin, with an entitlement to a share in an intestate estate, can bar the rights of other next of kin by adverse possession.

Section 125 of the Succession Act, 1965 states that where two or more persons enter into possession of land they shall be deemed to have entered and acquired title by possession as joint tenants as regards their own shares and the shares of the other next of kin who do not enter.

The Supreme Court case Gleeson v Feehan [1997] 1 ILRM 522 held that “the possession of lands by members of the family who had remained thereon was at all times adverset to the title of the true owner, the President of the High Court, in whom the entire estate in the lands was vested pending the raising of representation, and as they had been in possession for over 12 years, had acquired a title to the land as joint tenants”.

Relevant Sources

Land Registration Rules 2013

Adverse Possession – Title by Adverse Possession to Registered land guide from Land Registry

Statute of Limitations, 1957

Registration of Title Act, 1964

Deposits When Buying Property In Ireland-the Legal Position

property purchase deposit

Are you buying a house or apartment?

Are you wondering about the deposit you will have to pay, and whether you can get it back if the sale does not go ahead?

Let’s take a look and I will clarify the situation for you.

First, you need to understand that you will pay two deposits:

  1. A booking deposit to the auctioneer
  2. The contract deposit

The Booking Deposit

The booking deposit you pay to an auctioneer is fully refundable. You can change your mind about buying the house for good, bad, or no reason and you are entitled to get your booking deposit back.

Just make sure the booking deposit is paid to the auctioneer, not the vendor, and get a receipt confirming it is a booking deposit. You can also, if you feel it necessary, visit the website of the Property Services Regulatory Authority and check the auctioneer is on the public register.

The Contract Deposit

The contract deposit is payable when you sign and return the contracts to the vendor’s solicitor.

Let’s assume you are buying a property for €200,000. The contract deposit will be 10% of the purchase price-that is, €20,000.

So, when you sign the contracts you will have to pay €20,000 less whatever booking deposit you have paid to the auctioneer.

Let’s assume you have paid €5,000 booking deposit to the auctioneer; then you will have to pay €15,000 when you are signing and returning the contracts.

Once the vendor has signed the contracts and returns one part to your solicitor there is a binding contract in place. At this point you will not get your deposit back if you change your mind.

However, there is an exception to this: if your solicitor had inserted a “subject to finance” clause in the contract and the finance does not, for whatever reason, come through then you may be entitled to the deposit back on the basis that there is no binding contract in place as the contract was “subject to finance”.

Be very careful, though: failure to complete a sale can lead to the forfeiting of your deposit.

Also, the vendor can actually sue you for the balance of the purchase price and to compel you to complete the sale-a remedy of specific performance. This will not be of much use, however, if you are simply unable to complete.

But damages will be payable if the vendor rescinds the contract by serving a Completion Notice and you are unable to complete (see below).

In addition, the vendor can sell the property to someone else and if they get a lower price he can sue you for the difference-that is, the drop in value or sales price. First, he needs to serve a Completion Notice on you.

Stakeholder

The vendor’s solicitor holds the contract deposit as ‘stakeholder’. This means he/she is personally responsible to both purchaser and vendor for its safe-keeping. The stakeholder cannot hand over the deposit to the vendor until the vendor is entitled to it.

Completion Notice

Once the closing date has passed and you have been unable to complete the purchase the vendor can serve a Completion Notice on you. This makes time of the essence in relation to completing the sale.

When the time in the Completion Notice has passed the vendor can rescind (bring to an end) the contract and pursue you for damages and loss arising from your failure to complete the transaction.

Buying at Auction

When you buy at auction the procedure is slightly different. When the hammer falls and you are the highest bidder you will not be paying a booking deposit, but will have to sign the contract and pay the contract deposit.

If you are unable to complete, therefore, you will lose your deposit.

So, you need to carry out all your research about the property you have your eye on before you go to the auction; doing so later on is too late and is a stupid, avoidable mistake. (Learn more about buying property at auction here).

Conclusion

Booking deposits are refundable; contract deposits are not so get professional advice and carry out your due diligence before signing the contract and paying the contract deposit, not after.