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!

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.

Buying a House Versus an Apartment-Which is the Best Buy?

 

buying a house ireland

Are you thinking about buying your first residential property?

Have you decided whether you prefer a house or apartment?

In this piece I will give you my opinion about which is the best buy. I am assuming, in this article, you wish to live in the house, and not buy the property as an investment property.

But first, why should you pay any attention to me?

Firstly, I bought my first property in 1986. It was a small shop unit in Dublin with a one bedroom apartment overhead. Since then I have bought sites, other retail businesses, a petrol station, a pub, sites with planning permission, sites without planning permission, apartments, and houses.

I have also built a small (8 units) block of apartments. So, I have had a pretty long and, for the most part (with the exception of the property crash a few years ago), successful relationship with buying and selling property.

Let’s take a look, shall we?

The first big difference between buying a house and apartment is the legal interest you will be acquiring. Buying a house will mean you are buying a freehold interest; buying an apartment will involve acquiring a long leasehold interest.

From a legal perspective, this is not a problem. The leasehold for the apartment will be a long lease with a very small, insignificant rent. I have written elsewhere on this site about the differences between buying an apartment and house from a legal perspective.

The Management Company

Where problems may arise, however, is in the whole area of the management company.

In an apartment development each apartment owner becomes a member of the management company which will be needed to be set up. This management company’s job will be to manage and maintain the common areas-for example stairs, lifts, roof, of the development-and will have to appoint a managing agent who will manage it on a day to day basis.

However, problems with management companies can be common enough and some apartment developments are not well maintained with an understandable frustration for apartment owners and occupiers. Property owners will then retain the annual management company service charge, thereby making matters worse because the management company has even less money to provide the services.

Management companies also have to prepare and file annual accounts and collect the management fees from the owner of each unit.

In addition, it may have to pursue the owners who won’t pay by way of debt collection procedures which will be time consuming, expensive, and leave a bad taste all around.

Another factor to consider is that many apartments were purchased by investors as investments and future pension pots. This means that a large percentage of occupiers in an apartment block are likely to be renters. If you have a young family this may be less attractive for you given the likely higher turnover of occupants, and the lack of social cohesion in the “neighbourhood”.

Physical Problems

There is also the problem of anti social behaviour and noise pollution in an apartment complex versus living in a terraced or end of terrace house.

A problem I have also encountered from my own personal experience is leaking from balconies, and even bathrooms, causing damage being to neighbouring units. These problems can be hard to sort out, expensive, and lead to bad feeling between neighbours.

In summary, the problems I have seen with apartment living are

  1. Poor management companies or agents
  2. Noise pollution and hassle
  3. Apartment units more likely to be owned by investors than owner occupiers.

The advantage of buying an apartment versue a house are

  1. They are, all things being equal, cheaper than a house
  2. They are lower maintenance, for example you will not have any garden to maintain.

Conclusion

My advice, and this is not legal advice but practical property advice from my own experience and observation since buying my first one in 1986, is that I would choose a house over an apartment if I could.

That is assuming that all things were equal, and we are comparing like with like-that is, a house and an apartment in the same area- I would choose a house, especially if I had a young family. If you are a retired person, then an apartment may well make more sense and you will not want to have to maintain a garden, access to public transport may be better etc.

Obviously you need to take into account your own personal circumstances-for example your family situation, your work circumstance, and budget-before choosing.

And my advice generally in relation to buying a property is to buy the worst property in the best area, rather than the best property in the worst area.

You can change many things about your property and make improvements over time, but you can never change its location.

Naivety When You Are Buying Your First Property is Your No. 1 Enemy

buy house ireland

Are you thinking about buying your first property? It is an exciting, and terrifying, time.

One of the biggest dangers you need to guard against is naivety.

It’s not your fault, and everyone has to start somewhere with their first purchase. But you need to ensure it is a sound one. And you must guard against your inexperience and naivety.

I have bought and sold properties in Ireland since 1986 and you can learn from what I have learned, and my mistakes.

Let me explain my thesis that naivety is one of your biggest dangers in the process. There is a number of ways you can be naive, and, quite frankly, taken advantage of. This is because there is a number of specific but diverse activities you will engage in before you successfully move to your new home.

These activities include

  1. Assessing where to buy your new property-the location
  2. Assessing the physical condition of the property
  3. Negotiating the deal with the vendor or, more likely, the auctioneer
  4. Organising the finances.

Each of these four areas is a potentially tricky area on its own, but combine it with each of the other three areas and it is easy to see how you can make costly mistakes through naivety, and the fact that this is your first time.

The best approach to take is to ensure you have good advice every step of the way, don’t cut corners, and engage the help of professionals where you can.

The Structural Soundness of the Property

For example, don’t take chances with the structure of the property, and its physical boundaries. Have these checked out by an engineer/surveyor/architect who should also carry out a structural survey on the property to ensure the structural integrity of the property and no evidence of pyrite.

Ensure, too, that the surveyor had professional indemnity insurance and ask him any questions that are bugging you after he has given you his report; for example, a) is the property structurally sound? and b) do you recommend further investigation be carried out?

Negotiating the Deal

Negotiating the deal-always remember when you are buying the property that the auctioneer has only one client: the vendor. Don’t rely entirely, or at all, on representations or blandishments made by the auctioneer.

The likelihood is that when the contract is issued there will be a special condition in it which states you understand that you cannot rely on any other representations or warranties made prior to the issue of the contract. This, therefore, legally rules out you relying on what may have been promised by an enthusiastic, friendly auctioneer.

Organising the finance

Shop around for the best deal and be aware that the person in the bank who is selling you the loan will not be the person who stipulates the conditions set out in your loan offer. In the same way that you take what the auctioneer has told you with a pinch of salt you need to also understand that the front line person for the lender who is sending applications up the line has little or no influence over the loan conditions which will ultimately emanate from the bank’s legal and/or securities section.

A mortgage broker or advisor might be a useful tool in your toolbox provided that he/she is providing you with independent financial advice and has only one client: you.

Be cautious about advisors or brokers who have agencies with specific institutions or have some type of commission arrangement for selling a particular loan.

Through the whole process when you are dealing with someone-auctioneer, bank, vendor,engineer- always silently ask yourself: who is his/her client. If it is not you, be vigilant.

Conclusion

My advice to protect you against your inexperience and the fact that you are a “virgin” at this:

  • Use your head and get advice from those who have been through the experience of buying and selling property
  • Don’t be afraid to pay for professional advice, as buying property is a big investment and commitment
  • Keep a cool head and always remember who is acting for you, and who is not on your side.

These same fundamental principles also apply if you are buying a commercial property.