Category: Property Purchases and Sales

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Property Law Property Purchases and Sales

Commercial Property Investment-4 Vital Things to Consider

Thinking about buying a commercial investment property? There are a number of factors you will need to consider. 

Here are four important ones: 

1. The tenant

The quality of your tenant is critically important because it will determine how sound your rental income stream will be. Having a major retail brand or franchise as a tenant is a huge advantage over having a one man or woman business.

If there is difficulty in collecting the rent you can certainly go to Court and get a Court order for vacant possession and a judgment for the outstanding rent and costs. But this judgment will be of little value if you cannot enforce it and your debtor simply does not have the money to pay the judgment amount. This is a strong possibility with an inexperienced sole trader.

You will also have incurred your own legal costs and you can be sure your solicitor will want to be paid.

So, a weak tenant carries inherent and obvious risks from the outset.

2. The physical condition of the property

The physical condition of the property is worth considering carefully if you want to avoid a property which will require significant expenditure in maintenance or repair and refurbishment. The type of lease in place will determine who is responsible for repairs and maintenance to the building so this would want to be checked before investing.

3. Location

The location of your investment property is vitally important for a number of reasons. Firstly, from the perspective of selling the property on when you are ready. Secondly, if you have to evict the tenant or he does not renew the lease you will have to find another tenant and the location, if good, will make this a much easier task.

On the other hand the business that was carried on may have been one which relied to a large extent on the business and personal contacts and reputation of the tenant. It may be difficult to re-let the premises if it is in a secondary location and is only suitable for a small number of businesses.

4. The legals

You will need to ensure that all legal, planning, and regulatory matters are in order. This involves checking that good title is being offered, the planning and building regulations/building bye-laws are in order, the terms and conditions of the existing lease, and any rates or management company liabilities have been fully discharged and there will be no unpleasant surprises for a buyer of the building.

Conclusion

Buying a commercial investment property is broadly similar to buying a residential investment property. You are more likely, however, to have a sitting tenant with a commercial property and you may be buying a property that is subject to a long commercial lease-for example for 15, 20, or 35 years.

Categories
Property Law Property Purchases and Sales

Signing a Contract in Trust Where Principal Did Not Exist-Interesting Court of Appeal Decision

Signing contract in trust

The Court of Appeal handed down an interesting decision in this case involving the sale of land.

The facts were that Mr Gibbons was selling real property and Mr Doherty signed the contract for sale in trust and on behalf of a limited company. Mr Gibbons then nominated the beneficiary of the trust and the purchaser as ADT Investments Limited.

ADT Investments Limited was unable to complete the purchase and Mr Gibbons then sued Mr Doherty and ADT Investments Limited for specific performance of the contract. Mr Gibbons argued that as the company was not incorporated at the time of execution of the contract by Mr Doherty he was entitled to sue Mr Doherty in his personal capacity for specific performance.

The High Court refused to agree with Mr Gibbons who then appealed to the Court of Appeal.

The Court of Appeal agreed with the High Court decision and dismissed the appeal.

The Court of Appeal held General Condition 30 of the Law Society General Conditions of Sale, 2001 Edition permits a person to sign a contract in trust or as agent.

And importantly it does not expressly provide that the beneficiary or principal be in existence at the time of the contract. It also observed that that commercial reality sometimes demands that contracts be signed in trust and once the principal is in existence to complete the transaction there is no obvious problem.

You can read the full decision of the court of Appeal here (Gibbons -v- Doherty & anor [2019] IECA 275)

Categories
Property Law Property Purchases and Sales

Problems arising with title to your property-statutory provision to the rescue?

buying irish property from abroad

The Land and Conveyancing Law Reform Act 2009 may come to your rescue if there is a problem with the title to a property.

Recitals

Section 59(1) provides

59.— (1) Recitals, statements and descriptions of facts, matters and parties contained in instruments, statutory provisions or statutory declarations 15 years old at the date of the contract are, unless and except so far as they are proved to be inaccurate, sufficient evidence of the truth of such facts, matters and parties.

Rent of leasehold

Section 59

(2) Where land sold is held under a tenancy (other than a subtenancy), the purchaser shall assume, unless the contrary appears, that the tenancy was duly granted; and, on production of the receipt for the last payment due for rent under the tenancy before the date of the actual completion of the purchase, the purchaser shall assume, unless the contrary appears, that all the covenants and provisions of the tenancy have been duly performed and observed up to the date of actual completion of the purchase.

All estates

Section 76 states

76.— (1) Subject to subsection (2), a conveyance of land passes all the claim, demand, estate, interest, right and title which the grantor has or has power to convey in, to or on the land conveyed or expressed or intended to be conveyed.

(2) This section takes effect subject to the terms of the conveyance.

Receipt clause

Section 77 (1) states

77.— (1) A receipt for consideration in the body of a deed is sufficient discharge for the consideration to the person giving it, without any further receipt being endorsed on the deed.

Implied covenants

Section 80 Land and Conveyancing Law Reform Act 2009 sets out the implied covenants in a conveyance for value. These implied covenants would include

  • The vendor has full right to convey the property
  • The vendor warrants a covenant for quiet enjoyment
  • The vendor warrants the property is free from encumbrances
  • The vendor will execute further assurances to vest the interest contracted, if necessary.

Statutory acknowledgment and undertaking

Section 84 binds the person in possession of documents to produce them for inspection or in court to establish title and to furnish copies on request.

Categories
Property Law Property Purchases and Sales

How to Negotiate Successfully-10 Tips for Effective Negotiations

negotiation tactics

Many people do not like to negotiate or haggle. But it is essential in our daily lives and we are regularly forced to negotiate whether we like it or not.

It may be with a loved one, with a child, with a service worker at an airline desk, with a receptionist in a hotel, with a Judge or member of an Garda Siochána, with a referee on a sports pitch, with an adjudicator at a WRC hearing, or when you are buying something like a car or a house or business.

If you accept this, you might as well learn how to do it successfully and for the best possible outcome.

I have negotiated to buy and sell property for over 30 years and I have learned, through practice and research, some useful tactics to the best results.

Let’s look at what I have learned, shall we, in the context of buying a house?

1. Listen carefully and aggressively to the other side

You need to listen very carefully to what the other side is saying because you will usually pick up some vital clue as to the other party’s real position-their real position as opposed to what the auctioneer says is the reason for sale. You may not meet the vendors themselves but if you do it is a good opportunity to pick up some vital clues about the property and the motivation for sale.

You need to practice the same aggressive listening skills when speaking with the auctioneer and the staff working in his/her office. It is amazing what you might hear in an unguarded moment when you speak with a busy receptionist or support staff.

You may not hear anything but keep in mind you have two ears and one mouth for a reason.

2. Adopt a friendly/playful voice

The tone of your voice and your general demeanour are factors in how the other side will react to you and your position. A friendly, non-threatening voice is the one I have found most helpful.

3. Tactical empathy

Showing empathy for the other party’s position is valuable and is only possible when you follow the advice in number 1 above: listen carefully to the other side.

4. Be prepared to walk away

No deal is better than a bad deal and you do need to be prepared to walk away. Splitting the difference is a lazy, misguided way of negotiating.

5. Getting to ‘no’

Forget about getting to ‘yes’ because you can very easily get to a false ‘yes’ which will not be delivered upon; you are better off getting to ‘no’ from the other side as you will have a better idea of their true position.

6. Deadlines can be an ally

You can make time your ally by recognising that even if a deadline is missed a new one can easily be introduced. Don’t rush into a bad decision, though, just to meet a deadline-let the other side worry about the deadline.

7. Stay calm

Keep your emotions in check, adopt the approach that ‘it’s just business’ and there is no need to lose the head or get carried away.

8. Most important word in negotiations

The most important word in negotiations is ‘fair’. If you tell the other side you only want what’s fair or want a fair deal you are more likely to get a deal.

9. Don’t ask ‘why’

Ask how or what questions, not ‘why’ questions. For example, ‘how am I supposed to do that?’, ‘how am I supposed to pay that much?’ Such ‘how’ questions will encourage the other party to bid against themselves and try to find a solution to your problem.

10. Arrive at a precise, specific final offer

Make whatever offer you like-something between 60% and 80% of what you are eventually prepared to pay-and increase this by reducing increments to arrive at a final specific, odd number-never an even number.

This gives the other party the impression that this is your true final offer and you have thrown everything at it to do a deal. Offer an even figure and the other party will not accept you are at your limit.

Conclusion

Negotiation is not an art that you cannot learn, or which is only something that you can do naturally and you are a born haggler. Far from it. There is a science to negotiating, too, and following the 10 tips above will help you getter better deals. Over time you will get better and better at it.

Good luck!

Categories
Property Law Property Purchases and Sales

Vat on Property in Ireland-the Essentials

Vat on property is something that is easy to overlook if you are buying commercial property. It may also apply to residential property, depending on the circumstances, so you need to be careful and obtain expert tax advice if there is any doubt in your mind.

The current situation with regard to VAT and property is the regime in place since 2008.

Since then most property transactions are exempt but there are important exceptions where the option to tax the supply of the property is exercised in certain situations.

When we refer to ‘property’, remember, we are also referring to leasehold property in addition to freehold interests.

Commercial property, new buildings

Vat is chargeable at 13.5% on a new building. A ‘new building’ is

  1. The first supply of a completed property within 5 years of completion
  2. The second and subsequent supply of a property, if the supply is made within five years of completion, and the building has been occupied for less than two years.

Commercial property, second hand buildings

Properties developed after 1st July, 2008 are exempt but the vendor and purchaser can jointly opt to tax.

If this option is not exercised the vendor/developer will face a clawback of a proportion of the vat which he has already reclaimed from Revenue on the acquisition or redevelopment of the property. This clawback will be calculated on the vat life of the property.

Leasehold property

After 1st July, 2008 all lettings are exempt from vat.

The landlord can, however, elect to tax and charge vat on the rent at 21%. If he does not opt to tax he will face a clawback based on the vat he has already claimed on the development and/or acquisition of the property.

This option to tax does not arise if the landlord himself or a person connected to him occupies the building.

Assignments of leases

The assignment of surrender of a long lease will be chargeable to vat if the tenant who is the assignor was entitled to reclaim vat on acquiring the original lease or the development of the property.

Residential property

The first supply of new residential property is liable to vat.

Valuable resource

This page from the Revenue Commissioners is worth reading closely if you are concerned about vat on property. You are strongly advised to obtain tax advice from an accountant or tax consultant if you suspect that the vat position is not clear in either your supply or purchase of property.