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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

The Formation of the Contract in Purchase or Sale of a Property

In order for any contract to be enforceable you need 5 things:

  1. The parties must have the legal capacity to enter into a contract
  2. They must intend creating legal relations
  3. The contractual terms must be certain
  4. There must be offer and acceptance
  5. There must be consideration.

For the sale of land or real property it was the case that a written note or memorandum was made which was signed by the person to be charged with the contract. Although this requirement was relaxed by reason of the equitable doctrine of part performance.

Doctrine of part performance

This doctrine held that an oral contract for the sale of land, where no note or memorandum existed, could be enforced by the party seeking to enforce the contract has partly performed his actions under the contract and the other party has acquiesced in those acts of part performance.

Land and Conveyancing Law Reform Act 2009

This Act changed the law by repealing the old Statute of Frauds (Ireland) Act, 1695 as follows:

Section 51.— (1) Subject to subsection (2), no action shall be brought to enforce any contract for the sale or other disposition of land unless the agreement on which such action is brought, or some memorandum or note of it, is in writing and signed by the person against whom the action is brought or that person’s authorised agent.

[SF 1695, s. 2]

(2) Subsection (1) does not affect the law relating to part performance or other equitable doctrines.

(3) For the avoidance of doubt, but subject to an express provision in the contract to the contrary, payment of a deposit in money or money’s worth is not necessary for an enforceable contract.

Memorandum/Note of Agreement

The following matters should be included in the memorandum

  1. The parties
  2. The property
  3. The consideration
  4. Any other provisions agreed between the parties

Where the conditions of common law and the Land and Conveyancing Law Reform Act 2009 are satisfied an enforceable contract for the sale of land (real property) comes into being. This type of contract is known as an ‘open contract’ because all the terms of the contract are not set out in the memorandum.

Closed contract

A closed contract, by contrast, is one in which the parties set out all the terms of the agreement in a formal agreement. It is the practice in Ireland that the standard form Contract for Sale produced by the Law Society of Ireland is used.

You can learn more about the standard form contract for sale here. This is the contract that will be used in property transactions in Ireland.

Categories
Contract

Contract Law in Ireland-the Essentials

contract law in ireland

We all come into frequent contact with contracts in our daily lives.

Public transport, shopping, visiting your solicitor/doctor/physiotherapist, buying a second hand car, buying a sliced pan in Tesco or Supervalu-the instances of contract law being relevant in your day to day living are infinite.

Let’s take an overview of contract law in Ireland, shall we?

First, what is a contract?

A contract is, at its essence, an agreement between 2 or more parties. It has been defined as an agreement, enforceable at law between two or more parties whereby rights are acquired by one or more persons in return for certain acts or forbearances on the part of the other or others.

By and large, and subject to certain exceptions, the parties to the contract are free to agree their own terms and conditions.

The Components of a Contract

There are a number of essential ingredients to form a valid contract. There must be

  1. Agreement between the parties
  2. Consideration (something of value)
  3. Intention to create legal relations.
  1. Agreement

In order for agreement to be arrived at there must be an offer by one party and acceptance by the other party. The acceptance must be without qualification and the offer must be clear and unequivocal.

i) The Offer

The offer may be oral or in writing and made to one or more persons. An offer can be terminated in 3 ways:

  1. It is accepted
  2. It is rejected
  3. A counter-offer is made.

An offer can also be withdrawn before acceptance, provided this withdrawal is communicated to the other party. Offers do not last indefinitely and will lapse after a reasonable period of time.

What is considered ‘reasonable’ in any situation will depend on the circumstances. They can also lapse after passing a time limit.

An offer must be intended to become binding when accepted, and not just an invitation to treat or the provision of information or mere statements of intention. (An invitation to treat is where one party invites the other party to make an offer-for example, when a solicitor issues a contract for the sale of property-this is an invitation to treat, not an offer. Advertisements would also be considered invitations to treat.)

ii) Acceptance

Acceptance of the offer, if it is to be valid, must also be clear, unambiguous, and unconditional. Acceptance can be verbal, in writing, or clear from the conduct of the party who is accepting. If acceptance does not mirror the offer it may instead become a counter-offer with no agreement or contract in place.

2. Intention to create legal relations

An enforceable agreement only comes into being if the parties intended that they enter into legal relations. Business agreements are normally assumed to be legally binding whereas social agreements or contracts may not be.

If you promise to bring your child to GAA training but fail to do so he cannot sue you on foot of that failure.

Correspondence marked ‘without prejudice’ or ‘subject to contract’ is not intended to be legally binding until the parties have agreed all terms and conditions.

3. Consideration

Consideration-something of value-is a vital part of an enforceable, binding contract. An example of consideration is the price you might pay for goods or services.

Consideration can also be some forbearance or loss or detriment suffered by one of the parties. Both parties need to provide some consideration for the contract to be binding and the consideration must have legal value, even if this is only 1 euro or a peppercorn as the value of the consideration is irrelevant.

Past consideration-that is, consideration given before the parties entered into the agreement at hand-is not sufficient consideration to enforce the contract.

Oral and Written Contracts

It is not essential that a contract is committed to writing.

Clearly, it will be easier to ascertain what was agreed between the parties in the event of a dispute, however. A contract can also be inferred from the course of conduct between the parties.

When you go into a shop to buy milk or bread you are entering into a contract with the retailer, albeit the contract will not be in writing.

However, statute decrees that certain contracts must be in writing or must be evidenced by a memorandum in writing-for example, the sale of land. This memorandum must show the parties, the price, and the property.

Other Contractual Issues

The parties must agree freely to enter into a contract agreement. Undue influence and duress will make a contract voidable.

Courts will also refuse to enforce contracts which are contrary to public policy or which are made to pursue an illegal object.

Capacity-that is, legal capacity, is required to enter into contract.

Certain individuals such as minors, persons under the influence of drink or drugs, individuals suffering from mental illness are not deemed to have the capacity to enter into a legally binding contract and there are rules surrounding contracts for persons in these categories.

Limited companies can only enter into contracts permitted by their company memorandum of association.

Terms of the contract

What is contained in the contract-the meat and potatoes-are various terms and conditions. These terms can be express or implied.

Express terms are those set out in writing in the contract itself and are the nuts and bolts of the agreement struck between the parties.

Various terms can be implied into a contract, for example those implied by statute or common law or the constitution or custom and practice in the industry. Terms can also be implied to give the contract business efficacy-that is, make sense of it.

Conditions and warranties

The terms of the contract may be conditions or warranties. Conditions are fundamental to the contract and the breach of a condition will allow the other party to repudiate the contract.

Warranties, on the other hand, are not as fundamental and breach of a warranty may give rise to a claim for damages or compensation but will not necessarily give the right to repudiate the contract and call it at an end.

Non Binding Contracts-Void, Voidable, and Unenforceable

A void contract is an agreement without legal effect. This may be due to a fundamental mistake by both parties when arriving at the agreement, which mistake must go to the root of the agreement. A minor entering into a contract to buy property would also be void.

The usual remedy for a void contract is rescission which allows a party to set the agreement aside and be restored to his former position and both parties are released from the contract and its obligations.

A voidable contract is one which allows one of the parties to terminate the contract due to relying on misrepresentation of a material fact. However, that party can also affirm the contract. Certain statements, though, for example sales guff, are not intended to be relied upon.

The innocent party can treat the contract as being at an end and seek to recover damages.

An unenforceable contract is one which the Courts will not enforce as there is something missing-for example a written memorandum of the agreement/contract in a sale of land, which is required by statute. In this situation if one of the parties refuses to perform the contract he cannot be forced to do so.

Ending a contract

How is a contract brought to an end? In a number of ways.

  1. By performance

Both parties discharge their obligations under the contract. Performance must be complete, not partial. If the performance is prevented by one party the other party may sue on a quantum meruit basis to prevent unjust enrichment.

2. By agreement

The parties can agree not to pursue the contract and waive their rights under it.

3. Discharge by notice

An employment contract, for example, can be terminated by giving the required notice period. If there is no notice period provided in the contract reasonable notice must be given. What’s reasonable will depend on the circumstances.

4. Discharge by operation of law

5. Discharge by frustration

A contract can become frustrated when it becomes impossible to perform due to circumstances beyond the control of the parties-for example a sales representative or lorry driver losing his driving licence may be unable to fulfill the contract, no matter how willing he may be.

6. Discharge by breach

A contract can be discharged by breach of a condition of the contract. The wronged party can treat the contract as discharged or he can continue with the contract and sue for damages.

If the breach is breach of a warranty the wronged party can sue for damages only.

Remedies for breach of contract

  • Damages-this is the payment of monetary compensation for breaches of the contract. The damages are intended to put him in the position he would have been in if the contract had been performed.

The damages awarded can range from nominal to exemplary. You can read more about damages in civil law here.

  • Quantum meruit-read about quantum meruit here. Quantum meruit is the payment of a reasonable sum for the work done, as opposed to damages for breach of contract or compensatory damages.
  • Specific performance-this is an equitable remedy which directs the party in breach to perform his part of the contract.
  • An injunction-this is another equitable remedy which orders a party to do or refrain from doing an act in pursuance of the contract

Conclusion

The above is a 10,000 foot view of contract law in Ireland. There is statute law dealing with contract, too, such as the Sale of Goods and Supply of Services act, 1980 and the Consumer Protection Act, 2007 which deals with consumer contracts in Ireland while the Land and Conveyancing Law Reform Act 2009 deals with contracts for the sale of land. (Learn more about property law in Ireland here).

Categories
Wills and Probate

The Creation of Trusts in Wills-The Essentials

Are you looking to make provision for a child in a tax efficient way?  A bare trust is one way to do this.

Trusts have also been subject to close scrutiny by those looking to put assets beyond the reach of creditors in the last few years in Ireland.

If you have significant debt problems and are looking to put assets out of reach of creditors, a trust can be useful. But it is not foolproof and can be attacked and unraveled by creditors.

On the other hand you may have assets, no debt problems, but the person(s) who you would like to give those assets to may have debt issues.

And you are, understandably, afraid that those hard earned assets of yours will eventually end up in a great big pot for distribution to the creditors of your loved one.

This is the type of circumstance where a trust may be more usefully deployed, provided it is drafted correctly.

Anyway, here is the general background to trusts..

Trusts that can be used in drafting wills include:

  • a discretionary trust
  • a trust for sale
  • a Settled Land act trust
  • an interest in possession/fixed trust.

What is a trust?

Discretionary Trusts

A discretionary trust fund is one where the only interest that potential beneficiaries have is the right to be considered for an appointment of property. The beneficiaries do not have an absolute right to the trust fund so do not have an interest in possession.

A discretionary trust is useful where

  • There are young children
  • The testator wishes to postpone mainstream capital acquisitions tax
  • The testator wants to adopt a “wait and see” approach to see how potential beneficiaries will turn out.

The trust fund, the beneficiaries, and the trustees must be set out in the will.

Here is an example:

In my Will where the context so admits

1. The beneficiaries shall mean and include:

a) My children

b) My grandchildren born within the trust period hereinafter defined.

2. The trust fund shall mean

a) The sum of €25,000 or the whole of my estate after the payment of my debts, funeral, testamentary, administration expenses and legacies and

b) All money, investments or other property accepted by the trustees as additions.

c) All accumulations (if any) of income directed to be held as an accretion to capital and

d) The money, investments and property from time to time representing the above.

The definition of the trust fund can be as narrow or as wide as the testator chooses. It can be a specific sum of money, a property, or the residue of the estate.

The trustees need to be defined also.

Here is an example:

I appoint Jim and Mary to be trustees (my trustees) of my Will and I appoint them trustees for all the purposes of the Settled Land Acts 1882 to 1890, the Conveyancing Act 1881, the Land and Conveyancing Law Reform Act 2009 and sections 57 and 58 of the Succession Act 1965.

Once the trustees, trust fund, and beneficiaries are defined the substantive trust must be created.

Here is an example of a substantive trust:

I give devise and bequeath the trust fund to my trustees upon trust either to retain or sell it on the following trusts:

Until the vesting day to pay the capital and any income arising from it to any one or more of the beneficiaries in such shares and at such times as my trustees in their discretion think fit without obligation to make payments to or for the benefit of all the beneficiaries or to require equality among those to whom payments are made and on the vesting day to divide what remains of the capital and accrued income equally among the beneficiaries then living without regard to payments already made to them.

Trusts for Sale

This trust is where the trustees are under an obligation to sell, invest the proceeds and hold the proceeds on the terms of the original trust.

This type of trust puts the trustees in control of the timing of any sale of trust property and they cannot be forced to sell, even if a beneficiary wants them to do so.

To incorporate such a trust in a will you need to first decide:

  1. Who are the trustees and
  2. What is the trust property.

Here is an example of a trust to sell:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever situate unto my trustees upon trust to sell the same and to hold the proceeds of such sale or my residuary estate for so long as the same shall remain unsold upon trust for my daughters Michaela Smith and Susan Sarandon in equal shares.

There is no power to postpone a sale in the wording above. If such as power is to be given then this will give that power:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever situate unto my trustees upon trust to sell the same with power in their absolute discretion to postpone the said sale and to hold the proceeds of such sale or my residuary estate for so long as the same shall remain unsold upon trust for my daughters Michaela Smith and Susan Sarandon in equal shares.

If a property is not held upon trust for sale then a power of sale must be given to the trustees in the will.

An ultimate default trust will also be needed to cover the situation where Michaela and Susan referred to above predecease the settlor/testator or the trust fails for want of a beneficiary. If this default trust is not inserted the danger is that the property will pass on intestacy.

Settled Land Act Trusts

The Settled Land Act, 1882 defines a “settlement” of land. A “settlement” is where real property is held by a succession of interests or where a minor has an interest in property.

Settled Land Act Trusts are very useful for the protection of a life tenant who has the power of sale under the Settled Land Acts.

An example of a settlement would be

To my wife for life and thereafter to my son Sheamus.

One of the benefits of this type of settlement is to fix the time at which an interest will vest in the remainderman (Sheamus above) and to postpone the payment of tax to sometime int eh future.

Fixed Trusts/Interest in Possession Trusts

A fixed trust is one in which the interests of various beneficiaries are fixed at the time of the creation of the trust.

They can be very useful to

  • Create an immediate interest in possession eg a life interest
  • Provide clarity as to who will get the trust property at a fixed time in the future
  • Allow a testator to postpone the vesting of an interest until a beneficiary reaches a certain age
  • Avoid discretionary trust tax provisions.

It is worth noting the distinction between a benefit vested in possession and a benefit vested in interest.

Eg of a benefit vested in possession:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever located to my daughter Emily.

Eg of a benefit vested in interest:

I Give Devise and Bequeath all the rest residue and remainder of my estate of whatsoever nature and wheresoever located to my daughter Emily and on her death to my son John.

John has a benefit vested in interest.

Trusts and Taxation

You would be well advised to obtain taxation advice about using a trust because deemed disposals of property are said to have taken place for capital gains tax purposes at different times, depending on the wording of the trust instrument/will.

The Land and Conveyancing Law Reform Act 2009

The Land and Conveyancing Law Reform Act 2009 has made significant changes to trust law in Ireland eg the Rule Against Perpetuities which may have affected a trust has been abolished.

The Land and Conveyancing Law Reform Act 2009 introduced a simpler way of dealing with trust land which up to then had been governed by the Settled Land Acts, 1882-1890. The 2009 Act covers all trusts of land ,whether created by will or otherwise.

The Land and Conveyancing Law Reform Act 2009 also sets out the powers of trustees of land, procedures for resolution of disputes, jurisdiction of the Courts to vary and make other orders in relation to trusts, and offers protection for purchasers of trust land.

Categories
Property Law

The Different Types of Tenancies and Leases in Irish Law

leases-property-law

Tenancies or leases fall into two broad categories:

  1. A tenancy for a fixed term
  2. A tenancy from year to year or other period of time.

Fixed Term Tenancies

A tenancy can be created for any fixed term of any duration. Once the fixed term is arrived at the interest of the tenant in the property ends and the lessor is entitled to possession.

Periodic Tenancies

A periodic tenancy runs for a period of time which can be a week, month, year, etc. It automatically renews on the expiry of the initial period and will continue indefinitely until the lessor serves a notice to quit.

The notice periods are set by statute and common law. These tenancies can be created expressly or by implication.

Tenancy at Will

A tenancy at will is a common law concept and involves the person being in possession of the property for an indefinite period with the consent of the owner. This type of tenancy can be terminated by either party at any time.

It is worth noting that the relationship of landlord and tenant does exist but the tenant has no interest in the land which he can transfer to third parties. His tenure is ‘personal’ between himself and the landlord.

This type of tenancy is not covered by landlord and tenancy legislation and is deemed to end one year after it commences unless determined beforehand.

Tenancy at Sufferance

This type of tenancy arises by operation of law and occurs when a tenant is in possession at the end of the lease without the landlord’s consent and without paying rent. However this tenant is not a trespasser as his original entry into possession was lawful.

A tenant at sufferance has no interest in the land and is not in a landlord/tenant relationship; in fact, he is only called a ‘tenant’ because his original entry into possession was lawful.

Statutory Tenancy

A statutory tenancy arises under various pieces of legislation such as the Housing (Private Rented Dwellings) Act, 1982 and the Landlord and Tenant (Amendment) Act, 1980.

Part 4 of the Residential Tenancies Act, 2004 also provides relief to tenants who have been in occupation of a dwelling under a tenancy for a continuous period of 6 months.

Temporary Convenience Lettings

These lettings can arise in residential or commercial situations. If they are genuinely for the temporary convenience of the owner of the property they fall outside the statutory protections afforded to tenants under landlord and tenant legislation.

In such commercial lettings, it is essential that it is stated in the letting agreement that the nature of the temporary convenience is set out. There is no legal definition of ‘temporary convenience’ but it must be for the bona fide temporary necessity of the landlord.

Otherwise statutory protection and controls will be available to the tenant.

There is no limit on the duration of such lettings.

Conclusion

It is clear that there is a wide range of tenancies which can exist for both commercial and residential properties.

The Land And Conveyancing Law Reform Act 2009 provides that the relationship of landlord and tenant does not now arise in relation to a tenancy at will or tenancy at sufferance.