Walkin Auctioneers, Valuers & Estate Agents

The following article was originally published by the IAVI on its website and is reproduced here for informational purposes only.

Buying a Property in Ireland

The Republic of Ireland is a member of the European Union and European Monetary Union. The currency of Ireland is the euro. Ireland has the fastest growing economy in the EU and has enjoyed a very buoyant property market for the past five years. Ireland is a democratic republic with elected upper and lower houses of parliament and an elected President. Northern Ireland is part of the United Kingdom and, with the UK, joined the EU at the same time as the Republic. However, the UK has not joined European Monetary Union and retains sterling as its currency.

26 of Ireland's 32 counties form the Republic of Ireland and the remaining 6 Northern Ireland. The population of the Republic is c. 4 million, of which well over 1 million live in or close to the capital city Dublin.
In the Republic, other major population centres are Cork, Galway, Limerick and Waterford. Northern Ireland has a population of c. 1.5 million and its capital city is Belfast. Ireland enjoys a climate lacking extremes. Mid-winter temperatures are in the -3 to + 8 degrees centigrade range and in mid-summer temperatures can rise to mid 20s. While the country rarely has heavy snowfalls; regular rain is a feature.

These are the average sale prices for homes (on which mortgages were secured from all agencies for the purpose of purchase) in the 2nd Quarter of 2004.These are the latest available official figures from the Irish Department of the Environment, Heritage & Local Government.

Whole Country €240,985
Cork €227,399
Dublin €347,764
Galway €240,889
Limerick €210,576
Waterford €226,573
Other Areas €225,813

Whole Country €303,148
Cork €273,499
Dublin €415,432
Galway €286,055
Limerick €239,118
Waterford €213,310
Other Areas €235,738

Whole Country €273,152
Cork €245,230
Dublin €299,260
Galway €266,515
Limerick €205,313
Waterford €241,239
Other Areas €214,345

Whole Country €284,574
Cork €331,994*
Dublin €304,281*
Galway €284,529
Limerick €224,125
Waterford €196,938
Other Areas €219,293

Sales by Auction
Normally less than 10% of Irish properties are sold by this traditional method of sale. Competitive bidding is invited for a particular property on a particular day after a marketing campaign of about a month. To buy at auction it is essential that a solicitor (attorney) has vetted the title on your behalf and that all necessary loan and structural surveys are undertaken before the auction. A successful bidder must sign a contract immediately on the fall of the auctioneer's hammer (gavel) and pay a 10% contract deposit, which is forfeit should the buyer not complete the transaction in the manner proscribed. Therefore, any required loan approval must be secured in advance of the auction. It is unwise, to say the least, to buy at auction in anticipation of selling your own property, as all auctions are on the basis that bidding is unconditional, save for the conditions laid down by the seller in the Conditions of Sale, a standard Law Society document detailing the contract terms, to which price and the buyer's identity are added in the event of a successful sale.

Most agents issue a guide price before auction. While this guide price should be within 10% of the genuinely anticipated reserve price (that is the minimum price the seller will consider acceptable) buyers should know that actual reserves are rarely disclosed and that sellers retain the right to amend the reserve price at any stage.

If you do not know the market, have a valuer, who is a member of the Irish Auctioneers & Valuers Institute, advise you on value before the auction.

Sales by Private Treaty
Most sales in Ireland are conducted by the Private Treaty method, under which a price level is indicated on the seller's behalf and negotiations are conducted, leading to a successful sale. Frequently terms such as "price region" or "offers in the region of X" are used. Even where a specific asking price is quoted, it is NOT binding on a seller.

For a contract for the sale of real property to be enforceable in Ireland it must be evidenced in writing. In essence a letter or note from, or authorised by, the party against whom enforcement is sought, must contain three key facts relating to the agreed sale: The Property, The Price and The Parties. Enforceability may also hinge on such aspects as a deposit and an agreed closing date. Legal advice is essential in both the sale and purchase of real property.

"Gazumping" has yet to be made illegal in Ireland and, regrettably, occurs where a seller unilaterally withdraws from an agreed sale, having secured a higher offer, before being contractually committed. Normally a party becomes contractually committed once he or she signs the formal contract in respect of the sale. Up to that point, an estate agent is legally obliged to disclose all offers received for the property to the seller.

The IAVI obliges its members, on agreeing a sale of property and accepting an initial deposit (usually 5% of the sale price), to cease actively marketing the property and not to show the property to new prospects or to surveyors - other than a surveyor on behalf of the person paying the deposit or his finance company. This does not prevent gazumping, but does help curtail it. However by law this is subject to the overriding primacy of the client's instructions.

The IAVI has been pressing Government to legislate, in so far as is practical, to prevent gazumping. There is proposed legislation, but it will not tackle the second-hand market and will have limited effect in the new-homes sector.

Sales by Tender
Formal sales by tender are usually confined to certain types of commercial property and development land.

Formal tender is akin to an auction in that a specific date is designated for the submission of offers and interested parties must, by a specified time on the designated date, submit signed contracts indicating a specific single bid for the property accompanied by a contract deposit of 10%. The seller is not obliged to accept any tender but in the event that a tender is accepted, the seller will sign the relevant contract and the deposit cheque will be lodged for clearance. The other cheques will be returned un-cashed.

Formal tender rules out the "eyeball" bid/counter-bid scenario of the auction room but has the advantage (from the seller's viewpoint) that prospective buyers must put their best foot forward as they are bidding without the knowledge of the strength of their opposition.

In a buoyant market, such as that recently experienced in Ireland, many Private Treaty sales are resolved by what is effectively an informal tender known as the "best and final offer" (BFO). The seller is not obliged to disclose the level of offers received and, even in a BFO situation, he is not obliged to accept the highest or any offer. Indeed the highest offer may not be best because of conditions attached to it - e.g. an offer that is subject to the sale of the buyer's own property will not be viewed as being equal to an offer free of such a condition, even if it is at the same, or perhaps even a marginally higher, price level.

Similarly, an offer from an individual, for whom the property has already been successfully surveyed for mortgage purposes, will be viewed as stronger than one from anyone else.

When buying it helps to be forthright with the estate agent selling the property. Mistruths or exaggeration about the sale of your own property are quickly flushed out and will undermine your purchase. A seller who has been misled by a buyer is usually reluctant to see the transaction through if there is another buyer on the horizon - and there usually is in a buoyant market.

Most buyers affected by a BFO will have the knowledge of the level of bidding that has occurred to bring them to the position they find themselves in. Usually at least two parties have indicated that they will exceed the asking or indicated price level. It is up to the individual to decide what the particular property is worth.

FINANCE
A general word of advice, applicable to all buyers is not to over-stretch borrowings. While Irish lending institutions have traditionally been cautious, the primary responsibility for ensuring that one can meet one's future mortgage repayments rests with the borrower. Banks are in business to lend money - always remember that, particularly if you are ever tempted to borrow more than you can afford to repay after allowing for increases in mortgage interest rates.

Banks and Building Societies are the normal sources of funding for property purchase in Ireland and will usually lend up to 92% of the sale price, subject to varying criteria, including evidence of an ability to repay the loan in the agreed term.

The standard mortgage term is 20 years, but this is under some upward pressure at present. Rates can be variable or fixed, or indeed a combination of both (i.e. fixed rate on a portion of the loan and flexible on the balance). Fixed terms are usually upwards of one year and it is possible to obtain a ten-year fixed-term rate in today's market.

Always remember that highly qualified actuaries, employed by the lending institutions, set fixed-term repayment rates, whereas variable rates are dictated by the European Central Bank base lending rate, plus an identifiable margin.

COSTS
Stamp Duty
The main cost in buying property in Ireland is Stamp Duty, which is a Government transfer tax.
The Stamp Duty regime in the Republic of Ireland is unnecessarily complicated, as the following rates applicable to different categories of buyers and properties show:

Stamp duty on non-residential property, e.g. shops, offices, sites, etc is at the following rates:

Consideration:	Rate Of Duty:	New Thresholds
Less than €6,350	*Exempt	Up to €10,000
€6,351 - €12,700	1%	€10,001 - €20,000
€12,701 - €19,050	2%	€20,001 - €30,000
€19,051 - €31,750	3%	€30,001 - €40,000
€31,751 - €63,500	4%	€40,001 - €70,000
€63,591 - €76,200	5%	€70,001 - €80,000
Over €76,200	6%	€80,001 - €100,000
Not applicable	7%	€100,001 - €120,000
Not applicable	8%	€120,001 - €150,000
Not applicable	9%	Over €150,000

New homes up to 125 sq. m. that are bought as principal private residences are exempt from stamp duty, if a floor area certificate is provided as required by the Department of the Environment & Local Government.

Where properties bought as principal private residences exceeds 125 sq. m., stamp duty is payable on the site value or 25% of the full value, whichever is greater. For example, an owner occupier (who need not be a first-time buyer) buys a new house for €800,000. The site element is €150,000. The house is too large to qualify for exemption under s.91 SDCA99. However, it qualifies for relief under s.92 SDCA99. Duty ispayable on €200,000 @ 3% = €6,000 (i.e. duty is payable on 25% of the cost). If the site element were €250,000 instead of €150,000, duty would be payable on €250,000. The amount payable by an owner occupier would be €250,000 @ 3% = €7,500.

COMMERCIAL PROPERTY
In general, the rate of stamp duty on non-residential real estate sales in the Republic of Ireland is 9%, although certain lower rates apply if the value of the property does not exceed €150,000.

LEGAL FEES
In general expect to pay a solicitor (attorney) about 1% of the purchase price, plus VAT @ 21% and expenses. Fees are negotiable, so shop around - but bear in mind that cheapest is not always best and you cannot expect a Ritz standard of service if you pay fast food prices. While Irish solicitors are, in the main, both highly competent and ethical, it is always best to seek a reference to a good solicitor from a trusted colleague or friend. The Incorporated Law Society will also provide the names of suitable professionals to members of the public - its web site is at www.lawsociety.ie

TITLE
Legal title to property in Ireland may be registered or unregistered freehold, where the property is essentially held forever free of rent.

Alternatively, title may be leasehold for anything from 250 years to 999 years subject to a reserved (usually, but not always, modest) Ground Rent payable to a superior titleholder.

With this type of lease, most leaseholders are empowered with a right to compulsorily buy out the Freehold title, should they wish to do so. It is particularly important that this right be exercised well before the expiration date (called the reversion date) of the lease. If the purchase is made within 15 years of the reversion date, the cost of buying the freehold escalates dramatically. The advice of a member of the IAVI familiar with Ground Rent legislation should be sought.

Shorter Leases
Shorter leases are usually occupational and run from upwards of 5 years to a normal maximum of 35 years. Rent reviews are usually provided for and these leases, subject to certain conditions, are assignable.

Leases of one year or less are generally not assignable.

Residential Tenancies
Tenants who have occupied a residence for six months secure a right to a lease for up to four years (including the first period of occupancy).

Rent can be reviewed annually to open market level, with the rent being determined, in the absence of agreement, by the Private Residential Tenancies Board.

The landlord could recover possession if he bona fide wishes to sell the property,or requires it for occupation by an immediate family member. Possession could otherwise only be recovered in the event of a serious transgression by the tenant (e.g. non-payment of rent or serious anti-social behaviour).

When the four-year period expires, possession could be recovered for no reason whatever and the tenant must secure another six months occupation as a tenant before the right to another four-year tenancy arises.

TAXATION
Full Local Authority Rates apply to non-residential property.

Generally, residential property is exempted from Local Authority rates but in many areas, levies are imposed for water and refuse collection. It is wise to check the position in the particular area you intend to purchase. As a rule of thumb, allow up to €300 - €500 p.a. for refuse collection and a similar amount if there is a statutory charge for water supply. With a private water supply system, a higher amount will apply.

Capital Gains Tax is charged on most capital gains at a standard rate of 20%. Higher rates apply to some categories of property. Principal private residences are generally exempt from CGT, unless there is development potential, or the land attaching to the property exceeds one statute acre (0.4 hectare).

COMMERCIAL PROPERTY
Consult a Member Firm of the IAVI or of the Society of Chartered Surveyors (SCS) if seeking to rent or buy a commercial property in Ireland. They know the market, the legal background and the Town Planning and other complexities and will be able to assist you.

ESTATE AGENTS
Are usually referred to in Ireland as Auctioneers, despite the fact that most property is not sold by the auction method. The reason for this is that Estate Agents must hold either an Auctioneer's Licence or a House Agent's Licence.

The licence has no experience and/or academic requirement. Despite this, the majority of estate agents in Ireland are academically qualified thanks to the efforts of the IAVI and the Society of Chartered Surveyors. However there are still many unqualified practitioners in the business.

The lessor, or seller, of a property pays the fees of an estate agent, unless a tenant or buyer specifically retains an agent to act on his/her behalf. In all cases fees should be negotiated in advance and IAVI rules require members to confirm fee arrangements in writing to the client in advance.

IAVI MEMBER FIRMS
Full individual membership of the IAVI is available only to those who successfully complete a third-level course of property studies at degree level.

The IAVI recognises a number of full-time college courses in Ireland and also administers its own Honours BSc in Property Studies programme over a four-year period.

Associate Membership of the IAVI is available to those specialising in residential estate agency on successful completion of a one-year part time course in Residential and Land Agency, which is also administered by the Institute.

IAVI Member Firm status is available to practices where the majority of the owners are full individual qualified IAVI members, Professional Indemnity insurance is in place and a current Auctioneer's Licence is produced annually to the Institute by the practice.