Should we rent or buy? What to consider!
Lina Oksaite from our Property Team discusses renting vs buying in today’s market Statistics show that by 2018, home ownership in Ireland had increased up to 70.3% and people continue to buy homes for various reasons, be it for their own use or as an investment, especially in present times where renting a property is almost impossible. One may see that owning a home may be an investment and another may see renting as a way of saving their money and ensuring that their finances and any outgoings are stable and predictable, so they are able to plan and even save. Of course, many of us cannot imagine how paying money into landlords’ pockets, can be of any benefit at all. It has been noted that statistics show 14% rise in rents in 2022 alone, which is one of the highest increases in rental prices so far in Ireland according to Daft.ie, Irelands most popular property website. Daft.ie notes that at the end of 2016, there were less than 2,800 homes for sale in the Dublin market, however, in comparison, in December 2018, there are over 4,800 and it continues to increase making it harder for people to find homes to rent as selling property becomes more favorable. In 2022 there were only 345 homes to rent in Dublin and 1087 homes nationwide, which explains why renting is becoming unaffordable for many.It is important to note that Russia’s invasion of Ukraine, forced many residents to move and re-locate, some of whom have ended up in Ireland also increasing the demand for housing. Article 31 of the Council of Europe’s Revised European Social Charter sets out that the responsibility of the State is to: “promote access to housing of an adequate standard, to prevent and reduce homelessness with a view to its gradual elimination, and to make the price of housing accessible to those without adequate resources.” Over the past number of years, Ireland has been struggling to maintain affordable accommodation for renting purposes and even with the introduction of HAP, tenants face serious issues as their income may be “just little bit over” the threshold and they would fall outside the eligibility for this scheme. If you are one of the lucky ones and manage to secure a tenancy, one of the most obvious advantages, is that as a tenant, your responsibilities are limited such as to pay rent, keep the property in good condition as far as practicable and to pay some of utilities such as gas/electricity. Your Lease would usually contain all the covenants that you agree to by signing the Lease for a specific term. As a tenant in the property, you do not need to concern yourself with property taxes, management Fees or even repairs that may be due. You have flexibility in terms of your lifestyle, being able to move around without worrying about leaving your property behind or selling it. Renting property also provides the tenant with fixed expenditure therefore allowing the tenant to predict their expenditure and budget accordingly. However, if you are a considerably large family or wishing to settle it could be extremely difficult as a Lease would only last for a specific term and the Landlord is entitled to re-claim their property at any time for their own use or sale. This can be very unsettling as families usually find it difficult moving homes. Threshold, the tenants’ rights organization, which provides independent advice and advocacy to people experiencing housing problems, have reported that there is an ongoing increase in the number of people experiencing homelessness each month and even the lucky tenants are now forced to accept low-standard properties as supply drops but demand keeps increasing. In its report of 13 October 2022 called “Renting and Risk”, Threshold mentions the 2019 Focus Ireland Report, which found that 68% of homeless families in Dublin reported their last stable home as being in the private rented sector, with just over one-third of these becoming homeless because their rental property had been removed from the market (e.g., landlord selling). On the other hand, buying a house is a big step for anyone. The most obvious advantage is that it creates stability for families. You are your own boss, you can keep pets, make improvements you like, and no one is there to tell you otherwise. With rent prices being so high, you may see it more profitable to pay a mortgage which would be the same or less than rent payments. Especially nowadays where renting is so hard to find for a reasonable price. RTB statistics show that average rent payments in Dublin are around €2000 while average monthly mortgage instalments according to Bank of Ireland Calculators, could range between €1,300-€1,700 for a reasonably sized property, therefore meaning that paying a mortgage especially if you are living in Dublin, could be cheaper than renting a home. However, it’s not as easy as it sounds. Buying a home is a big financial expense. You are required to have a deposit of 10% and a wage of a certain level if you wish to get a mortgage as the size of the mortgage you are able to receive will always depend on your income. Any loans, or similar commitments will also reduce the size of the Loan you are able to receive. Apart from your mortgage, there is other expenditure you may incur such as paying taxes e.g. LPT, if it’s an apartment you will have to pay management fee, you will be responsible for repairs etc. Owning a home means you cannot just move without having a responsibility to look after it or being forced to dispose of the property, which also can be a great expenditure, especially where the market value falls, and you are not able to sell your property for the value you bought it. Despite the above, many people still choose to buy property due to the market being so good at this time and they are able to
The Help to Buy Scheme- Top 5 Questions Answered
Rachael Mc Cormack from our property team answers the the most commonly asked questions in respect of the help to buy scheme What is the scheme and why was it created? The Help to Buy Scheme was firstly set up by the Irish Government in 2017 to allow first time home buyers to get their foot onto the property ladder. It’s designed to help first time buyers raise their contractual deposit needed to either purchase or build a new home. The tax incentive works in a way of a tax refund of Income Tax and Deposit Interest Retention Tax over the last 4 years which can result in a refund of up to €30,000.00. This scheme has now been extended until 31 December 2024. Who is eligible? For a person to qualify for this tax incentive, they are required to be a first time buyer who is either buying or building a new home up to the value of €500,000.00. If you are buying with another person, they too must be considered as a first-time buyer. The initiative is only applicable to new built homes, it does not apply to second hand homes, buy to let properties or renovated properties. How to apply? When applying for the Help to Buy Scheme there is two stages; The Application Stage (Preliminary stage) A person must be tax compliant in order to apply for this tax incentive. A person would apply through their “my account” with revenue, they can apply as an individual or as part of a group if buying with another person. If revenue confirms that the applicant has been tax compliant, they are given an application number, a summary of the maximum amount they can receive and an access code. The Claim Stage A valid claim must be submitted before the applications expires, otherwise an application would have to be resubmitted. If an application was submitted between the dates of 1st January and 30th September, it would expire on the 31st December of the same year, if the application was submitted on the 1st October and 31st December it would expire on 31st March of the following year. Once the applicant’s contract for sale and loan offer has been signed it is then required to be uploaded to their claim application. Revenue then provides the applicant with a claim reference and access code which is required to be provided to the Developer and their Solicitor in order to obtain the tax refund which would represent the remaining contractual deposit. Can you use a Mortgage with the HTB? Yes, a person who is eligible for the scheme may use the assistance of finance with the Help to Buy Scheme. It is important to note that Revenue has a requirement in place to be complied before a person can make a successful claim under the initiative being that the person must take out a mortgage of at least 70% of the purchase price. Revenue will provide an application number and access code once your application has been accepted which will be needed to be provided to your lending institution. How is the Tax refund received? Once the application stage has been completed, the applicant is then sent for verification. This process involves the Developer if purchasing a new build or the applicants Solicitors if building a new home to verify the sale. Once the claim has been verified the tax refund is provided to either the Developer in circumstances of purchasing a new build property or the applicants solicitor in circumstances where the applicant is building their home. *Please note that the content of this blog does not amount to professional advice. Legal advice should be sought in respect of specific queries. This update is provided on the basis of information available as at February 2023. For further information, please contact Rachael McCormack/Lisa McKenna or any member of the McKenna & Co Property Team.
First Home Scheme [FHS]- Is it more of a hindrance than a help!
Jack Duhig from our Property Team outlines the rules of the FHS to include the process. The First Home Scheme was launched in July 2022 and is available to first time home owners purchasing a new build or “fresh start” applicants purchasing a new build who have been adjudged bankrupt or who are divorced/ separated with no interest in the family home. Not only does the purchaser have to qualify for the FHS, but the mortgage provider must be one that participates in the scheme and thirdly; the property itself must also qualify. The rules vary for what properties qualify by purchase price according to County Council areas and in is recommend that you have a look at the FHS eligibility calculator on the FHS website to see what properties qualify in your area. The FHS is different from the Help to Buy Scheme as the FHS is a shared-equity facility, whereby the State pays up to 30% of the purchase price of the property and takes a commensurate stake in the property. If a purchaser is also availing of the Help to Buy Scheme, the amount of equity that can be contributed by the FHS is reduced. There are no charges for availing of the FHS for the fist five years, and thereafter there is a percentage charge applied each year called a service charge which gradually increases to a 2.85% charge in year 30. If after 30 years you have not bought back the equity, and you got a €30,000 facility from the scheme, you will have to pay a service charge of €855 per annum. There are several scenarios which trigger the redemption of the equity, for example if the property is sold or if the home owner dies, where the equity share will have to be “bought back” in full. It is important to note that the FHS is entitled to a percentage share of the property’s value, so if they initially contributed €30,000 which was 10% of the property purchase price, and the value of the property subsequently doubled, the FHS is still entitled to 10% which is now €60,000, on an event which triggers redemption. The FHS recipient does not have to wait until a redemption event to buy back the equity in the property and can do so at any point, or they can pay it back in installments of at least 5% of the original amount received. Practically speaking for the FHS applicant, your solicitor will receive the FHS legal pack around the same time that they receive the legal pack from the mortgage provider and will be able to advise on both at the same meeting. Once all documents are submitted to the FHS by the solicitor, the FHS will disburse funds directly to the solicitor’s client account in the same manner which happens with loan funds from your mortgage provider. It is recommended by the FHS that you obtain independent financial advice as well as legal advice before availing of the scheme. The FHS has proved popular with over 800 applications so far and the initiative forms part of the Government’s “Housing for all” plan. *Please note that the content of this blog does not amount to professional advice. Legal advice should be sought in respect of specific queries. This update is provided on the basis of information available as at January 2023. For further information, please contact Jack Duhig/Lisa McKenna or any member of the McKenna & Co Property Team.
Eviction Ban Bill 2022
The Cabinet has approved legislation that will grant a temporary and conditional delay on tenant terminations for the length of the present housing crisis, according to the Minister for Housing, Local Government and Heritage, Darragh O’Brien. No-fault tenancy terminations scheduled for the next winter months will be postponed until 31 March 2023 under the Residential Tenancies (Deferment of Termination Dates of Certain Tenancies) Bill 2022. Exemptions to the termination of residential tenancies are considered to be the following; damage to the property over and above normal wear and tear, anti – social behaviour, non – payment of rent or invalidating insurance. Your termination date will be delayed until after the eviction ban if it comes between 30 October 2022 and 31 March 2023. Depending on how long you’ve been renting and when your lease originally ended, your new termination date will change. Property rights in Ireland are subject to the common good however coming into Winter the government want to make sure people are not fearful that they’re going to be evicted. So, this is a temporary measure insuring a short term solution to potential homelessness this Winter.
The Residential Tenancies Board: what is it?
And when/why should you get in touch? Court is expensive, time-consuming and even before Covid-19, there was a backlog of cases waiting to be seen. In order to avoid court in landlord and tenant disagreements, the Residential Tenancies Board was set up. As in the name, it applies to tenants living in accommodation, as opposed to commercial tenancies like a shop-owner in a unit. The RTB has to: 1. Keep a record of residential tenancies; 2.Offer a dispute resolution service for landlords and tenants; 3. Carry out research into the private rented sector; 4. Provide policy advice to the Government on the private rented sector. The RTB also sets out the obligations of both the landlord and tenant, which is helpful because it may not be clear who is responsible for certain repairs and/or expenses. If you have an issue with your landlord/tenant and you can’t agree it between yourselves, you go to the RTB. Matters can be brought to either adjudication or mediation. A. Adjudication This is where an adjudicator assesses both the landlord and the tenant’s evidence and makes a decision in an informal setting. B. Mediation This is where a mediator listens to both sides and tries to help the landlord and the tenant come to a solution. This gives some flexibility and autonomy to the landlord and the tenant as they get to have a voice in the process. This may not be possible where relations with each other are particularly poor! If the Adjudication or Mediation decision is accepted, this becomes a decision (or “Determination Order” as it is officially known) that the landlord and tenant are both legally bound and then it needs to be enforced by the court if either party do not comply. If a decision is not reached in Mediation or the decision of the Adjudication is appealed, the case can be heard in front of a Tribunal. As above, the decision of the tribunal is called a determination order, is legally binding and cannot be appealed. If you are having issues with either your landlord or your tenant, please don’t hesitate to contact our conveyancing team on 01 485 4563.
Things to consider for first-time buyers
Cost, amenities and what it is you’re looking for 1. Costs This is generally the first thing people think of when they’ve decided to buy property. Apart from the purchase price itself – as well as the booking deposit – there’s a number of costs that you should be aware of. a. Stamp Duty This is usually 1% of the purchase price, but double check with your solicitor. It depends on the type of property you’re purchasing. If the property is a new build the stamp duty is 1% of the VAT exclusive purchase price. b. Professional Fees How much is the solicitor charging you? This will vary from firm to firm, shop around and do your research before making any decisions! Within a solicitor’s quote, they may include the obligatory costs of buying in Ireland. These are not decided by the solicitor but by the relevant governing body. A solicitor will pay them on your behalf and you will be charged for them. i. Searches: Solicitors are obliged to perform online searches to ensure that everything you’re buying and who you’re buying from is above board. The cost of these will depend on the property and the seller. ii. Registration Fees: Land must be registered with either the Registry of Deeds or the Land Registry, depending on what kind of land you are buying, this registration incurs a fee. c. Surveyor’s Fees If you’re getting a mortgage, you should carry out a survey to ensure the structure of the property is sound. These fees are entirely separate to the estate agent and the solicitor. 2. Amenities What are you looking for out of your new home? Do you want to be close to supermarkets, public transport, schools? Be aware of upcoming commuter towns, and urban expansion, these areas are likely to have ongoing construction over the next couple of years. 3. Parking Spaces If you are buying an apartment, a parking space is not guaranteed. If this is important to you, make sure you ask your solicitor/estate agent whether a space, or a right to one, comes with the property! 4. Home Improvement Thinkabout what it is you want out of this new home: do you want to step into a space that’s ready to be filled with furniture or are you ready, willing and able to put some work – and finances – into repairs and renovation? You may pay more upfront for a place that doesn’t require renovations, but it’ll likely save you time and stress in the future. Buying a home doesn’t have to be stressful, as long as you know what it is you’re looking for and your budget. We hope this non-exhaustive list has provided some useful things to consider when you’re looking at buying property. If you have any questions or queries, please don’t hesitate to contact our property team on 01 485 4563.
Switching your mortgage: is it worth it?
It is if you want to save money and trust your solicitor and broker to get you there. Switching a mortgage may sound like a hassle but if you have a good broker, and an efficient solicitor the process is straightforward and will save you money long into the future. We can recommend a top class broker who can provide a seamless switch. We don’t offer advice on the loan offer but your broker/bank can and will be happy to do so. We write to your original lender to request Title Deeds, once we get the Title Deeds we carry out due diligence on the title to ensure all is in order for the new lenders. You put your Life and Home Insurance in place. We return all documents to the lender and request your funds. Depending on the day you have chosen; your new mortgage terms will come into force. It is usually the day we drawdown the loan funds of the following month. i.e. if we draw funds on the 1st of January, your first mortgage payment will be the 1st of February. We then repay your old lender the redemption funds, the same day we drawdown your new loan funds. If there is money left on Account we deduct our fee from same and send you any balance. Finally, we proceed to request the old lender to remove their legal charge from your title and we make an application to have your new charge registered on title and we send you updated title and send all the title deeds to your new lender. This whole process takes no more than 4 to 6 weeks. Please do not hesitate to contact our property team should you have any queries in relation to any of the above. Image by Nattanan Kanchanaprat from Pixabay
It’s Complicated: when unmarried couples cohabit
What are your legal rights when you own together but aren’t married or in a civil partnership? Couples who aren’t married or civil partners have no legal rights, unless one of you is economically dependent on the other, you’ve been living together in an intimate and committed relationship for five years or more (or two years if you have dependent children), and the richer one of you dies. In that case, the survivor – the economically dependent one – can apply to the courts for (but won’t necessarily get) assets from the richer partner’s estate. Apart from that, you have to decide what your legal relationship should be in relation to your home, and establish the necessary legal framework. The question to be asked is: do you own the home jointly? There are two ways you can own a home: as joint tenants or tenants in common. If you are joint tenants, when one of you dies, the other automatically inherits the whole property, as surviving co-owner. If you are tenants in common, each of you owns a part share in your home – for example, you might have agreed to own it 50:50. When a tenant in common dies, their proportion doesn’t automatically go to the other, but is part of their estate, to be distributed in accordance with the deceased’s Will. So the surviving co-owner only gets the deceased’s share in the property if the deceased’s Will says they do – but if it says their share goes to someone else, then the survivor has to share the property with that new co-owner. If only one of you owns the home you live in, the other has no rights in it (except, on death, as discussed above). The owner can ask the non-owner to leave at any time, and sell the property without asking the non-owner’s permission. If the owner dies, the non-owner only gets the property (or a sharein it) if the owner has left it to them in their Will, or if the exception mentioned above applies. One way a non-owner cohabitant can prove they have rights in the home they share with the owner is to show there was an express agreement (either in writing or agreed orally) that they should have such rights. It’s much easier to prove there was an express agreement if it’s recorded in writing and signed. To make sure it’s valid, this agreement should be drafted by a solicitor and is called a co-ownership agreement. If there is no express agreement the non-owner has to prove that an agreement should be inferred from the way they and the owner behaved towards each other, and what that agreement was. That can be extremely difficult, which could lead to contentious litigation. The non-owner may be able to argue that they contributed some of the purchase price, shared the mortgage repayments or paid for substantive improvement to the property, as evidence of an agreement that they should have rights in the property. Then they have to argue what those rights are. It can all get very uncertain, and be expensive. The clear lesson is that, before co-habiting, make sure you agree: If you are to co-own your property, whether you do so as joint tenants or tenants in common. If you co-own as tenants in common, what your respective shares in the property will be. If only one of you owns the property, what rights the other cohabitant will have in it (if any). Generally, consider the other implications of co-habiting too, and write down what you have agreed over those too. In every case, formally record what you have agreed in writing. As you can see, it’s complicated, so legal advice is strongly recommended. Please do not hesitate to contact our property team should you have any queries in relation to any of the above.
Lease or a licence? The Court will decide
What’s the difference and why does it matter? Whether you are the landlord or the tenant, it is important to know whether your arrangement is a lease or a licence as the rights and responsibilities for both vary depending on which it is. If there is a dispute as to whether it is a lease or a licence, the Court will decide based on the realities of the situation. In a recent case, there was an agreement described as a licence, but in fact, it was a lease. What’s the difference? Licence: Does not give the tenant a legal interest in the property itself. It’s just a contract giving the tenant permission to use the property. Lease: Does give the tenant a legal interest in the property, giving the tenant exclusive possession. If you are the tenant, this means you can exclude anyone else from the premises, even the landlord! The Court will consider the parties intentions to decide whether it is a licence or lease. It asks what a reasonable person would think once presented with the objective facts? The Court also considers the power dynamic of the parties, and will try to help the tenants where possible. In the case above, the court decided that the business was availing of a lease. The case highlights the importance of getting legal advice if there is any doubt about whether an agreement is a lease or a licence. Photo Credit: by Unknown Author is licensed under CC BY-SA
Buying and selling property in Ireland: what taxes are you liable for?
What are they and will you have to pay them? 1. NPPR, Non-Principal Private Residence Set up in 2009, to generate more funds during the Recession, the NPPR lasted until 2013 and taxed people who owned more than one property. The property either has a Certificate of Discharge, which acknowledges that the NPPR has been paid, or a Certificate of Exemption, which says the property was exempt from the NPPR as it was the occupant’s primary residence. This applies to new builds, second hand dwellings and apartments. The NPPR tax is retroactive. 2. LPT, Local Property Tax The LPT has been in effect since 2013 and is paid annually. The LPT applies to anyone who owns a property, whether that be a second-hand home or an apartment. For those with new builds, the LPT won’t have to be paid until November of the following year. On purchasing either a second-hand dwelling or an apartment the LPT will be apportioned so that the vendor (person selling) pays the full amount for the year and the purchaser will repay what they owe from the date they move in. For example, Mary buys a house from John and the transaction closes on 20th June. John will pay the full LPT for the year. The amount, which ranges depending on the property value, will be divided so that Mary pays from 20th June onwards and John pays for the time preceding that. 3. Service Charge A service charge is a charge payable on either apartments or new builds with a common area. The charge will pay for things like cleaning and maintenance of the area and general upkeep. It is paid once a year to a management company. 4. Stamp Duty Stamp Duty is payable on every house in Ireland to the Revenue. On second-hand buildings and apartments, the stamp duty is 1% of the purchase price. For new builds, it is slightly less than 1% as there is no VAT on the stamp duty for a new build.
