Thursday 23 March 2017

Home Economics: answering your property questions

Danske Bank left Ireland in 2014
Danske Bank left Ireland in 2014
Sinead Ryan

Sinead Ryan

Q: My mother died some years ago and my father has a progressive illness which makes it difficult to care for him at home. With his agreement, he is going to a nearby nursing home. The only asset he has is his house, which we understand will be charged at 7.5pc per annum for three years under Fair Deal. Is there any possibility of him transferring the house to me now to avoid this charge? It would be coming to me in any event as I am his only son and I don't want to have to sell it.

A. The workings of Fair Deal mean that everyone who has income or assets contributes according to means. Deliberate transferring of assets to avoid the contribution isn't allowed.

I asked the HSE for a formal response and they said: "In the case described, should the family home be transferred from father to son, in line with the Nursing Homes Support Scheme Act 2009, the value of the property will be included in the financial assessment for the first three years of nursing home care.

"A person's contribution is based on 80pc of his/her assessable income and 7.5pc of the value of any assets owned by the applicant, including assets that he/she transferred at any time in the period of five years prior, or at any time on or subsequent to the date on which the first application for State support is made.

"The first €36,000 of the value of an applicant's cash and non-cash assets are disregarded as part of the financial assessment and the value of a person's principal private residence is only included in the financial assessment for the first three years that the person receives care services in a nursing home."

Q. I originally took out my mortgage with National Irish Bank. I received letters over years from Danske Bank after the takeover but now I seem to be getting them from an outfit called Pepper. Is this another bank and what happened to Danske? I'm trying to move house but they say I can't take the tracker mortgage I already have with me.

A. Danske left Ireland as a retail bank in 2014 and appointed Pepper Ireland to manage its day-to-day administrative services here, including its loan book as it naturally winds down - it didn't take over ownership of the bank but Danske no longer has a retail banking licence in Ireland and can't lend or conduct new business here any more although it has a corporate presence. There were no changes to the existing terms and conditions of anybody's mortgage.

Pepper appointed brokers to manage any new business arising from it, and I asked one of them, Garry Manning, from Omac Mortgages and Finance about your situation with regard to upgrading your mortgage.

"As Danske Bank no longer holds a banking licence in Ireland, you can't take the tracker mortgage with you to your new home. Pepper does have its own home loan company, but treats all applications as new business and does not offer tracker portability. You should also note that they only lend for properties in certain geographical areas, mainly around the provincial capitals.

"My advice to you is that you go to your nearest AEMA Mortgage Broker who will be able to advise you on all lenders, including Pepper home loans, and work out the best deal for you. Obviously your existing relationship with Danske will form part of this discussion."

The Ryan Review

The Living City initiative is an excellent plan to get city centre properties revitalised and encourage use of all space available for housing.

It gives tax breaks to landlords to refurbish vacant 'above the shop' units. The equally positive Repair and Lease grant scheme will do similar and has €2m set aside for this purpose.

The Census threw up some 200,000 vacant properties which would go a long way to helping the housing crisis if they can be identified and incentivised back into use.

However, one big anomaly remains in doing so. It is to do with properties which are vacant due to their owner having moved into a nursing home under the Fair Deal scheme. The scheme swipes 7.5pc off assets each year as the patient's contribution toward care.

While the family home asset is 'capped' after three years, so that the maximum taken won't exceed 22.5pc, it does however result in an unintended consequence, which is the house itself cannot be sold after this period (or indeed, at all), because to do so would convert the asset to cash, and the 7.5pc appropriation thereof is for an unlimited time. Alternatively, it would force the repayment of the State loan, if applicable.

Neither, in most cases, can the property be rented out. To do so would result in a rental income to the owner and the Fair Deal takes 80pc of the gross value of this toward care, resulting, in some cases, with the contribution being higher than the income. So these homes remain empty as long as their owner continues in care.

There are 24,000 people in nursing homes via Fair Deal, due to increase by 9,000 by 2018. Not all leave vacant homes behind, but for those that do, boarding them up is the only viable financial solution. What a great pity.

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