Home Economics: Our property finance expert answers your questions
Question:Myself and my boyfriend are buying our first home together. It is my first house, but he is selling a flat he owns to purchase it which is worth €140,000 once the mortgage is paid and our new house will be around €500,000. However, our solicitor is saying that his contribution to the purchase could be treated as a ‘gift’ to me, which I don’t understand, as we will both own the house 50/50. I’m putting in €25,000 of my savings also. Is there a tax implication and how do we get around it?
A This is complex and I can see where your solicitor is coming from. Generally speaking, people who transfer money, gifts or wealth to each other, and who are not married, are subject to Capital Acquisitions, or Gift Tax on amounts over €16,250 (plus an annual €3,000 small gifts exemption).
This would mean your boyfriend is in fact ‘giving’ you the €140,000, even though it is going into a property you jointly own. It isn’t distinguishable from a cheque or cash. As a result, the bill could be as high as €39,847.50 and would be payable immediately. Either way, it’s clearly not a good idea.
However, Revenue tells me that a work-around is to purchase the property as ‘tenants in common’, i.e. you won’t own the house as ‘joint tenants’ or 50/50, but as owners reflecting the actual value you brought to the purchase. “If you own the property in proportion to the contributions in consideration paid, then there is no gift event and a charge to CAT does not arise.”
You will need a solicitor to draw up the terms of the tenancy agreement, and you may find the banks pushes back on it as they generally prefer joint owners to have a 50/50 split, but it is really only the mortgage that will be so, and your lawyer can advise this to them. So, in actual fact, your boyfriend will own say, 60pc of the house, and you the remaining 40pc, or whatever way the numbers fall.
Don’t forget also to ensure that you effect joint life insurance (which the banks will insist upon anyway), and make a will to reflect what you want to happen in the event of either of your untimely deaths. Assets do not pass tax free among unmarried couples on death and there will be another possible tax event if this happened.
Q We’re planning a home swap for a spring holiday with an Italian family coming over while we head to Rome. The trip is for a wedding and we are including a holiday and taking two weeks out in total. We have never done this kind of thing before but it is keeping costs down on accommodation and the website has been used by friends of ours. Is there any implication for us in terms of our house insurance?
A Any time you change the circumstances of a property’s use, there is a potential implication. To keep things above board, I would be making a call to the insurer just to let it know there will be other people in the property over the set period. Although you don’t normally need to do this if you were just going on holiday and leaving it vacant, other people living there poses an additional element of risk, in case there were a flood, fire or burglary. In such an unlikely scenario, there would be a claims adjuster making enquiries, possible Garda involvement etc, and it’s really not the time you want your insurance company finding out a different family at your home instead of you. There probably won’t be any additional premium, but it’s no harm giving the insurer the heads up. If you were swapping your cars over, you’d certainly have to do it. Enjoy the trip!
The Ryan Review
We’re seeing the fallout now from building oversights at dozens of schools around the country.
Thousands of children will be displaced, possibly for months, as contractors and the Department of Education play catch-up with the affected buildings. The cause is still under investigation, but it’s almost certainly exacerbated by lack of proper inspections by the department when many of these quick-build schools were being thrown up. In previous years, we’ve also seen just how traumatic and dangerous it is for buildings not properly governed, not least for former Priory Hall residents and all those in the pyrite redress scheme.
It may even be the thin end of the wedge. The Society of Chartered Surveyors Ireland (SCSI) claims the “vast majority” of multi unit developments (MUDs, or ‘apartments’ to you and me), have not set aside adequate funds for maintenance and refurbishment. Its report on 632 MUDs containing 52,600 properties cites just one in four who have done so.
Most management companies have been forced to charge extra levies to sinking funds from unit owners to carry out essential works on lifts, pumps, alarms and boilers. It warns of safety concerns if these cannot be undertaken. The legal requirement for a sinking fund contribution is €200 p.a. by individual owners, but this is proving woefully inadequate.
Meanwhile, a dearth of construction workers and apprentices is gumming up the works and causing delays in even inspecting, never mind remedying at fault buildings.
So what can we expect from the Department of Housing in response? Lots of photo-ops of Minister Eoghan Murphy in a hard hat with sleeves rolled up, one expects.