Saving for your first castle? You might get a tax break to match
Anyone tempted to snap up a historic building since the government announced tax breaks for the restoration of such properties shouldn't rush in too quickly - as they will have to wait 10 years to get all the relief they are entitled to.
The renovation bills for historic buildings can run into tens of millions of euro.
Earlier this month, Finance Minister Michael Noonan launched the Living City Initiative in a bid to encourage families and developers to restore pre-1915 buildings.
Under the scheme, owners of houses that are at least 100 years old can claim back the cost of refurbishing the property - over 10 years. So an individual who has spent €50,000 doing up a heritage home for example would get €5,000 back a year in tax relief for ten years - as long as they meet the rules of the scheme.
The tax break is certainly a carrot to anyone who has dreamed of living in a Georgian building or Victorian mansion. Have your eyes open before buying such a property, however.
"Historic buildings are very attractive but like many old buildings, you need to do a survey in advance of buying one," said Michael Brennan, business development area manager with Ecclesiastical Insurance, which specialises in insurance for historic homes. "Listed buildings can be tricky and expensive to restore."
The expense and challenges that you could run into when taking on a listed building often arise from the onerous duties of care which the Planning and Development Act 2000 puts on those who own or live in such properties. Under this law, the owners of listed buildings must preserve the historic features of their property.
"When you take on a historic property, you have to make sure its unique heritage is maintained," says Mr Brennan. "Extensions would need to be cleared in advance with your local authority. Any changes to the building would need to be in keeping with the character of the property."
If the building had limestone or sandstone walls for example, you might have to find that exact stone (or something very similar) if renovating the walls. The same applies to any timbers, stained glass windows, or mosaic tiles that might need replacing.
"It can work out more expensive to replace materials in a period building than a modern one," said Mr Brennan.
The materials are not the only thing which would prove costly if doing up a historic home - so too would any professional advice needed and the specialist craftsmen you are likely to have to hire.
Most mainstream insurers shy away from historic properties so you will usually need to get specialist cover.
"The floors and staircases in old heritage buildings are normally timber - which poses an added fire risk," said Mr Brennan. "The electrics and plumbing may be older too. So mainstream insurers tend to avoid such properties"
Should your property be damaged by fire or anything else after you have bought it, your insurance might not cover the entire bill to reinstate it to its former glory - because of the runaway costs involved.
It cost about €30m to restore St Mel's Cathedral in Longford, for example, after it was destroyed by a fire in 2009. The restoration project for the cathedral, which dates back to 1840, took five years.
Despite all the challenges, you might still be determined to buy that period home of your dreams - before you take one on, be sure that both you and it qualify for the Living City Initiative tax break.
That tax break can only be claimed on buildings in the historic centres of six cities - Dublin, Cork, Limerick, Galway, Waterford and Kilkenny. You can claim the relief if you own one such property - as long as it was built before 1915 and you are living in it.
Landlords cannot claim the tax break. There are, however, capital allowances available under the scheme for the owners of historic commercial buildings. (Unlike the residential tax break, such buildings do not have to be built before 1915 to be eligible for relief).
Property developers may renovate a property under this scheme, sell the refurbished property to you - and you can then claim the relief.
For those planning to use the tax break to buy a home, the property itself must have been originally built for use as a dwelling. So that derelict church you've fallen in love with is unlikely to qualify for the tax break - if you have to convert it into a home. Similarly, a property which was originally built as a dwelling but which has been converted and used for an office since would still qualify for the tax break. The tax perk is only available for money spent on refurbishments or conversions over the next five years. Renovating an old building takes time - so get cracking if you want to get the full benefit of this tax break.
Sunday Indo Business