Monday 26 February 2018

Home economics.... answering your property questions

Revenue Commissioners
Revenue Commissioners

Our property expert answers your queries.

Q. We are converting a side annexe as a 'granddad' flat for my elderly father. A door will allow direct access to our kitchen, with a lock from his side. It is a 'bedsit' with a bedroom/sitting room and bathroom.  He will give me his pension and there is no rent involved. I thought it would be simple but I've been warned he may be liable for local property tax (LPT) separately to us.  Is this true and why?

Sinead replies: Nothing is simple when it comes to property tax. Technically, any 'self-contained dwelling' (such as an appended annexe) is treated as a separate residential property incurring its own LPT liability.

However, Revenue "recognises that certain types of dwelling are an integral part of a larger building and may be difficult to value/sell on the open market.

"Therefore [it] will give a liable person the option of valuing a granny flat as part of the overall building where the liable person in relation to both parts of the building is the same. However, where there is a different liable person in relation to the flat and the rest of the building, the flat is valued separately for LPT purposes.

"The current valuation period for LPT is from July 1, 2013 to December 31, 2016. Improvements or additions to a property occurring after July 1, 2013 will not affect the valuation of a property for LPT purposes until the next valuation date (November 1, 2016) to cover the period 2017 to 2019".

On the pension/rent issue, the tax implications depend on circumstances, not least the purpose of the payments.

However, the assumption would be that the provision of the accommodation is not a business arrangement, but rather is out of "natural love and affection" for your parent.

In those situations, Revenue would not in general expect it to give rise to tax consequences in relation to the pension payments or the non-receipt of rent.

Q. Last month my boyfriend left me and our child and moved back to his mother's house after eight years together. My sister is concerned he has some lien against the house through 'common law' civil partnership, although we never had a formal ceremony. The house is ours (my sister's and mine), left to us by our parents, now deceased. He was never on the deeds, but I'm quite worried.

You have not entered a civil partnership so your relationship does not fall within this category. However, you are cohabitants for the purposes of the law and that has implications. Susan Cosgrove of Cosgrove Gaynard Solicitors explains: "The 'Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010' enacted in January 2011 provides for certain legal rights upon the break-up of cohabitants similar to those available to married couples or civil partners when they separate.

"Under the Act you fall into what is deemed to be a "qualified cohabitant" as you are together over two years and have a child together (if you did not have children you would still fall into this category as you are together over five years). A Property Adjustment Order is one of the legal remedies that a qualified cohabitant can seek but such an order is far from automatic.

The court, in deciding whether or not to grant it, will take a number of factors into account including the financial circumstances, needs and obligations of each cohabitant, the rights of your sister (as she owns 50pc of the property), the duration of the relationship and of course, the welfare of the child.

"Furthermore the court will look to the contribution, if any, made to the property by your ex-partner.

"It should also be noted that an application for such an order must be made within two years of the end of the relationship."

My suggestion is that you get legal advice without further ado.

The Ryan review

A 'normal' property market - if we can ever remember such a thing existed - has a turnover rate of around 4pc - 6pc a year.  This is the number of sales required to avoid prices either grinding to a halt, or roller-coastering about. It makes sure first-time buyers, trader uppers/downers and renters all get their piece of the pie.

In a low interest rate environment, such as we have now, activity can be at the upper end as cheaper loans fund movement.

In Dublin, turnover is around 0.8pc at the moment and less rurally, as it has been for some considerable time. This is neither good, nor sustainable. It stymies anybody who's thinking of buying, and contracts sellers who believe if they hold out they'll get a better future price. Another reason for dire supply in the second-hand market is the inability for many to meet the Central Bank's 20pc deposit requirements. This 'deposit' is often in the form of equity but the rising market may not have lifted all the boats out of negative equity territory so many people are staying put. Often they are living in cramped conditions with two kids, in accommodation they acquired when they were a childless couple.

Although there has been a hike in new builds, these are piecemeal, as developers find credit challenging. Instead of a 50-unit launch, it's five. It would be somewhat ironic if the main source of supply is courtesy of the repossession courts rather than natural activity, but it may be so in the short term.

Indo Property

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