Home economics... answering your property questions
Advice is given on questions about Principal Private Residence relief (PPR) and disclosing problems when selling a house.
Question: We are moving abroad prior to retirement. We plan to rent for a year or two in a few places to see if we like it before committing, hanging on to our family house in Dublin in the meantime. Our question is will we run into tax problems when we sell up? We thought all proceeds from the family home were tax exempt and we're not planning on renting it out.
Sinead replies: The tax relief you are thinking about is Principal Private Residence relief (PPR) and is one of the most common reliefs utilised, as people selling family homes aren't expected to pay Capital Gains Tax (CGT) on the gain. However, Barry Flanagan of Taxback.com explains its limitations:
"A gain on the disposal of a dwelling-house by an individual may be exempt from CGT if the house has been occupied by the individual as their only or main residence throughout the period of ownership. Therefore, if you were to rent/buy a different property and occupy that as your new sole/main residence, relief is not available in full but apportioned for the period it was your main residence. An additional 'grace period' can be allowed, however as Revenue recognises it may take some time to sell your house, so the last 12 months of ownership is concessionally granted as 'deemed occupation', i.e. Revenue will automatically allow the last 12 months to be included in the period of occupation even though the owner may not have been actually living there. There are other concessions for those working abroad.
"So, say you own a house for 10 years. If you occupy the property as your sole residence for eight years and then move to France for two years before finally selling, you are deemed to have occupied the house for nine years (i.e. the first eight plus the last 12 months deemed occupation). You would be able to claim CGT relief on 9/10ths of the gain."
Whether you rent/buy the house in France or rent your house out here is not relevant. Keep all records and good luck with the move!
Question: We got a house survey completed a couple of years ago for an extension we were planning on building, but which didn't go ahead as we decided to move house instead. The surveyor found a structural problem with the supporting wall between the kitchen and exterior which he said wasn't dangerous but would cost a good bit of our budget to fix, so we didn't bother. Now that we're selling up, do we need to disclose this to the estate agent or leave it to see if their surveyor picks it up? Would we be expected to fix it first? This would be expensive?
Sinead replies: Legally, you are not under any obligation to disclose physical defects in a property for sale. That said, any solicitor will advise a purchaser to get a full structural survey completed prior to buying, and any surveyor worth his or her salt will pick this problem up straight away, as yours did, so in one sense the issue is academic.
However, the scenario you probably wish to avoid is finding a buyer, going sale agreed and them then reneging on the offer after the survey; - it looks bad for future buyers and your estate agent won't be thrilled. It's highly likely if the buyer requires a mortgage, their bank won't lend them the money until it is repaired, leaving you high and dry.
My advice, and that of estate agents, would be to disclose it upfront, perhaps with a quote for the cost of repair and build this into the selling price. That way, it's bought 'as seen' but the buyer can be reassured that (a) it is fixable and (b) you've been honest and are therefore a 'good' vendor.
* Note: I am obliged to readers who have told me they are getting conflicting information on the water conservation grant. It applies to Primary residences only, which means that a landlord cannot claim it for vacant premises, but his/her tenant can, once it is let.
Is it pure stubbornness or wilful badness that accompanied the latest figures from the Insolvency Service (ISI) which showed some banks were prepared to lose €100,000 per mortgage than do a debt deal with errant borrowers?
Forcing them into bankruptcy certainly makes no logical sense, as ISI’s Lorcan O’Connor pointed out, so the only conclusion is that the banks make such decisions because (a) there’s nothing to stop them, and (b) it serves the debtor right.
In other circumstances it might be touching that the cold finger of finance could be swayed by emotion, but not when it’s akin to the truculent tantrum of a toddler on the naughty step.
The biggest cross-patches are Permanent TSB and Bank of Ireland. The former’s excuse is they’re still in financial trouble and being flathualach with write-offs for debtors won’t help. I wonder how the potential shareholders it’s wooing feel about millions more being heaped upon already considerable liabilities so they can cock-a-snook at borrowers they don’t like.
In Bank of Ireland’s case at least they’re honest: CEO Richie Boucher said he had no intention of doing deals because he doesn’t have to. With the State’s ownership at a dribble, who’s to say otherwise?
The bank veto in the insolvency legislation was a mistake from the off. The prevarication on setting up an independent appeals process is disgraceful. The Credit Review Office exists to arbitrate for business loan refusals — why not something similar for benighted home owners?