Saturday 24 August 2019

Home economics: Our property finance expert answers your questions


Works which results in BER being improved by at least seven energy ratings allows for rent increases in excess of 4 per cent. Stock picture
Works which results in BER being improved by at least seven energy ratings allows for rent increases in excess of 4 per cent. Stock picture
Sinead Ryan

Sinead Ryan

Q My landlord moved me out of the house I rent from him as he was carrying out what he described as 'remedial works'. He let me live in another property he owns nearby on a very small rent, which I agreed to and thought very good of him. Now the work is complete, he has informed me that the rent is to increase by 15pc. The house is in a rent pressure zone, and I don't understand how this is allowed. I know there are some exemptions, but I didn't ask for this work to be done in the first place and can't afford the rent now. Is he trying to get rid of me?

A I can't answer that. It seems an expensive way to go about it, so let's accept his bona fides and see if he is in the right. Under the Rent Pressure Zone legislation, landlords are not permitted to increase rent by more than four per cent per annum, but there are 'exempt' properties within this. They include those which have "undergone a substantial change in the nature of the accommodation".

Changes to the exemption rule became effective on June 4 this year and "substantial change" is only deemed to have taken place where strict criteria have been met, namely:

* a permanent extension that increases the floor area by at least 25pc of the original, or

* result in the BER being improved by at least seven energy ratings, or;

* three of the following: (a) the internal layout being permanently altered, (b) adaptation for use by persons with a disability, (c) a permanent increase in the number of rooms, (d) BER improvement of at least two or three energy ratings (under certain definitions).

So I can't say from your email if the work carried out qualifies, however, it seems clear your landlord should, at the very least, have informed you of the consequences. Give the RTB a call (0818 303037), open 8.30am-6.30pm Monday to Friday or email to see what steps you can take.

Q I am anxious that my step-children get a share of my property when I pass away as their mother (my wife) died a few years ago and I feel an obligation to provide for them in some way. My own children may object to this, but what are the rules about it? Can they inherit the same amount as my biological children, or is there a different tax treatment? All are grown-ups now.

A Step-children qualify for the same tax free threshold as your natural children - that is, €320,000, under the Group A category. But, as Bob Quinn of The Money Advisers says: "Fair does not have to be equal. In this instance, the three obvious pitfalls are legal, tax, and emotional. To deal with the legal issue first and to ensure your wishes are executed after you die, you must write a will. While wills can be contested, it should be written with explicit instructions as to how assets should be divided, who gets what, and, better again, if you can justify your rationale in the document itself. In the absence of a will, your step-children have no rights to share in your estate.

"From the tax perspective, depending on the value of the assets your step-children inherited from their mother on her death, this may give rise to a capital acquisitions tax (CAT) liability. Let's assume they inherited €320,000 on their mother's death, anything you leave them on your death will be taxed at 33pc as it is a cumulative threshold. While I am not suggesting you leave them less in your will because of this tax implication, I'd urge you to seek advice on the most effective ways to pass this wealth to them.

"Finally, the most effective way to ensure children do not develop a sense of unfairness is to discuss your plans in advance of your demise. The Irish Hospice Foundation has a booklet called Think Ahead which can open up conversations with your nearest and dearest. But most of all, its cover has five words that we should all buy into: Think, Talk, Tell, Record, Review."


The Ryan Review

Incoming Central Bank boss Gabriel Makhlouf will be met by a steady stream of lobbyists when he takes up his role (despite, ahem, local concerns over his taking up the position given some outstanding business at home) and the  Kiwi treasury head's first job will be to fend off calls for him to relax bank-lending rules on mortgages.

He should resist. The latest call comes from Mark FitzGerald, scion of Sherry Fitz and son of Garret, who told a property conference that Makhlouf "needs to be told" of his responsibility to the broader market and how "binding" the LTI and LTV rules are. It's not clear why the Governor of the Central Bank should be overly concerned about estate agents' fortunes, but given there is finally evidence of the lending rules having some effect on house prices in an ultra-low interest rate environment, all that would be needed for a boom to turn into a bubble is runaway credit. And we know to our sorry cost how that ends.

It might go down well if you're in the business of flogging houses, but not if your job is maintaining economic stability.

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