Residential Property: Houses and Apartments

Under new legislation enacted on 9th July 2007 first time buyers (see below) are eligible for an absolute exemption from stamp duty on the purchase of a house or apartment of any value since 31st March 2007, subject to claw back (see below).

Before 31st March 2007 only certain newly built properties were exempt from stamp duty for first time buyers, but now the market has been opened for them to purchase any house or apartment, including second hand properties.

What if you’ve already paid stamp duty on the purchase of your house / apartment since 31st March 2007 and you think you are now eligible for the exemption?

You should contact your solicitor to see if you are now eligible for the exemption. If so, you will have to meet with them to sign a form confirming you are eligible for the relief. They will then liaise with the Revenue Commissioners to obtain your refund. The Revenue Commissioners will not pay interest on your refund unless they take over 93 days from the date they receive your valid complete claim to pay the refund.

What if you were liable to pay stamp duty and think you are now exempt, and you haven’t yet paid any stamp duty?

If you satisfy the following requirements you should contact your solicitor as there may be some additional forms to be signed by you to claim the exemption:

  • If you have completed the purchase of a house/apartment on which you would previously have had to pay stamp duty, since 31st March 2007 but before 9th July 2007, and
  • If you think you are now exempt from stamp duty, and
  • You have not already paid the stamp duty.

Who is a first time buyer?

There are strict rules as to who is a first time buyer:

  • The purchaser must have never before, either individually or with another person, bought or built a house/apartment either in Ireland or anywhere else in the world, and
  • The purchaser, or another person on their behalf, is going to live in the house/apartment they are buying as their only or principal (main) place of residence, and
  • They are not going to receive any rent (other than under the rent-a- room scheme detailed below) from the letting of the property during the first five years from the date of the instrument when they purchased the property.

Also, the following rules apply to persons claiming first time buyer stamp duty
relief:

  • All the purchasers must be first time buyers to claim the relief.
  • The first time buyer(s) must provide all the funds to purchase the property, by way of borrowings or otherwise. If anyone else provides part of the purchase monies or is a party to the borrowings that person is also considered to be a buyer and if they are not a first time buyer the relief cannot be claimed. This includes a situation where a couple sell a house owned by one partner, and use the funds to buy a property in the name of the other partner, who is a first time buyer. As the funds were provided by the non-first time buyer the relief cannot be claimed. However, if a property is bought by a first time buyer in their sole name but their lending institution require their parents, or any other person, to be co-mortgagors for the purpose of additional security, and the intention of both the parents/other person and the first time buyer is that the parents/other person will not get a beneficial interest in the property, nor will they be contributing to repayments of the mortgage; the Revenue Commissioners will allow the relief. This allows parents/others to act as guarantors to loans without affecting the first time buyer relief.
  • If a person receives an unconditional gift of funds to purchase a property it does not affect their status as a first time buyer.
  • If a person has previously received a gift of a house they may still be a first time buyer if the gift was received prior to 22nd June 2000 (or 27th June 2000 if the gift was of only part of the house) subject to the requirements outlined above. However, a person will no longer be a first time buyer if they have received a gift of a residential property since then, although, if they qualify as a first time buyer when receiving the gift, first time buyer relief may be claimed on the gift.
  • If a person has inherited a house at any time they can still qualify as a first time buyer if they satisfy all the other requirements.
  • If two first time buyers buy a house together and claim the relief on the purchase, and at a later stage, one buys out the share of the other in the same house, the first time buyer relief may be claimed again by the person buying out the second owner, provided they haven’t in the meantime bought another residential property or part of one.

A person will also be deemed to be a first time buyer in certain circumstances:

  • Trustees to a Trust, in certain circumstances.
  • A spouse buying their first residence after officially separating from their spouse (by way of Judicial Separation/Deed of Separation/Divorce/Decree of Nullity) provided they do not retain an interest in their former family home and they were not beneficially entitled to an interest in any other residential property other than the family home immediately prior to the date of their official separation, and at that date their former spouse was in occupation of the former family home.

What is the rent-a-room scheme?

A first time buyer is allowed to rent the property without the first time buyer stamp duty relief being clawed back (see below) provided the rent is received from the letting of furnished accommodation in part of the property while the first time buyer (or a person on their behalf, not paying rent) is also living in the house as their principal place of residence.

For stamp duty purposes, there is no limit to the amount of rent that may be received as long as the other requirements are met. Note that there may be income tax consequences though and advice should be sought in this regard if you are thinking about letting part of the property.

What happens when the relief is clawed back?

A claw back of the relief arises if the property is rented, other than under the rent-a-room scheme (see above). If the terms are breached, the first time buyer will then be liable to pay a sum to the Revenue Commissioners, calculated as follows:

Stamp duty an investor would have to pay on the property
MINUS
Any stamp duty the first time buyer actually paid.

This sum becomes payable on the date that rent is first received for the letting of the property other than under the rent-a-room scheme. If you purchased a property and claimed first time buyer relief from stamp duty you should contact your solicitor immediately on deciding to rent the property (other than under the rent-a-room scheme) to arrange the payment of any claw back of stamp duty as soon as possible in order to avoid penalties and interest charged by the Revenue Commissioners for late stamping.

18 August 2007

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