UPDATE ON STAMP DUTY CHANGES IN FINANCE BILL 2017

Transitional Arrangements relating to Commercial Property

The most significant change to Stamp Duty announced in the Budget Speech was the increase in the rate applicable to commercial property from 2% to 6%. The transitional arrangements applicable have been clarified on publication of the Finance Bill.  There were some fears immediately following the Minister’s speech that the higher rate of duty would apply even where binding contracts to purchase had been signed prior to the Budget.  This would have been a departure from the practice in previous years where the pre-Budget rate of duty had continued to apply to such transactions.  It would also have had a penal effect on purchasers who had committed to buying commercial property but would now be facing unanticipated increases in purchase costs. The Finance Bill has now confirmed that the 2% rate of duty will continue to apply where a binding contract was entered into prior to midnight on 11 October 2017 provided the relevant instrument or deed transferring the property is executed before 1 January 2018.  The instrument or deed must contain a certificate confirming that a binding contract had been entered into prior to 11 October 2017.

Land purchased for residential development

The Minister stated in his Budget Speech that a Stamp Duty Rebate Scheme is to be introduced in relation to commercial land purchased for the development of housing where development commences on the land within 30 months of purchase.  The Finance Bill does not contain any details of this Scheme or how it will operate and it has been indicated that this will be introduced at the Committee stage of the Bill.

Transfers of Agricultural Land

The possible application of the increased rate of Stamp Duty to transfers of agricultural land caused a lot of unhappiness in the agricultural community.   While previously a reduced rate was applicable to the transfer of farms in families, this was subject to a requirement that the transferor was not aged over 67.  This upper age limit is to be removed, and such transfers will benefit from a fixed rate of 1%.  It would appear however that the removal of the upper age limit will not come into effect until the passing of the Finance Act.

Leases of commercial property

The Stamp Duty rate on leases of commercial property will continue to be charged at a rate of 1% on the average annual rent.  Where the landlord receives a premium from the tenant at lease commencement, this will be subject to Stamp Duty at the new 6% rate.

Transfers of Residential Property

The Stamp Duty on residential property remains unaffected by Budget 2018 and will continue to apply at a rate of 1% up to the first €1,000,000 with 2% payable on the excess over €1,000,000.

Leases of residential property

Short-term leases of residential property have not been subject to stamp duty unless the annual rent exceeded €30,000.  This threshold has now been increased to €40,000.

For further information contact:

Jerome O`Sullivan, Head of Commercial Property Email: josullivan@jwod.ie.

Patrick Bradley Partner Email: pbradley@jwod.ie

Ciara McDonnell Partner Email: cmcdonnell@jwod.ie

 

J.W. O’Donovan were delighted to once again sponsor and be part of the judging panel for this years UCC IGNITE programme awards.

The event celebrated the achievements of the 7^th cohort of Recent Graduate Entrepreneurs who participated in the 12 month business incubation programme. Ten aspiring Recent Graduate Entrepreneurs, who have just commenced the programme, were also introduced on the night.

The awards judging panel comprised of Sean Byerley, Head of Bank of Ireland – Cork City; Rosscoe Deasy, Associate Director EY; and John Fuller, Associate Solicitor, J.W. O’Donovan.

Sean Byerley, Head of Bank of Ireland – Cork City, chair of the judging panel, praised the young companies, saying “The calibre of the business presentations this year was extremely high, and it’s very encouraging to see that a number of the start-ups we met are well on the road to success having already generated sales revenue or raised finance. Each of the start-ups that presented to the judging panel demonstrated true entrepreneurial spirit and steadfast determination; and each has the potential to develop a successful business.”

Top award winner ApisProtect helps commercial and amateur beekeepers, managing 81 million beehives globally who are losing up to 50% of their colonies each year by using in hive IoT enabled sensors, machine learning , and world class beekeeping knowledge to help them identify hive problems, diseases, and pests.

The JW O’Donovan Solicitors/IGNITE Innovation Award was presented to Kaushik Shanmugam of Lacidem, for the most innovative use of technology. Lacidem is a wearable technology company that provides solutions which enable hospitals to proactively monitor post-surgery/treatment cardiac patients remotely and predict abnormalities. Kaushik came up with the idea when he lost his friend who suffered a heart attack, which motivated him to find a solution to monitor patients outside hospitals efficiently.  Pictured below is John Fuller of our Corporate and Commercial team presenting the award to Kaushik Shanmugam.

The EY/ IGNITE Business Plan Award went to Conor Lyden of TrustAp, a new transaction platform that acts as a safety net for consumers when they’re buying and selling online. Trustap holds the buyer’s money until the transaction has completed and subsequently financial losses to consumers are eliminated.

Estate Agents and Negligent Misstatement

Walsh v Jones Lang Lasalle Limited

With the return of confidence to the Irish property market, increased activity in purchasing and rising prices, it could be said that the Supreme Court has issued a timely reminder about the dangers of relying on information from estate agents which has been provided for promotional purposes.

The decision of Mr Justice O’Donnell in the case of Walsh v Jones Lang Lasalle Limited [2017] IESC 38 was handed down on the 1^st of June 2017 and serves as a stark reminder of the pitfalls a purchaser can fall into when relying on information from a particular source, who does not assume liability for such statement.

Facts

In January 2007 the High Court awarded the plaintiff €350,000.00 in general damages for the loss he suffered by relying on details contained in a sales brochure prepared by the defendant estate agent.

The details, which the High Court found amounted to a misstatement, were such that it stated the property’s measurements were 23,057 sq. ft. with a site area of 0.31 Acres. At the end of the page there was a disclaimer stating:-

“Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchasers/lessees should satisfy themselves as to the correctness of the information given.”

The measurement of the property was in fact 1,809 sq. ft. smaller than the sales brochure had stated, standing at 21,248 sq. ft. Only a survey as to the condition of the premises was carried out. The purchaser had made approximate calculations of £20.00 per square foot in his valuation and development plan.

The plaintiff purchaser claimed a significant loss due to the price paid, and the calculations he carried out on a price per square foot basis. The price paid in 2000 was £2.342m.

The High Court found in favour of the plaintiff purchaser by reasoning that there was a relationship between the purchaser and estate agent which was sufficiently proximate to give rise to a special relationship, which in turn satisfied the High Court legal test laid down in the case of Wildgust & Another v Bank of Ireland & Another [2006] 1 IR 570.

Supreme Court Decision

The Supreme Court in rejecting the finding of the High Court said that the test in Wildgust was not appropriate in all cases.

The Supreme Court more particularly said the statement on which the plaintiff purchaser relied, was generally available to anyone who wished to see it. In other words, the estate agent did not make this statement to just the plaintiff purchaser but rather to the world at large.

The Supreme Court found that this case came down to the allocation of risk – weighing up the interests of the estate agent to reasonably limit its liability versus assuming risk and charging substantially more in fees for its services.

The Supreme Court concluded by saying that if a purchaser has a particular interest in the square footage of a property, then they should contract for that, whether it be with the vendor, the vendor’s agent or his/her own expert.

Conclusion

This case illustrates the dangers in relying on information from a party who can reasonably limit their liability for a statement made by them. In such transactions, if a purchaser has a specific interest in the square footage, or other measurement, of a property then they need to contract with an appropriate party to provide a warranty for such information.

With the renewed activity in the Irish property market, this case shows the value and security that can be obtained in engaging the relevant expert and in turn allowing a purchaser to rely on an appropriate source of information.

J.W. O’Donovan advises Irish and International clients on an extensive range of property law matters. We offer services to large institutional and private investors, developers and major retailers in the Irish market. Our property service comprises three distinct practice areas – commercial property, construction and residential property.

Should you have any property related query, please do not hesitate to contact Jerome O’Sullivan the Head of our Property Department.

 

 

 

 

Jerome O’Sullivan
Head of Property

Email: josullivan@jwod.ie
Tel No: +353 21 7300200

We would like to thank everyone who attended at our office on Thursday 4^th May to mark Alzheimer’s Tea Day in support of the Alzheimer’s Society.

Alzheimer’s Tea Day is the largest annual fundraising campaign in The Alzheimer Society of Ireland’s calendar. Since the very first Alzheimer’s Tea Day in 1994 over €7.5M has been raised to provide essential support to the 55,000 people living with dementia in Ireland today.

We are delighted to announce that we raised €1,165.70 for the Society and we thank you for your very generous contributions.

How long does it take to get a progressive, important and relatively uncontroversial piece of legislation passed in this country?  One year, two years, three?  In the case of the Landlord & Tenant Law Reform Bill, the gestation period is currently running at almost 14 years, and counting.

In 2003 the Law Reform Commission (“LRC”) published a Consultation Paper on the General Law of Landlord and Tenant and invited submissions from interested parties.  This consultation process resulted in the publication by the LRC in 2007 of their Report on the Law of Landlord and Tenant to which was appended a draft Landlord and Tenant Bill. This draft bill proposed fundamental reforms of landlord and tenant law, particularly as it applies to business tenancies.

Anyone who has had to grapple with the vagaries of our landlord and tenant law, be they business owners, lawyers, surveyors or other professional advisers, knows that it is riddled with archaic rules and procedures that are entirely unsuited to the commercial realities of today.  The bill proposed by the LRC would get rid of most of these anachronisms once and for all, proposing as it does to repeal many pieces of outdated legislation dating from the Distress Act 1493 to the Landlord and Tenant (Amendment) Act 1989.  I don’t propose to go through everything that is contained in the bill but, suffice to say, it would bring about an extensive modernisation of many aspects of landlord and tenant law, such as the formalities required to create a tenancy, rent review procedures, and when and how tenancies may be terminated.  The legislation, if and when implemented, would have the effect of providing a much greater degree of certainty for both landlords and tenants as to their rights, entitlements and obligations in dealing with leased property.

So what has happened to this bill?  Four years after the LRC Report, the then Minister for Justice and Equality, Mr. Alan Shatter, published draft heads for the bill, commenting that “a modern landlord and tenant code applicable to business tenancies is essential for our economic recovery”.  He invited submissions on the proposed bill from interested parties prior to 31^st May 2011.  Since then, it appears to have gone nowhere fast.

Some clues as to the importance attributed to this bill by our legislators can be gleaned from the Legislation Programmes issued by the Government at the beginning of each Dáil session.  For example, in the Legislation Programme for the Autumn Session 2013, this bill was listed in “Section B – Bills in respect of which heads have been agreed and texts are being drafted”.  We were told that publication was expected in late 2014.  In the programme for the Spring/Summer Sessions 2015, it was still in Section B, but publication was “not possible to indicate at this stage”.  In the programme for the current session of the Dáil, Spring/Summer 2017, the bill has been relegated to the third division, a section entitled “All Other Legislation”, and we were reassured that its status is “heads approved, work is continuing”!

Ireland’s pre-eminent landlord and tenant scholar, Professor J.C.W. Wylie, in the preface to the third edition of his book on Landlord and Tenant Law expresses “great sadness” at the lack of progress in implementing this bill.  In fact, Professor Wylie, who played an important role in the LRC process way back in 2003-2007, had delayed the latest edition of his work in the hope that the bill would be passed; eventually he decided he could wait no longer.

As mentioned earlier, there is nothing particularly controversial in this bill and it is difficult to understand why it has languished in some legislative limbo for so long, while the inadequacies of our current regime continue to have a negative impact on the business life of the country. At least part of the reason must be disinterest and indifference on the part of our legislators.  Most of the time, there is nothing vote-catching or headline-grabbing about landlord and tenant law, but it is noteworthy that one of the only recent changes in the law relating to business tenancies, the abolition of upward-only rent reviews, was hurriedly inserted as a last-minute addition to a largely unrelated statute in 2009, a time when the high level of commercial rents was a hot political issue.

So it seems we shouldn’t hold our breath waiting for anything to change in the near future. Or perhaps we should all, whether individually or through lobby groups, professional bodies and other groupings, try to bring some pressure to bear on our politicians to expedite this much-needed reform.

For further information please contact:

 

 

 

 

Jerome O’Sullivan
Managing Partner

Email: josullivan@jwod.ie
Tel No: +353 21 7300200