On 18 May 2021, the government announced that changes to both stamp duty and planning law are proposed in order to mitigate against the bulk purchase of houses in Ireland. Minister Donohoe stated this would be done by way of imposing a stamp duty charge of 10% on the cumulative purchase of 10 or more residential houses in a 12 month period. Minister for Housing Darragh O’Brien also announced new planning measures to prohibit the bulk buying of houses and duplexes in new developments, as well as the introduction of an “owner occupier guarantee” which would ensure that a minimum number of houses and duplexes in a development are designated for owner occupiers. The stamp duty measures will take effect from 20 May 2021.
The background to this Financial Resolution is the purchase by institutional investors of all or a significant proportion of residential housing estates, particularly close to the time of completion. This 10% rate is intended to provide a significant disincentive to this practice of multiple purchases by institutional investors of large parts of, or indeed whole, housing estates before they reach the market, thus denying first-time buyers an opportunity to purchase a home.
The new proposed 10% stamp duty charge is expected to apply to situations where a person acquires 10 or more units on a cumulative basis over a 12 month period, in addition to bulk purchases of 10 or more properties. The measure will apply to all Irish dwellings (other than apartments), regardless of location (i.e. it should apply where there are multiple dwellings in one estate or a single dwelling each in different locations across the country) or when the house was built (including both new builds and existing houses). Apartments are fully exempt from this higher stamp duty charge, as are multiple purchases by Local Authorities and Approved Housing Bodies.
Going forward, where the 10% rate is triggered as a result of the acquisition of 10 or more properties over a 12-month period, the increased rate may apply to all purchases within that 12-month period, including the first 9 purchases. However, it appears that this should not apply with respect to units purchased before the Financial Resolution comes into effect begin 20 May 2021; units purchased before this date can be counted towards triggering the threshold of 10 properties over the 12-month period, but the higher stamp rate can only be applied to units bought on or after 20 May 2021. It is unclear under which mechanism the additional stamp duty will be collected in respect of the first 9 properties.
Apartments are defined in line with Planning guidance being a multi-storey residential property that comprises, or will comprise, not less than 3 apartments with grouped or common access. Therefore, it would appear that duplexes should fall within scope of the new measures.
The increased rate will also apply in circumstances where multiple purchases of residential units are made indirectly through shares, units in investment funds or interest in a partnership. It is unclear how these measures will operate in practice. We will be seeking further clarification from the Irish Revenue / Department of Finance on this. It appears that the 10% stamp duty rate will only apply on the proportion of the value of the shares that represents residential houses and only where there is a change in control in the company / investment fund / partnership.
A 3-month transition period is included for execution of contracts that have been entered into but not completed prior to the commencement of the Financial Resolution. This appears to be on the advice of the Attorney General’s office, with this decision possibly influenced by the recent Appeal Commissioner determination which considered the application of stamp duty to conveyances where a takeover agreement had been entered into prior to introduction of a new measure introduced in October 2019 Budget announcement.
Minister O’Brien announced that new planning guidelines will be issued shortly by way of a Departmental circular to require Local Authorities and An Bord Pleanala to prohibit bulk buying of houses and duplexes. In addition, an “owner occupier guarantee” was announced, which will enable Local Authorities, based on their own Housing Needs and Demand Assessment, to designate a specified number of houses and duplexes in a development for owner occupiers. Local Authorities will be able to designate up to 50% of houses and duplexes for such purposes and this is in addition to existing Part V requirements which facilitate the delivery of social and affordable housing.
Again, these new measures will not apply to apartments, with the Minster noting that this is in recognition of the need for continued investment from international capital to ensure supply in core urban and high density areas.
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