Our son is in his mid-30s and unable to move up the property ladder in South Dublin. We have a very large garden with generous side access and have often thought about building a house for our old age. However, what would be the legal and planning requirements if we were to offer this site to our son instead and let him build his own house to a mutually acceptable design. Would we be better off applying for the building permit and dealing with the legal aspects after the property is built?
Siobhan Durkan writes: If there are plans to build a new house, you or your son must apply for a building permit. The applicant must be the legal owner or have a letter of consent from the owner to make the request. Therefore, the site does not need to be transferred to make the planning request and it is often best not to do so in case the planning request is not granted. The only concern in adopting this strategy is that the value of the site can increase dramatically if planning permission is granted. This will increase the stamp duty payable by him. If the value exceeds € 335,000, your son may be liable for gift tax for the value beyond. For this reason, it is advisable to consult a local licensed appraiser to assess the site with and without a building permit to determine the best course of action.
Pre-planning consultation with the local authority is recommended. The purpose of pre-planning is to get advice from the local authority on a development project. This will inform you as to the likelihood of success in obtaining the planning.
In consultation with a licensed surveyor or architect, final plans can be prepared and the building permit application can be submitted. The surveyor / architect will need to sign the building to confirm compliance with the building permit, building regulations and to satisfy the mortgage provider at every stage of construction before the mortgage provider releases each payment due. ‘step.
It is important to note that Law Society regulations prohibit a lawyer or firm from acting for both parties in a voluntary transfer like this. Therefore, you and your son will need separate attorneys if ownership is to be transferred.
There are tax implications you should be aware of in a voluntary site transfer.
The person (s) relinquishing the site will not have to pay capital gains tax (CGT) if it is transferred to their child to build a house there. The house must be the child’s sole or primary residence. A transfer includes a joint transfer by you and your spouse or civil partner to your child and his or her spouse or civil partner. To qualify for relief, the site must be one acre or less and be valued at $ 500,000 or less.
Stamp duty is payable by your son at the non-residential rate of 7.5% of the site’s value
As far as your son is concerned, the following tax implications should be taken into account.
There is a clawback provision which provides that your son may have to pay CGT on the assignment of the site from you to him in two specific situations. This is where your son disposes of the land, has not built a house on it, has not occupied the house built as his sole or principal residence for at least three years. This clawback does not apply if your son transfers the property to his spouse or civil partner.
Stamp duty is payable by your son at the non-residential rate of 7.5 percent of the site’s value. When your child builds a house on the site, they are eligible for a refund of a portion of the stamp duty paid under the Residential Development Stamp Duty Rebate Program. The maximum amount of reimbursement that can be requested is eleven-fifteenths of the duties paid. There are conditions for the refund, more details are available on the Revenue website.
From a gift tax perspective, your son can receive gifts totaling € 335,000 from parents during his lifetime without being subject to this tax. When a child has not received any donations or inheritances previously, a site worth up to € 335,000 would be exempt from donation tax.
Your son should look into purchasing assistance as he may be eligible. The incentive only applies to properties purchased or built as a first-time home. Your son must take out a mortgage of at least 70 percent of the appraisal approved by the mortgage lender. As of January 1, 2017, the purchase assistance system only applies to goods of an amount less than or equal to € 500,000. The enhanced relief is available until December 31, 2021. Further details are available at income.ie.
Siobhan Durkan is a lawyer at P O’Connor & Sons