In recent years there has been an increasing number of property based taxes which can remain as a charge against a property even after it has changed hands.
The first wave of property based taxes in recent years were the Household Charge and the Non Principal Private Residence (NPPR) charge. Although both charges have been abolished and replaced by Local Property tax (LPT) it is important to note that outstanding charges and liabilities can still apply in respect of same. In some cases a potential issue will only be uncovered on the sale or mortgage of a property. Potential Consequences
Under the relevant legislation if a property to which the charges apply is sold a new owner can become liable to the outstanding charges. Any outstanding liability shall be a charge on the property to which it relates for up to a 12 years. It is therefore crucial that a solicitor acting for a purchaser obtains a Certificate of Discharge (or if applicable a Certificate of Exemption) in respect of both Household charge and NPPR charge. There are significant penalties for the late payment of the NPPR charge in particular meaning that arrears of in excess of €7,000 can accrue despite the fact that the quantum of the charge was relatively low (€200 per annum) LPT
A similar issue arises in relation to the LPT charge however the rules in relation to discharge or clearance are more complicated. A solicitor acting for a purchaser must ensure that not only has LPT been discharged but also that the valuation submitted by the Vendor as at the most recent valuation date (May 2013) is reasonable. If the Vendor can show that any increase in the sales price is attributable to a rise in comparable properties or work carried out to the property or is within an allowable valuation margin (25% in Dublin) than no specific clearance is required. If however the increase cannot be attributed to one of the said factors specific clearance must be obtained from Revenue. If Revenue will not furnish same the Vendor must self correct the original valuation submitted and pay any arrears. If the Vendor refuses to do this after the sale has taken place the purchaser as a last resort can submit their own estimate to Revenue which will remove the liability from the property and onto the vendor.
Unfortunately with the commencement of water charges and the provisions of the Environmental (Miscellaneous Provisions) Bill 2014 it would appear that a purchaser will now also be required to ensure that any outstanding water charges have been discharged prior to closing although it is still not fully clear if this will be practicable going forward. Download
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