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Contractual rights
• A variety of other contractual rights affecting land can also be
created such as option/pre-emption rights and licences
to occupy.
• One key category of rights to which property can be subject
are restrictive covenants. They affect freehold land and
represent a documented agreement by an owner to restrict
the use and enjoyment of its land in some way for the benefit
of another’s land. Depending on the drafting of the covenant
it may be enforceable not only as between the original
contracting parties but also by their respective successors
in title.
ACQUISITION PROCESS:
KEY STAGES
• Under ROI law any individual or legal entity, whether resident
or non-resident can purchase and own property. There are no
foreign direct investment restrictions. In 2013 legislation was
passed to allow for the establishment of REITs in ROI.
• Although the following briefly summarises the process
involved in the direct acquisition of property it is often the
case in practice that high value properties (or portfolios
of properties) are acquired indirectly through a variety of
different corporate vehicles including through buying shares
in REITs or investing in units in a property unit trust.
Marketing
• The marketing of commercial property is usually carried
out on behalf of the seller by a property agent. There are
legislative controls on guide prices quoted by agents. High
value commercial property is frequently marketed through a
private tender process where bidders are invited to tender for
the property but without knowing the bids from competitor
bidders. High value residential property (and increasingly low
value repossessed commercial and residential property) is
offered though public auction.
Negotiation
• Commercial negotiations commence once an interested party
has been identified.
• While until a written sale contract is agreed, signed and
dated (“exchanged”) neither party is legally bound it is
easier through simple correspondence for parties to become
unintentionally bound in the ROI than in the UK and all
written negotiations need to be headed “subject to contract”
so as to protect the unwary. It is common to find non binding
“heads of terms” recording the principal commercial terms of
the transaction in high value deals. Lawyers are often called in
to assist preparation of bid letters/heads of terms to ensure
that parties do not become bound.
• A serious buyer may require an exclusivity period within
which to try to agree terms with the seller and lawyers may
be instructed to draw up an exclusivity agreement giving
the buyer a period of time within which to undertake its due
diligence and “exchange contracts” for the purchase.
• Subject as mentioned above lawyers would usually only
get involved once the seller and buyer (via their respective
agents) have agreed terms although frequently.
Pre-exchange
• Once terms have been agreed the buyer’s lawyer will
investigate the seller’s title to the property and carry out
due diligence. Generally a seller of property is not under an
obligation of disclosure to the buyer and the principle of
“caveat emptor” (let the buyer aware) is adopted.
• It is also likely that the buyer will instruct a number of other
professionals to advise it on the transaction. By way of
example surveyors will almost certainly be asked to carry out
condition surveys of the property and any buildings on it.
Sale contract
• The sale contract will be negotiated by the parties’ lawyers
and will contain all the terms agreed between the seller and
the buyer including any special conditions required to deal
with matters revealed by the buyer’s due diligence.
• The buyer become legally bound to complete the purchase
and the seller to sell, subject to any conditions specified in
the sale contract, once the sale contract has been exchanged
(formally entered into).
• Typically a deposit of 10% of the purchase price is payable
by the buyer on exchange. If the buyer fails to complete the
purchase then the seller may retain the deposit.
Transfer
• The sale of the property will be completed on the date
specified in the sale contract by way of completion of a
separate document known as a “transfer” or a “conveyance”.
Simultaneous exchange and completion is not common in
ROI and only tends to occur in very high value transactions.
More typical is a 4 to 6 week interval between exchange and
completion. The balance of the purchase price will be paid on
completion.
• The transfer needs to be registered at Land Registry. Although
as between seller and buyer title to the property passes on
completion the buyer will not become the legal owner of
the property until it has been registered as owner at Land
Registry. While a priority search procedure similar to the UK
exists, it is not common to avail of it (it only lasts 14 days
although can be renewed) unless the seller is in financial
distress and there is a real prospect of judgment mortgages
being registered. Completion searches are carried out on the
day of completion itself.
TAX
Direct acquisition of a property
• The acquisition of a property (whether freehold or leasehold)
gives rise to stamp duty.
• Stamp Duty is payable by the buyer/tenant (as appropriate).
• On a freehold acquisition the rate payable is a percentage
of the purchase price – 2% on acquisition of commercial
property and 1% on the first €1 million and 2% on the excess
on purchases of residential property; on long leases the
same rates apply to the premia paid on them. On market rent
leases, stamp duty of 1% of the average annual rent is paid on
leases of terms up to 35 years.
• Value Added Tax (VAT) which is a form of sales tax may
be payable in addition. VAT on property in ROI is complex
and the VAT treatment of any particular sale is dependent
on the development history of the property and previous
54 Investors Guide to Europe 2015