Baulking Bulk Purchases

First, the Minister for Finance will bring a financial resolution to the Dail on 19th May 2021 which will propose a stamp duty rate of 10% on the multiple purchase of 10 or more residential units in Ireland regardless of location. It will also apply in circumstances where multiple purchases of residential units are made directly through shares or investment funds. This higher rate, as well as applying to bulk purchases, will also apply to a situation where a person or institution acquires 10 or more units on a cumulative basis over a 12 month period.  

Apartments will be fully exempt from this higher rate of stamp duty. The basis behind this significant exemption is that the Government believes that apartment developments face significant liability challenges and that there are clear indications that any additional costs and burdens to apartment developments would have significant consequences for supply. These would consequently impact on Ireland’s future housing model, in particular urban living. This higher stamp duty rate will also not apply to multiple purchases by Local Authorities or approved housing bodies.  

While the higher rate of stamp duty will apply to all bulk purchases of 10 or more units, it will also apply on a cumulative basis where an individual or institution is purchasing regularly on a unit-by-unit basis. The intent here is to avoid any circumvention of the higher rate of stamp duty rate by a series of smaller purchases.

The higher rate of stamp duty will also be retrospective. This means that, subject to the exception set out below, where an individual or institution has purchased incrementally and reaches the 10 unit threshold in a 12 month period, the higher rate of stamp duty will apply to all of the other previous purchases in that 12 month period also. In such a situation and where the lower rate of stamp duty has already been paid, it appears to be intended that the uplift in stamp duty will be added to the stamp duty liability of the tenth unit.  

On the advice of the Attorney General’s Office, there will be a requirement for a 3 month transition period for the completion of contracts that have been entered into but not closed prior to the financial resolution. However, units purchased before the financial resolution comes into effect can be counted towards triggering the threshold of 10 units but the 10% rate of stamp duty can only be applied to units bought after the introduction of the financial resolution.

Secondly, and potentially of greater significance, the Minister of Housing, Local Government & Heritage announced new planning measures designed to mitigate the bulk purchase of houses and duplexes together with plans to earmark homes in certain developments exclusively for owner occupiers.

New planning guidelines are to be issued shortly by way of a departmental circular under Section 28 of the Planning and Development Act 2000 which will require Local Authorities and An Bord Pleanala to prohibit bulk buying of houses and duplexes. Separately, an “owner occupier guarantee” will be introduced by a legislative amendment which will involve enabling Local Authorities to designate a specific number of houses and duplexes within a pre-determined range of between 0% to 50% of units in a development for owner occupiers similar to the requirements currently in place under the Part V of the Planning & Development Act 2000. Current Part V and social and affordable housing requirements will be in addition to any “owner occupier” designation.  

Again, apartments will be exempt from these rules. The Department indicated that this is in recognition of the fact that continued investment from international capital is needed to ensure the supply of apartments in core urban areas.  

The effect of this proposed legislation could be to ring fence up to 70% of units within a development for owner occupiers, Local Authorities or approved housing bodies.

If you have any queries about the proposed changes to stamp duty or the planning legislation set out above, our team in Kane Tuohy LLP are available to help with any queries you may have.  

Please note this article is not intended as legal advice. For specific queries, please contact either Paul McCutcheon or David Mullins whose contact details are set out below:

AUTHORS

Paul McCutcheon, Partner
E: pmcutcheon@kanetuohy.ie  
M: 087 632 2591

David Mullins, Solicitor
E: dmullins@kanetuohy.ie
M: 087 700 7480