Q I'd like to give my daughter a leg up the property ladder. How much can I gift her as a deposit?
A This is a very topical question especially in light of the recent Central Bank rules on mortgage lending. The simple answer is that you can give your daughter as much or as little as you like or as much as you can afford but, there are a number of considerations that you need to look at.
Firstly from a taxation perspective – and I would suggest that you seek independent advice on this – the current threshold for Capital Acquisitions Tax (CAT) is €225,000. This is the maximum amount that you can gift a son or a daughter without them having to pay CAT. Above this your daughter will have to pay 33 per cent, this threshold applies to the total sum gifted to your daughter or her future inheritance from your estate.
What this means to her is that if you gift her for example €50,000, and in the very distant future you pass on and your estate is being distributed among your beneficiaries, and her share of that is €300,000, the €50,000 previously gifted will form part of that aggregate sum so under the current threshold rules she’ll have to pay CAT on €125,000 (€300,000 share of estate plus previously gifted €50,000 equals €350,000 minus the threshold which is currently €225,000 which means that your daughter will be liable for CAT (currently 33 per cent) on €125,000). The €225,000 is a lifetime – or the proceeds of the parents estate – threshold. In the past the threshold was almost double this but in recent budgets the threshold was reduced.
If you are making such a large gift to your daughter you should note that once she has received an aggregate sum up to 80 per cent of the threshold, she needs to make a return to the Revenue Commissioners.
The Revenue Commissioners website is a good reference for information revenue.ie/en/tax/ cat/thresholds.html
Most parents who gift a deposit to a son or daughter are doing so on the basis of much more modest sums than the threshold and I understand that the first €3,000 gifted in any one year is exempt from CAT. Anyone can gift another person €3,000 per annum without tax being applicable.
For example a father can gift his child €3,000, a mother can gift the same child €3,000 and both parents can gift the child’s spouse €3,000 each so in that case the child and his or her spouse could receive €12,000 tax free in a year.
The other matter to consider is that despite a very generous gift from you, your daughter will have to illustrate to her potential lender, when applying for mortgage finance, that she has an ability to save and budget.
In light of this I would suggest that your daughter should try and regularly put aside the amount equal to the expected monthly mortgage payment to illustrate an ability to repay a loan. This will also assist towards a deposit.
John O'Sullivan is a member of the Society of Chartered Surveyors Ireland (SCSI) Residential Agency Professional Group.
Inherited house
Q I am looking for advice on whether it is best to rent or sell a house I recently inherited. My initial thought would be that renting would generate a decent monthly income and that the house would appreciate in value over the next 10 to 20 years.
At the moment I am thinking of renting the property for a few years to see how that goes, but I do intend to use a management company as I have no experience as a landlord.
It is a five-bedroom detached house in the southern suburbs of Cork city. It is in good condition, needing just some cosmetic refurbishment/ painting and decluttering (is it better to rent out unfurnished or leave as is, or de-clutter and leave tables, chairs, beds etc?).
Rental value has been quoted as somewhere between €2,000 to €2,500pm and the selling price was quoted as being somewhere between €550,000 and up to €700,000.
A Firstly, if your preference is to hold on to the property for the long term – say 10-20 years – then that is exactly what you should do and there is every chance of good appreciation in that time span given the natural cycles of the property market. If you don’t need the capital now and would prefer a monthly rental income then that is the way to go as I gather you are in a highly sought after location so there should be no risk of long-term voids.
No one can forecast returns for the financial markets versus the property market with any accuracy over a 20-year period and it is also impossible to give an accurate forecast of what the projected growth will be, hence I would recommend that you have the house valued every couple of years and keep your eye on the property market for how your asset is appreciating and the best time to sell.
Many part-time landlords find renting a headache so you are quite right to engage a letting agent to do the management as it will take the pain out of everyday requests. I would also recommend getting a third or indeed a fourth agent in for another opinion on value, given that the two agents you have had were poles apart on their values, and then engaging the agent who you trust and want to work with.
The agent of your choice will best advise you on how your property should be presented for the rental market. Many families have their own furniture so maybe leave that option open and market your house as furnished or unfurnished. It is important that you give a clean, fresh product to the market. Felicity Fox is a member of the Society of Chartered Surveyors Ireland (SCSI) Residential Surveying Professional Group.
Compliance certs
QI recently bought a house with an extension that did not have a building compliance certificate. The vendor said they neglected to get one when it was built three years ago – and after making fresh inquiries, the building firm has since folded. As a result, I bought the house at a small discount. But I'm having difficulty finding a builder or engineer who is prepared to issue a certificate. Most say they could be liable for any structural defects. Could you advise if there is any other course of action I could try?
A Your difficulty in obtaining a compliance certificate may be as a result of uncertainty on the part of the individuals you have approached to date with regard to the requirements of building regulation approval and certification. The introduction of a new building control amendment regulation which came into force on 1 March 2014 is still in the infancy of implementation and has created apprehension around the potential liability exposure for construction professionals.
The construction of your extension (2012) falls outside of the requirement of the new regulation and any certification should be issued under the Act in its pre-existing form.
The building control system in Ireland is centred on the parent Act, the Building Control Act 1990 (the Act). Every building to which building regulations apply must be designed and constructed in accordance with the provisions of the regulations.
There is no requirement to produce a certificate of compliance under the Act. The production of certificates of compliance are solely about providing evidence for title purposes of the compliance of the completed work (when buying or selling a property). Certificates only relate to compliance with the requirement of the regulations and are not a report or survey on the physical condition of the relevant work.
Two types of certificates are utilised “full service” and “part service”. A full service certificate is issued when confirming the work has been monitored during construction.
A part service certificate is issued on the basis of a single visual inspection with no opening up work carried out. Any certificate issued will confirm substantial compliance with building regulations.
Unless there is a substantial issue relating to the construction of the extension, I can see no reason why a part service certificate cannot be issued. Your situation is one that I have come across on a number of occasions and I believe your best course of action is to engage the services of a Chartered Building Surveyor who will assist you in this matter with particular reference to interpretation of the building control system.
Andrew Ramsey is chair of the Building Surveying Professional Group Committee of the Society of Chartered Surveyors Ireland (SCSI)
Send your queries to propertyquestions@irishtimes.com or to Property Clinic, The Irish Times, 24-28 Tara Street, Dublin 2. This column is a readers’ service. Advice given is general and individual advice should always be sought
