From a legal and a practical point of view, the purchase of a new house - or the purchase of a house in the course of construction, or the purchase of a house "off the plans" - is very different from the purchase of a second-hand house.

The contract will involve the purchase of a site together with an agreement between the purchaser and the development company to build the house according to certain plans and specifications. Timelines, stamp duty issues, loan offers, payment arrangements and legal documentation usually tend to be a bit more complicated with new houses than those involved in the purchase of second-hand houses.

This blog post sets out some of the issues involved. It tells you some of the things you, as a purchaser, need to be aware of and about which your solicitor should be able to advise you. 

We are often asked about the so-called "7 year rule" in connection with planning permission.

Some people believe that the 7 year rule amounts to a kind of amnesty from the consequences of having carried out an unauthorised development. This belief is incorrect.  While the 7 year rule does provide a certain amount of comfort to a property owner or potential purchaser, an unauthorised development remains an unauthorised development unless and until retention permission is sought and granted. This unauthorised status carries with it certain difficulties which this article will explain.

 Application of CGT, chargeable persons and rates 

CGT applies in relation to any life time transfer of property including the transfer of a site

CGT is charged on the person who sells or transfers the property.

A charge is applied even if the person who transfers the property is not receiving any consideration or payment in return for it. In such a case the property is deemed to be disposed of at market value and CGT is charged on that value. 

Tax is payable on the difference between the value of the site at the date it was acquired by the transferor and the value it has on the date of the gift to the transferee, at a rate of 33%. 

However, in the case of a transfer of a site from a parent to a child, a CGT exemption is available.
 
 CGT exemption on the transfer of a site from parent to a child
 
If a person transfers land to their child to build a house which is to be the child’s only or main residence, the transferor will not have to pay CGT on the transfer.  
 
In order to qualify for this exemption, the site must be:

• an area of no more than one acre
• with a value of no more than €500,000

​ In addition, the child is required to build a house on the land and occupy that house as their only or main residence for a period of three years.  
 
Clawback of the relief
 
The exemption will be clawed back in circumstances where the child does not comply with the requirements.
 
So, if the child disposes of the site either

• without having built a house on the site

            or

• having built a house on the land, but without having occupied that house as their only or main residence for the full period of at least three years,

then, in such circumstances, the CGT that the transferor parent would have been liable to pay on the transfer to the child if the exemption had not been availed of becomes payable by the child.
 
This clawback does not apply in a situation where the child disposes of the land to a spouse or civil partner.

The government has just launched another initiative to help people  – who, up to now, had been excluded from the housing market  – purchase their first home.
 
The scheme, called the Rebuilding Ireland Home Loan, is due to commence on 1 February 2018 and is aimed at first time buyers with annual salaries of less than €50,000 for a single applicant or less than €75,000 for joint applicants.
 
The main benefits of the scheme will be, firstly, the relatively cheap lending rates –  starting at 2% over 25 years – and, secondly, the fact that it will offer potential buyers a way around the Central Bank’s income multiple rule which limits mortgage borrowings to 3.5 times the borrower(s)' salary.
 
The scheme will apply to first time buyers of new and second-hand (and self-build) homes.

Applicants will be able to borrow up to 90% of the purchase price up to a maximum purchase price of €320,000 in Dublin, Cork, Galway, Kildare, Louth, Meath and Wicklow, and €250,000 in the rest of the country. The effect of this is that the maximum loan (90% of the purchase price) will be €288,000 in the seven above mentioned counties and €225,000 everywhere else.
 
The loan term will extend over a maximum term of 30 years. 

The scheme offers three different rates, as follows: 

• 2%* fixed for up to 25 years (APR 2.02%*).
• 2.25%* fixed for up to 30 years (APR 2.27%*).
• 2.30%* variable (subject to fluctuation) for up to 30 years (APR 2.32%*).

* These are current rates and are subject to change.