Q I am a first-time buyer, buying an apartment, and have been approved for a mortgage by AIB. I have signed the contract, but the property is currently rented until 31st December 2012, which means I will not get possession until January 2013. Will I be able to claim the 25 per cent relief given to first- time buyers who purchased property in 2012?
A The Government has stated on a number of occasions that there will be no extension on Mortgage Interest Relief, so in order to qualify for the tax relief the sale of a property has to be completed before 31st December 2012. This is also the date when the existing tenancy expires. However, this is in the middle of the Christmas holiday period and most solicitors offices are likely be closed.
It is my experience of seeking to get sales concluded prior to the Christmas Holiday period that one needs to have all paperwork in order well ahead of the holiday period which typically begins on December 22nd or 23rd. You say that you have signed the contracts so you have obviously consulted with a solicitor. They are in the best position to advise you of the likely timing of completion and what specifically you have to do in order to avail of mortgage interest relief.
In this instance, the sale is complicated by an existing tenancy but there may still be the potential to purchase the property and avail of the relief. There are perhaps two options. Firstly I would suggest that the sale could be completed subject to the existing tenancy and vacant possession being achieved in January 2013. The trigger for the relief is the final draw-down of a mortgage which is undertaken by the buyer’s solicitor and will only be carried out when contracts have been signed, due diligence has been carried out and completion is imminent. However, in this unusual situation where there is a sitting tenant, the vendor would have to provide assurances that vacant possession will be provided on the expiry of the lease.
Secondly, in the event that no such assurances can or will be provided, I would suggest that you request that the vendor gets vacant possession prior to December 31st. They will have to negotiate directly with their tenants and may well have to offer them some form of compensation in order for them to vacate before the lease expiry. Your negotiation position may be slightly compromised if you have already exchanged the contracts. It is worth noting that tenants have rights under the Residential Tenancies Acts which your solicitor or the Private Residential Tenancies Board (PRTB) can advise you on.
This is an unusual situation as most purchasers of a property will get vacant possession of the property on completion. I can fully understand your desire to buy now and avail of the valuable tax savings but you need to tread carefully with this purchase and I would strongly advise that you consult with a solicitor before proceeding further.
Gerard O’Toole is vice chair of the western region of the Society of Chartered Surveyors Ireland,scsi.ie