capital acquisitions tax and problem with title

[Ger]

I have inherited a very old house from my uncle valued at 62k . I was hoping to sell this property and pay the capital acquisition tax (about 10k) which is due in the next few months out of the proceeds of sale. However, there appears to be a huge and unforeseen problem (at the time of probate) with the title, which means the property is unsaleable for at least the next couple of years.
The fixing of this title (if this is possible)and getting first registration and possibly buying out a lease as well as other unforeseen debts could be expensive.

This inheritance is turning out to be a little bit of a nightmare at least for now in the short term. I have committed myself to legal expenses (about 6k) for title search which I hope will be fruitful and have had to do some emergency repairs to secure the property.
I have also received a letter from revenue last week to file and pay the tax due but I am naturally unhappy at paying tax on a property with an uncertain title and which is unsaleable. (The property is also in too poor a condition to rent).
So I was wondering in this case would I be entitled to a postponement or exemption from paying the tax? Would interest be payable on same?

 

[rob oyle]

Could you get a valuation on the property, taking into account its condition, the issues with title etc?
Perhaps it would be worth €62k if it was in a sellable condition/status but that is not the case now as the issues you have identified will impact.

I don't know if there is a provision to be exempted from CAT, I doubt it.

 

[Ger]

Could you get a valuation on the property, taking into account its condition, the issues with title etc?
Perhaps it would be worth €62k if it was in a sellable condition/status but that is not the case now as the issues you have identified will impact.

I don't know if there is a provision to be exempted from CAT, I doubt it.

The €62k is the valuation (what the property would likely sell for ) and takes into account its poor condition I have no problem with this and indeed I have a buyer at this price, if I had title. My problem is that I don't have title and hence cannot sell at present or get the value that has been accessed for tax.

 

[Joe_90]

If the title has an issue with it then you can't be considered to be "beneficially entitled" to the property.

Has probate been granted already?

 

[Thirsty]

ok, so IANAL, but here's my tuppence worth

The title issue can be sorted out, may well be a pain, but it can be done; I don't understand why it might take years? In my view, the legal costs would be part of the costs of sale along w. say estate agent fees, advertising etc.,

You have until 31st Oct to pay the inheritance tax, so my suggestion would be to put the property on the market, get a good faith deposit from your buyer and let your buyer know it might take some months to sort out the legal side, given the condition of the property I doubt they were planning to move in straight away anyway.

All going well, you'll have everything sorted by the deadline date.

 

[Ger]

Thanks all for replies. Probate has been taking out. The title or lack of has to go to the land registry examiner but 'exhaustive searches' must be carried out beforehand as per requirement. This is quite a lengthy process and involves submission of affidavits etc. I have been told that this will take between two and three years. In the meantime, my potential buyer has withdrawn on advice from her solicitor.

My solicitor states that the legal costs etc.will be part of the cost of sale but to get the value of this, I will have to increase the sale price of the property. He is not sure whether these projected costs or some other way can be got to reduce the tax liability at this stage in this case and is suggesting the use of an accountant to make the tax submission next October.

 

[Bronte]

I have been told that this will take between two and three years.

My solicitor states that the legal costs etc.will be part of the cost of sale but to get the value of this, I will have to increase the sale price of the property.

He is not sure .

Anything that takes two to three years suggests a) costly and b) might not be worthwhile.

Have you a fee quotation from the solicitor?

Is this the same person handling the probate? If yes, how much is probate costing?

I totally do not understand the reasoning behind the sale price increasing to cover costs. Normally when there is a title issue the sale prices is less.

How about the auction route to sell, that's how 'iffy' property can sometimes be sold.

In relation to the land registry, there is as far as a know a procedure where if enough time has elapses there is no issue with getting title.

What is the actual title issue by the way?

And I would have thought that a solicitor handling probate would know the taxes in relation to these kind of issues. Or at least a fair idea.

 

[Ger]

You are right about this been costly and to question the necessity of doing this. The solicitor (who also handled probate) also made the same point but nevertheless states that the property will be very difficult/ impossible to sell unless first registration is done. (My first attempt to sell failed because the buyers solicitor would not allow the sale to proceed until the title is fixed).

The probate cost was I think 2% of estate plus outlay. The solicitor drew up form of assent and has registered the assent as per requirement. But the first registration is my responsibility.

As regards the sale price, my understanding is that if I spend for example a total of 10k euro on title and eligible repairs, then I can add this to the assessed value 62K that I would have originally paid tax on and I will not be at a loss if I receive 62 + 10 = 72k euro. However, the problem may be getting this price as prices are not rising here in the west, so either way, it would be better and safer if I could defer paying tax until after the future sale.

The title issue goes back to the validity of the lease that was drawn up between my great grandfather and the estate/landlord.

By the way, I have confidence in my solicitor, but he does play thing safe and is reluctant to speculate. On tax issues, he says he always recommends the use of an accountant (cost about 300 euro) for beneficiaries where they go above the threshold and there are tax issues. ( I was executor of my father estate with a different solicitor and I think that we also used an accountant to tidy up tax issues)

My main reason for my inquiry is that I have been very much in a limbo position while awaiting probate etc. and now the fixing of the title. In the meantime life goes on and there are some bits and pieces to be done, as well as possibly taxes to be paid. (e.g. The gutters are leaking, the house could do with a lick of paint and the tidy towns are looking forward to the (town) house been cleaned up a bit, as the house had got very shabby while my uncle was in the home.)

 

[Bronte]

What year was the lease that is causing the problem?

What question did the purchaser ask that couldn't be answered?

Can you borrow the tax? Technically something that cannot be solid is worth zero?

And laughing that percentage of estate is still the fees. Thought that was banned.

Did you get a fee quote in writing for a) probate and b) title?

 

[Ger]

What year was the lease that is causing the problem?

What question did the purchaser ask that couldn't be answered?

Can you borrow the tax? Technically something that cannot be solid is worth zero?

And laughing that percentage of estate is still the fees. Thought that was banned.

Did you get a fee quote in writing for a) probate and b) title?

The purchaser was giving full photocopies of a bundle of documents consisting of deeds of assent, will, death certs etc. that link my ownership back to my great grandfather (1880s). There is also record of rents that were paid (around 6pounds/year) which I don't think helps. To continue with the deal would of meant drawing up some type of clause guaranteeing first registration and withholding money until first registration, with some type of time clause with an opt out for the buyer. This would of really tied things up and neither solicitor nor myself were happy with this position.

I can raise the tax with perhaps only some small borrowings.

I don't have any problem with probate fees as the overall estate was relatively small and anyhow I did not have to pay them as they came out of a cash residue that went to someone else.

We have a written agreement on the possible range of fees.

There could be additional cost in terms of buying out the title to make property freehold rather than leasehold.

 

[Bronte]

Range of fees ! Why not state them?

I'm no expert but I would have thought that something going back that far would be easy to get full title for. As it happens I have the same issue myself and I just have to wait one more year and 'time' takes care of it for first registration.

I think you need to go for 'squatter's rights' instead of trying to rectify the title.

 

[Vanilla]

Joe 90 is correct, if you are not beneficially entitled then the valuation date has not yet passed. Until the valuation date is passed you do not have to pay tax. Your accountant should inform the revenue of this. Once title is sorted out, then you have a valuation date and then you can go ahead and file your return and pay tax. You should also then be able to sell the property with good registered title.