New House Contract & Building Agreement

K

KCT

Registered User
Messages
90
I've gone sale agreed on a new house, a one off house on half acre site. The house has been built for 5 months but when the contracts were issued to my solicitor it was broken into two. The first was a contract for the purchase of the site and the second was a building agreement whereby I would state that I employed the builder to build the house for me. I'm purchasing from the builder.

I have some qualms about this, namely I didn't see the plans or planning permission so I have no idea if the house is built in compliance with them. Also I didn't contract the builder to build the house for me, it is preexisting so I don't understand the logic of signing a retrospective agreement. My solicitor is newly qualified and she is struggling with some of the stuff going on here so I'd really like to have someone with experience of the situation comment. Thanks.
 
Compliance with planning permission is one of the first things a solicitor should look for before closing a sale for you.

It is normal for a new build, once off or in a devleopment for have a building agreement & contract for sale of the land. It is likely that this may be in favour with regard to stamp duty payment anyway. Check the valuation of the site. If it is being sold to you for , * i think* less than €127,00 then you don't pay SD.

In any case, these matters should be dealt with in full by your solicitor. If you feel , for whatever reason , that she is not competent to deal with them, you should really engage the services of someone else/ or request that a senior colleague give their opinion on any matters that are cloudy.
 
Thanks for the reply, it's a long saga going on since August and there have been so many problems with contracts, certificates etc. that I have lost confidence with my solicitor but because it's nearly at end game I decided to stay with her.
 
Be VERY careful !!!

Does the builder own the land or did he lease it to build, thus avoiding stamp duty ?

Site can't be sold for a nominal amount - stamp duty is calculated on a "market value" if revenue think something is amiss.

Make sure you're not stung for stamp duty on the land post sale / purchase.

Your solicitor doesn't inspire confidence.
 
A builder told me that he does this same thing. he inflates the price of the site as he only pays 20% capital gains tax on the profit on the site and the remainder is reckonable for normal income tax.
 
Site is actually valued a bit less than what sites are going for now in the area so that's not a problem. I was mainly concerned about signing a building agreement for a house I had no act or part in constructing. The bulider's name is on the site folio so he is the owner.
 
If the house is substantially complete it should really be sold by way of contract, but quite often in the later stages of building it is still sold by way of building agreement and contract for sale of site to attract more buyers because of the stamp duty exemption that it can attract. There are really no down sides to you signing a building agreement from a contractual point of view since it actually affords you additional protection with regard to structural defects in the future or at least clarity in relation thereto. As with all new builds check if your builder is offering homebond or alternative protection. Ensure your engineer has professional indemnity insurance. Ensure that you are given the usual certificates of compliance with planning, building regulations and identity. These are all basic necessities. If you don't have confidence in your solicitor, if she is struggling as you say, then you should tell her and ask her to have the file reviewed by her boss/ another solicitor with more experience. This is the biggest purchase or one of them you will make, so no half measures will do.

My biggest concern is whether the site/building agreement is being used to defraud the revenue in relation to stamp duty. If the house is complete as you say, then it is possible that this is the case.
 
Contract / Building Agreement is standard when purchasing a new property in a Development. The fact that the developer has gotten to the stage of nearly completing the house before you sign the documents doesnt make any difference. I'm sure your solicitor mentioned that this is standard practice and not something the devloper just dreamt up in an effort to defraud anyone.
 
The fact that the developer has gotten to the stage of nearly completing the house before you sign the documents doesnt make any difference
Click to expand...

Darth Vader- the OP said the house is built 5 months. And it is a one off house.
 
Hi,

I would have thought that if you are buying the site, then you are liable for stamp duty on the site price. If it is over €125k then it is chargable at 9% and a sliding scale below that.

If you buy a new build house and the site value is less that 127k then you are not liable for stamp duty.

I would be wary of this as to me it looks like you would be liable for stamp on the site.

Browser
 
The site is valued at 85000 so it's exempt. The builder isn't in the homebond scheme though so I take it it's very important that the engineer has full insurance and the certificates are in order.
 
The exemption is because it is connected and dependant upon a building agreement which is entirely different from just buying a site and building on it yourself or with an unconnected builder.
 
Thanks for clearing that up, I got a shock when I thought I was going to have to fork up 4 grand.
 
Vanilla,

Can please expand on your point. I can't see the difference in buying a site and THEN getting a builder to build your house compared with the way KCT is doing it.

Surely the way he is signing two different contracts amounts to the same thing.

If this is not the case, then how would one go about avoiding tax for a site purchase and building with a builder as opposed to a self build.

Thanks,
Browser
 
From the revenue website:

Sites
  • Where an individual purchases a site in connection with, or as part of, an arrangement to build a house or apartment on that site then stamp duty will be charged, subject to the reliefs referred to above, based on the aggregate amount of the site cost and the building cost at the appropriate residential property rate.

  • Where an individual purchases a site with no connected agreement to build a house or apartment, the transfer of the site is chargeable at the non-residential rates in the table below.
Click to expand...
 
Thanks for that, but does anyone know if you have to actually be buying the site off the builder who is building the house or just have an agreement with an unconnected builder i.e. one you have lined up to build the house after you buy the site off, say, a farmer.

Browser
 
Read the quote from the REvenue again and my posts. Yes, there HAS to be a connection between the site purchase and building agreement in order for it to be stamped at residential rates. If unconnected it is stamped at non residential rates.
 
You must log in or register to reply here.
Back
Top