Question about stamp duty on a share of a house.

H

Helenka

Guest
Hello

This is my first post, but I've been reading the site for a while, it's very useful!

My boyfriend and I are planning to buy a 50% share in a house my father owns. Basically, I & my bf will be getting a mortgage from the bank for €313,000 (the house is worth approx €600,000), all three of our names (me, dad, bf) will be on the mortgage, but only bf & I will be making the repayments. Does this sound OK?

My question is about stamp duty: my boyfriend and I are both first time buyers, and we are really only buying half the house. Will we be paying stamp duty (if it ends up being valued at over the threshhold) on 1/2 the house, or on the whole thing? I mean, it's duty on the value of what you buy, isn't it? And we won't own the whole thing ... There's no way we could afford stamp duty on 600,000 -- we're already stretching ourselves to the limit to get the mortgage & be able to make the repayments ...
 
it's duty on the value of what you buy, isn't it?


Yes and its market value.

mf
 
Thanks very much for replying. I don't quite understand though -- do you mean it's duty on what we buy (ie half the house) or its duty on the whole house, since the 3 of us will be on the mortgage, and between the three of us we'll own the house?

I rang the revenue, and they said it's on the percentage you purchase, so I'm presuming it's on the value of half the house?

Sorry for sounding so confused, I suppose I'm mixing up the number of people who have shares in the house, and the percentage they own.
 
You buy half, you pay stamp duty on the market value of that - and thats half the value of the house. As you are ftb's, and its under the exemption E317.5, then there is no stamp duty payable.

Not wishing to be the voice of doom and gloom but do agree with father and bf what happens if there is a big falling out. Who gets what ?

mf
 
Thanks very much for your help & your clarification! I should have been able to understand it myself from the Revenue site, but sometimes all the new info can be a bit overwhelming.

We're in the process of getting the mortgage from the bank, and I have a solicitor lined up for after that. I've had a preliminary chat with her, and she's going to help us draw up some documents saying who gets what in the event of a doom and gloom scenario (fingers crossed it doesn't happen!).

In the future, we're either planning to a) buy my dad out if me & bf start earning much more and can afford it, b) be extremely grateful to him if he gifts the second half to me after I've been there a certain amount of years c) inherit the other half, and start saving now for the inheritance tax!

Thanks again for your help.
 
Helenka said:
My boyfriend and I are planning to buy a 50% share in a house my father owns. Basically, I & my bf will be getting a mortgage from the bank for €313,000 (the house is worth approx €600,000), all three of our names (me, dad, bf) will be on the mortgage
Click to expand...

Why would your dad's name be on the mortgage which is used to buy what your dad's owns?
As a guarantor?
 
A Mortgage amounts to an entire conveyance of the lands to a lender until all sums due on the mortgage, which is secured on a property, are paid. If the mortgage is not paid the lender gets the property without any question. In this case, father's ownership must stand behind the lenders entitlement to repossess. If he is not mortgaging his share also, then bank cannot repossess the entire property but only half - which is not much use to lender.

Does that make sense?

mf
 
I am taken aback as to why the stamp duty assessment in the above case is based on the share of the property owned by the individual participants.

I would have thought that a house whose value is well over the S.D. threshold could not be subject to sub-division for S.D. purposes.

I'd like to see a link to a statement from revenue or oasis to that effect if anyone has it handy. The options on that front are endless if that is indeed the case.
 
I couldn't find anything on the Revenue site, which is why I asked here. But then I rang the Revenue and asked, and they said the same as mf01.

I originally thought it would be on the whole value as well, but obviously I'll get my solicitor to double check when I get the whole process started. I suppose it's because you are paying duty on the value of your assets, and our assets will only be 50% of a property?
 
Does this only apply because the father already owns the property?? Normally if people are buying jointly, each party must be a FTB to avail of stamp duty exemption. In this instance the father is remortgaging and he is not a FTB...I'm confusing myself here. Presumably the father will have to pay Capital Gains Tax.
 
From the Revenue Site :

What is the position where the purchase monies are not provided entirely by the first time buyer?

The basis for this treatment is that, in such circumstances, the house is held for the person providing the monies used in the purchase of the house by way of a resulting trust presumed in favour of that person. This treatment applies whether or not all the parties providing the purchase monies, or all the parties to any borrowings, are actually named in the deed of transfer.

Notwithstanding this treatment, to take account of particular situations, Revenue is prepared to accept that a child, who is a first time buyer, will not be precluded from claiming first time buyer relief where a parent acts as a co-mortgagor in the following circumstances:
  • The transfer of the house is taken in the name of the child.
  • It is the intention of both the child and the parent that the parent is not to take a beneficial interest in the house.
  • The parent has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase.
  • It is not intended that the parent will be contributing to the repayment of the mortgage in the normal course.
Where the four conditions set out above are satisfied, Revenue will treat the parent as effectively acting in the role of guarantor for the loan.

The relief from stamp duty is intended to benefit only genuine first time buyers and Revenue will continue to use our audit programme to ensure that there is no abuse of the relief.
 
I'm aware of that one Tenacious, but the OP says s/he is only buying 50% of the house. Where does that leave them? Surely that means the father still has a stake in the property?
 
Indeed. The other side of the transaction is that OP's father is actually selling 50% of his asset, therefore he is liable for CGT on the part disposal of his asset.
 
Yes that's what I thought (CGT). Are you saying the OP should be paying stamp duty though as Revenue says they should not.
 
I am taken aback as to why the stamp duty assessment in the above case is based on the share of the property owned by the individual participants.

But stamp duty is only payable by a purchaser on the market value of the property they are acquiring - they are only acquiring half of an an asset so they are only paying stamp duty on the value of half of the asset - the father still owns the other half, he is not disposing of that half.

I would have thought that a house whose value is well over the S.D. threshold could not be subject to sub-division for S.D. purposes.

Its not subdivision - its the sale and purchase of a share. Sub division would be if they were carving out a new interest/title e.g. a mews site at the bottom to be owned solely and even then if the value of the site was less than 317.5K, it still would not attract stamp duty.

The options on that front are endless if that is indeed the case.
I can't see what options.

As regards CGT, will only apply if its not his PPR - and thats not clear from the original post.

mf
 
mf1 said:
But stamp duty is only payable by a purchaser on the market value of the property they are acquiring - they are only acquiring half of an an asset so they are only paying stamp duty on the value of half of the asset - the father still owns the other half, he is not disposing of that half.
mf
Click to expand...

This is correct. The OP has already stated the Market Value of the property is €600,000. Therefore as they are first time buyers, buying half the property, 50% * €600,000 = €300,000 and therefore exempt from Stamp Duty.

The OP's father will be liable to CGT on the part disposal of the property, provided of course its not his Principal Private Residence.

Here are some guidance notes on the Stamp Duties Consolidation Act 1999 (Updated to the Finance Act 2006)

[broken link removed]
 
Quote nt00deep: The options on that front are endless if that is indeed the case.
Quote mf1: I can't see what options.

The limitations evident from the snip pasted from the revenue site closed down the myriad of "what-ifs" that were running through my head.
 
So if the property in question was valued at 800K and the OP's share was 400K, stamp duty would be payable on that amount. But if the father was selling solely to child, they'd also be entitled to consanguinity relief....yes??
 
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