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GAZETTE
JULY-AUGUST 1978
CONVEYANCING NOTES
An Act was passed on the 10th of May 1978 to
prevent the creation of new Leases reserving ground rents
on dwellings and to provide for related matters.
Amond the related matters dealt with, was one giving
to a person who owned a leasehold interest in property
suitable for development which had at the date of the
passing of the Act, Planning Permission for such
development the right to acquire the fee simple of the
property under the Landlord & Tenant (Ground Rents)
Act of 1967.
Despite representations made by the Law Society for
an extension the provisions giving the right to acquire the
fee simple apply only for the period of one year after the
passing of the Act.
Obviously builders in the process of developing land or
planning to develop land, will be aware of their rights, and
will make sure to exercise them during the period. Failure
to do so will leave themselves in the position of having to
negotiate the purchase of the fee simple where a
freeholder can name his own price in order to be able to
sell the houses.
The purpose of this notice is to draw the attention of
Solicitors, Architects, builders and developers to the
following:—
(1) These provisions apply to any plot of ground —
even a site for one house which comes within the
definition:—
(a) Held under a Lease for a term of not less than
99 years of which at least fifty years are unexpired
and,
(b) Permission (including outline permission)
exists under the Planning Act for the development
of the land wholly or mainly by the construction of
dwellings.
(2) It is unlikely that the time limit of one year will be
extended.
(3) In case any difficulty should arise with the
procedure (if, for instance, the person is not the owner of
the fee simple), it would be adviseable to set these in hand
at the earliest possible moment.
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In January 1977 the Conveyancing Committee of the
Law Society recommended that the long standing practice
of a Vendor furnishing a Negative Search on the sale of
property be discontinued.
Having monitored the operation of the new system for
18 months and having received representations from a
number of members the Committee has now decided to
recommend that the previous practice should be resumed.
In coming to this decision the Committee has had regard
to the following factors:^
1. Purchasers solicitors have not generally arranged to
lodge Negative Searches at the contract stage and have
usually commissioned hand searches for the closing of
purchases, thus necessitating further hand searches being
commissioned on the occasion of the closing of
subsequent mortgage transactions. Since no hand
searches can be kept open to include the registration of
the purchase deeds it follows that when the title is
subsequently examined it will be necessary to have a
further search made against the Vendor from the date of
the last hand search to date of registration of the deed.
2. The protection given to solicitors by negative
searches cannot readily be discounted particularly since it
has been ascertained that the insurance cover which the
various firms of Law Searchers have in comparison with
the totals of the considerations passing in the various
transactions in which hand searches are being made.
The Committee would remind members that for the
smooth operation of the practice whereby the Vendor
furnishes the negative search his solicitor should ensure
that a draft requisition for negative search be furnished
with the draft contract together with all existing searches
covering the period contracted for which are in the
Vendors possession. The failure to lodge requisitions for
search at the contract stage inevitably resulted in the
searches not being ready for the closing and the additional
expense of hand searches had to be incurred.
Adjudication Office Practice
Most Solicitors are using a separate form of Building
Contract and Agreement for Sale for the sale of new
houses which are not eligible for Certificates of
Reasonable Value.
While Builders advertise and sell at an "all-in" price,
the usual practice is to put in the value of the site as the
sale price thereof in the Agreement for Sale and the
difference will be the building price. Normally, the site
value used was the price paid for it by the Builder.
Problems have arisen in regard to the site values. The
attention of the Revenue Commissioners was drawn to
the position by finding a number of cases where derisory
site values were put in agreements with the result that they
now scrutinise all site values closely. They examine
carefully all cases where the value of the site is anything
less than a quarter of the total of the site value and
building price. The Revenue Commissioners have
indicated that in their view the site value must be a
realistic market value as at the date of the agreement. If the
site was purchased by the Builder a few months before at
the same price, a statement to that effect lodged with the
other usual papers in the adjudication would normally
obviate any further enquiry. If, however, the Builder had
bought the site a year or two previously, they would not
regard this site value as the appropriate value as at the date
of the agreement and a fair market value should be used.
They will be guided in this respect by the Commissioner of
Valuation.
The Revenue Commissioners have also indicated that
if a Builder is building on foot of a Building Licence that
they would normally accept the price per site in the
Building Licence as a reasonable value where the
transaction was at arms length.
The purpose of this Memo is to draw the attention of
Solicitors to the problem. In those cases where queries
arise, the deed is usually needed urgently for the
completion of the sale or the completion of a Mortgage
and there is pressure on all parties. If care is taken at the
commencement of the transaction to ensure that the site
value used is realistic, it should save these problems
arising.
To sum up, in any case where the Site value is less than a
quarter of the total of the Site value and building price, it is
advisable, to avoid delays, to lodge with the agreement for
sale documentation or evidence in support of that value.
While the Revenue Commissioners reserve the right to
investigate any transaction, adherence to the foregoing
guidelines will obviate difficulties and delays in the vast
majority of cases.
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