The Gazette 1978

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.

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. 125

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. * * £ 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