"Justice for Investors" & Irish Property Owners Association (IPOA)

HellFireClub

I could have been forgiven for thinking that I'd slept through the months of February and March and had actually woken up on April Fool's Day when I read this article today:

http://www.irishtimes.com/newspaper/property/2011/0127/1224288388541.html?via=mr

Far from being members of a fat-cat elite, many small-time property investors say they face bankruptcy if Section 23 tax reliefs are phased out, writes CAROLINE MADDEN
MENTION the phrase “Ireland’s landlord classes” and it conjures up images of a rackrenting, bed-sit- peddling elite who simply sit back and watch the money roll in from their vast property empires. In reality, today’s landlord is much more likely to be a small-time, buy-to-let investor, with one or two white elephant properties, who is now facing death by a thousand cuts. Last Thursday night, about 250 such property investors gathered on Dublin’s northside for a meeting of the Irish Property Owners Association (IPOA), where they expressed fears of financial devastation. Many warned they would face bankruptcy if the curtailment of Section 23 tax relief announced in Budget 2011 went ahead.
The following afternoon, IPOA members and thousands of other investors breathed a sigh of relief as the Finance Bill put the Section 23 proposals on ice until at least 2012. However although they have been granted a reprieve, it is only temporary.
In last December’s Budget, Minister for Finance Brian Lenihan announced that property-based legacy reliefs were to be phased out. The most controversial element of this related to Section 23 tax relief on rented residential property in tax-designated areas.
The main attraction of this type of property for investors was the ability to offset between 75 and 90 per cent (typically) of the purchase price against all of their Irish rental income, thereby cutting their tax bill.
However Minister Lenihan announced that from January 1st 2011, the relief could only be offset against rental income from the Section 23 property, as opposed to rental income from all of the investor’s Irish properties.
As the rents on Section 23 properties tend to be low, and borrowings are almost always high, little or no taxable income arises on such properties. Therefore if the tax relief were to be ring-fenced in this way, it would become worthless for many investors.
Doubtless the Government banked on the public appetite for meting out punishment to anyone associated with property development to carry this proposal through. However the big property players would have escaped unscathed from any such restriction, as they were generally able to use up their all of their reliefs or allowances in the first year or so.
Instead, small individual investors – from middle-class full-time landlords to tradespeople to pensioners – would have found their unused Section 23 relief effectively guillotined this year.
Representative groups argued that to retrospectively change the terms of the incentive was unfair, as investors had a legitimate expectation of being able to claim the full relief as offered to them by the State at the time of investing.
The Government was inundated with several hundred submissions to this effect and announced it was delaying the change, ostensibly to allow for the completion of an economic impact assessment.
In reality, as Labour finance spokeswoman Joan Burton summed it up last week, what the Government has done is to simply kick the can down the road.
It will take at least six months for the assessment to be completed, by which point it will be someone else’s problem as a new government will be in place.
If the Labour Party gets into power it is unlikely to take a softer line with property investors than the current Government, but it is impossible to predict whether the Section 23 proposals will eventually be implemented, changed or scrapped.
A recently-formed group, Justice for Investors, is encouraging investors to continue lobbying TDs and the Minister for Finance on this issue because of the uncertainty surrounding it. It has provided sample letters and TD lists on its website, justiceforinvestors.com.
Paul Reynolds, president of the Institute of Professional Auctioneers and Valuers (IPAV), has highlighted the fact that the deferral of any decision on property incentives has created serious uncertainty in the market. Investors now find themselves caught in a limbo – whatever hope they had of selling a Section 23-type property before, they have even less chance now.
This tax-shelter saga is not the only thorn in the side of property investors. In the 2009 emergency Budget, the amount of mortgage interest that could be offset as an expense against rental income was reduced to 75 per cent (from 100 per cent).
According to a Munster-based landlord (who did not wish to be identified) with more than 20 properties and no other source of income, this is a more serious issue for investors than the proposed restriction of Section 23 reliefs as it affects everyone who owns a second property and rents it out. “It’s not purely rack-renting fat landlords,” he says. Many investors are just waking up to the impact of this change now, as they only became aware of it when they filed their tax return three months ago.
“It’s a bigger but less immediate problem. People are going to slowly go bust,” says the landlord.
“With the 75 per cent mortgage interest restriction, there is no case for investing in residential property in Ireland,” he says. “You can only lose money.” He makes the point that if, for example, an individual earns €1,000 a year in rent, and they pay €1,000 in mortgage interest, (ignoring other expenses) they are breaking even. However they can only deduct €750 for tax purposes, and therefore will be taxed on €250, even though in reality they did not make a profit.
“It’s one thing to pay tax on income you have. It’s quite another to pay tax on income you don’t have,” he says. He believes that if the 75 per cent interest restriction is not repealed, he’ll be “wiped out” and the property market will not recover. “Investors are never coming back into the market while some of the interest costs are disallowed,” he predicts.
Like many investors, he is only repaying interest on his property borrowings at the moment. “I can only repay capital if I’m making a profit, so I’m interest-only.” He says he has been “invited” by his bank to begin repaying capital, but he has not been “compelled” to do so.
“If I was, it would be become a distressed loan, so the banks can’t afford to go there,” he says. Different banks have different approaches, though, and many investors have been contacted by their lenders in recent months to inform them that they are due to begin repaying capital on their borrowings.
In some cases, investors on tracker mortgages have been presented with two options: begin repaying capital as well as interest, or switch to a more expensive variable rate mortgage and remain interest-only for a further period of, say, two years.
The problem is that many landlords are struggling to meet their interest repayments, let alone repay the principal of the loan. Not only have rents shrunk, but the list of expenses landlords face has grown considerably longer. Firstly, there’s the annual non-principal private residence (NPPR) charge of €200, which cannot be written off for tax purposes.
If the investor’s property is divided up into different flats, bedsits or apartments, this charge applies to each of the units.
Management fees are another area of growing concern for owners of apartments, including buy-to-let investors, as they can run into thousands each year. Landlords also have to register every tenancy with the PRTB now, at a cost of €70.
And as of January 1st, 2009, all homes for sale or rent have been required to have a BER certificate, which indicates how energy efficient the property is. There is no set fee for getting a BER assessment carried out, as it depends on the type of property, but it usually costs between €120 and €300.
“A lot of people are in a situation where they would be better off to have nothing [no property],” a spokeswoman for the IPOA said. “They’d be better off on social welfare instead of working and paying money towards their investment properties. They’re in a situation where they have pared down their own expenses to the bare bone.”
With the most vulnerable sections of society being hit by budget cuts, and family homes being repossessed, there is little sympathy for those who saddled themselves with debt to join the landlord classes.
But with no property market recovery in sight, many investors will soon be forced to choose between paying their taxes and repaying their borrowings, at which point their problems will become the State’s problems too.

---

In all seriousness are these people for real expecting any sympathy from people like myself who were to a large extent completely priced out of the market by these free market/capitalist loving parasites when I wanted to buy a single home in the couty that I was born in???

Now that capitalism (which I completely believe in by the way!), should dictate that success is rewarded and failure is punished, and these people face losing their assets over a bad investment, based on nothing less than greed, greed and more greed, why should these property parasites be artifically propped up by tax breaks, the same tax breaks that caused the property to hyperinflate and collapse?!?!?!?

gurramok

There was a thread on this in the Accommodation forum a while back. Think they are in a heave using the legailty of rowing back on the reliefs. No sympathy from here.

The following statement is true indeed, too many properties bought by investors lead us to a glut. We need to direct investment away from property into companies to create jobs.
“With the 75 per cent mortgage interest restriction, there is no case for investing in residential property in Ireland,”

Pete_Cavan

HellFireClub wrote: »

Now that capitalism (which I completely believe in by the way!), should dictate that success is rewarded and failure is punished, and these people face losing their assets over a bad investment, based on nothing less than greed, greed and more greed, why should these property parasites be artifically propped up by tax breaks, the same tax breaks that caused the property to hyperinflate and collapse?!?!?!?

In fairness, you can hardly call it a bad investment if the terms of it, which had been set in stone, suddenly change. This is not like saying burn the bondholders. Bondholders were fully aware that they were taking a risk, people who bought Section 23 houses bought them based on tax reliefs offered to them by the government of this country and were set by legislation in our national tax system, this was not a risk.

It is as much a consumer issue a much as anything else. You cant allow people to purchase something based on guaranteed tax relief for a fixed period and then change the conditions and remove the tax relief. It is like a garage selling out a car and you getting a three year warranty as part of the deal and then them deciding, sorry the warranty now ends after one year.

(I just want to make it clear that I do not own a Section 23 btw)

Sponge Bob

While I could see a case for justice being served for the small investor with one of these properties I fail to see why anyone would care about the owners of 10 and 20 of these things.

Pete_Cavan

Pete_Cavan wrote: »

which had been set in stone

But it wasn't set in stone - it was written on paper and was very easy to change.

I do have some sympathy for these people but at the same time - if you are making an investment it should not be for the tax benefit, that should be a bonus.

djpbarry

Pete_Cavan wrote: »

In fairness, you can hardly call it a bad investment if the terms of it, which had been set in stone, suddenly change.

Were Section 23 tax breaks set in stone?

deandean

Property investors contributed largely to the inflated prices for apartments.
They generally paid over the odds for a speculative investment.

I'd never wish hardship onto anyone (including property investors) BUT in this life you are gonna get downs as well as ups.

And I feel the name of the new organisation, which uses the word 'justice', is inappropriate. What they are looking for, is a better return on investment.

Perhaps a more appropriate name for the new organisation would be 'Lobby Group for Taxpayer Funded Bailout of Property Investors' (LGTFBOPI - hmmm, needs work).

Sponge Bob

deandean wrote: »

Perhaps a more appropriate name for the new organisation would be 'Lobby Group for Taxpayer Funded Bailout of Property Investors' (LGTFBOPI - hmmm, needs work).

They already had the bailout, ie the S23. It is being taken off them.

The Keep Investment Property Incentivisation Initiative ....or KIPII...perhaps :cool:

TheInquisitor

Hellfireclub this would be like you going to buy a car for 10,000. The salespeople saying they'll give you a rebate of 3,000 after the purchase. So the cost to you is 7,000 which is what your budget was. But then wait after you buy the car they say they won't give you a rebate.

How would you feel?

hoorsmelt

No sympathy for these people, any rented accommodation I've lived in has generally been piss-poor standard, and they are dying for any opportunity to take your deposit back off you.

gigino

TheInquisitor wrote: »

Hellfireclub this would be like you going to buy a car for 10,000. The salespeople saying they'll give you a rebate of 3,000 after the purchase. So the cost to you is 7,000 which is what your budget was. But then wait after you buy the car they say they won't give you a rebate.

How would you feel?

A good analogy and well put. Most people who bought a section 23 did so to provide themselves with a pension, and they took out a mortgage to do so. The price of the section 23 was inflated because of the tax incentives. Now they are being hit when they are down.

hoorsmelt wrote: »

No sympathy for these people, any rented accommodation I've lived in has generally been piss-poor standard

The actual point of the section 23's was to increase the quantity of new accomodation built to a standard, which it did. You should be grateful to the section 23 "investors". They provided employment, provided newly built accomodation, paid taxes + have got badly stung.

Head The Wall

Maybe they are getting badly stung because they directly contributed to the boom and then used these properties to reduce their tax liabilities

HellFireClub

TheInquisitor wrote: »

Hellfireclub this would be like you going to buy a car for 10,000. The salespeople saying they'll give you a rebate of 3,000 after the purchase. So the cost to you is 7,000 which is what your budget was. But then wait after you buy the car they say they won't give you a rebate.

How would you feel?

An interesting analogy... Say the law said I could buy one car for myself, and I'd have 100% interest relief on the loan for that car and that commitment was honoured. But then say I wasn't happy with one car, say I became greedy and I wanted more and more cars, and I kind of became obsessed with buying more cars. I'd first of all, as a responsible citizen, askk myself what kind of a government would incentivise me into such behaviour, and I'd decide accordingly. There was a time back in the boom where I could have acquired several properties, I didn't do so, because common sense and cop on and a deep sense of fairness told me that I didn't need multiple properties, I just needed one house that I could live in.

HellFireClub

gigino wrote: »

The actual point of the section 23's was to increase the quantity of new accomodation built to a standard, which it did. You should be grateful to the section 23 "investors". They provided employment, provided newly built accomodation, paid taxes + have got badly stung.

I've no issue with them having been badly stung, once they have the business itegrity to realise that they have been stung, they took a bad punt and there are losses to be faced up to. That's enterprise, regardless of whether you have invested in a property or any other class of asset.

But as for the government being expected to take a hit or extend some kind of bail out, forget about it is my view...

later12

Sponge Bob wrote: »

While I could see a case for justice being served for the small investor with one of these properties I fail to see why anyone would care about the owners of 10 and 20 of these things.

Why?

It seems that many people don't have a problem with a profit, as long as it is a very small profit. 'Let's all be poor and miserable together', should that be the national motto?

Treehouse72

Are people seriously telling us that they didn't realise tax code could change?

Hadn't you noticed that it changes every year?

And that it has done so in every year since the foundation of the state?

I have no problem people fighting their corner. But for the love of God don't insult our intelligence by justifying bad investment decisions post facto based on the bogus argument that it was inconceivable the tax code could change.

Paulzx

The rules on mortgage interest relief for home owners have changed repeatedly over the last few years.

Anyone that didn't see the same thing happeneing to Sec 23 relief was either very stupid or innocent beyond belief.

The previous poster hit the nail on the head. Tax code changes repeatedly. Nothing stays the same for ever

Do they honestly expect anyone to give a shít? Because we don't. The only people who care are the people who own these properties and there is zero benefit to anyone but themselves that they keep these properties. So why should they receive tax breaks?

Simple answer: They shouldn't.

skelliser

I would hedge a guess that the majority of these people vote for Fianna Fail.
I would also guess that they will vote Fianna Fail in this election.

Go figure!

gigino

The point is that people were encouraged to buy a buy to let , because of the section 23 legislation introduced by the government. Why did the government introduce section 23 ? It wanted to increase the quality of the rented housing stock in the country, create employment + get tax ( which it did : 50% of each new house went in tax to the government ). It encouraged people to borrow to invest in a buy to let, and to provide security for their old age / pension...and in return it promised tax incentives on rental income for 10 years. The price people paid for the section 23 was inflated, and they were only available in those areas of the country which the government decided needed development / were underdeveloped.

Now the government has got the tax revenues from the houses sold but is reneging on the tax incentives bit...
An analogy would be CIE selling a ten year travel pass for a large, inflated one-off price up front, and then telling the investors after a year or two to get lost.

People trusted the government. Many peoples hopes for a bit of security in their old age has been destroyed, and with their buy to let in negative equity the latest government move will depress the market further , cause further defaults and losses for the banks etc. Instead of borrowing to invest in this country, which created employment, paid tax and provided modern accomodation up to a standard, the small buy to let investor should have sent whatever money they had out of the country.

The winners were the auctioneers, accountants and solicitors who pushed these schemes on innocent people who only wanted to provide for a rainy day. The biggest beneficiary was the government who got all the tax. Now people are driven to the wall / commiting suicide because of it.

jimmycrackcorm

There's no point pretending that these investors were anything other than property gamblers. The government changing the rules is no more different than the economy changing the market or the ECB increasing interest rates. The only quibble seems to be that these people seem to have an expectation that the government rules should be fixed but it's ok to accept the vagrancies of market dynamics.

gigino

The government reneiging on the ten year tax incentives small investors paid well for ( usually with borrowed money ) is no different in principle to a car manufacturer offering a five year guarantee with a car and reneiging on that guarantee after a year.
Many investment properties are now worth only half or less of what people bought them for - destroying the market further is not in the interests of anyone...people who were relying on this income to pay kids college fees, the banks, or the government.

Sponge Bob

gigino wrote: »

The government reneiging on the ten year tax incentives small investors paid well for ( usually with borrowed money ) is no different in principle to a car manufacturer offering a five year guarantee with a car and reneiging on that guarantee after a year.

Like I said earlier, the proposed withdrawal of S23 is the removal of a bailout in effect. In principle it calls into question any structured tax relief designed to incentivise investment in any asset class. I am not in favour of a blanket withdrawal for that reason.

I would be in favour of an allowance cap instead.

Many investment properties are now worth only half or less of what people bought them for -

That is mainly because they were low grade rubbish that did not bear investing in absent the reliefs. If your S23 in Limerick is crumbling you only have yourself to blame, the market will correctly price in the decrepitude and high maintenance cost.

gigino

Sponge Bob wrote: »

That is mainly because they were low grade rubbish that did not bear investing in absent the reliefs. If your S23 in Limerick is crumbling you only have yourself to blame, the market will correctly price in the decrepitude and high maintenance cost.

So to use the analogy of the car manufacturer deciding to scrap the 5 year promise ( guarantee ), the person who bought the vehicle ( partly because it had a five year guarantee ), as well as being told after a year or two the five year guarantee is worthless / will not be honoured, is told now its his own fault his property has depreciated so much, it was "low grade rubbish" anyway ( despite being made to government regulations ).

Sponge Bob

gigino wrote: »

So to use the analogy of the car manufacturer deciding to scrap the 5 year promise .

Crap analogy dude What I said was keep the 5 year guarantee for an individual car or nobody will ever trust a car guarantee again but don't allow the extensification of a single car guarantee to an unlimited sized fleet guarantee.

AvidIrishReader

I see both sides of this argument, primarily because I'm PAYE and I own property other than my primary residence. But here's the difference:

Firstly, my wife & I invested in property in Europe, in a stable market where prices were not dictated by short-term speculators (which is what happened in Ireland). Secondly, when we released equity on the value of our primary residence, we based it on the value of that property falling by 30%. So in theory, if there was a property crash in Ireland or we lost our jobs and had to sell the house to clear debt, then we could just about scrape by and at least break even. Luckily, we still have jobs (and before anyone uses this to beat me, I have been made redundant twice since 2005) and the current 'low' value on the house would clear all our mortgages.

And this brings me to the crux of the story: too many people lost the run of themselves and bought property in an inflated Irish market. People are right to say that S23 created jobs and led to the expansion of the house/apt stock, but the Relief should have been abolished 7 years ago once the industry had been kickstarted; and this in turn would have minimised the devastating effect they we now see - amateur investment decisions by people who got carried away with the buzz of property, new cars and wealth.

Some people on this thread have mentioned that people bought houses as part of their pension plans, or to provide for their kids, etc. However, if someone invested on the assumption that their profit was shaped by S23 tax relief, as opposed to 'real cash' provided by rental income, and didn't take into account a worse-case scenario, they only have themselves to blame.

For the last 15 years the government gave away too much and took too little. What did Mary Harney once say about looking to Boston as opposed to Berlin? German growth over the last 12 months has been phenomenal, which is not what can be said about the USA.

If you voted for FF, the PDs or even the Greens, then this is the outcome. When you make your bed, you have to lie in it. Sorry, but that's how this unhappy story ends.

gigino wrote: »

The government reneiging on the ten year tax incentives small investors paid well for ( usually with borrowed money ) is no different in principle to a car manufacturer offering a five year guarantee with a car and reneiging on that guarantee after a year.
Many investment properties are now worth only half or less of what people bought them for - destroying the market further is not in the interests of anyone...people who were relying on this income to pay kids college fees, the banks, or the government.

Sponge Bob

But you were not incentivised to invest in Europe .....you yourself decided to spread your risk with no tax incentive. That is what a real investor does where most S23 'investors' in Ireland were in fact SHEEP.

The problem here is that all tax shelters were ultimately property related. There was no S23 type tax shelter for Technology or Medical Device development and export other than the unwieldy BES.

In running down the property investment incentives which caused untold damage we should not close the window for a more productive and widely based ...never mind targetted.... tax shelter scheme in future.

Outright abolition, in that sense, is unwise.

We should, however, cap it.

gigino

Sponge Bob wrote: »

Crap analogy dude What I saidwas keep the 5 year guarantee for an individual car or nobody will ever trust a car guarantee again but don't allow the extensification of a single car guarantee to an unlimited sized fleet guarantee.

Nobody is arguing for the extensification of a single car guarantee to an unlimited sized fleet guarantee. Simply to leave the tax laws re section 23 as they were, now that people, for whatever reason, were hooked on them ( and most would wish they were not ).

Sponge Bob wrote: »

We should, however, cap it.

fine, end it for new investors if you want. Tell people buying the car there are no inventives.

But do'nt take away the ten year tax guarantee already given to people who bought the over-taxed car in the first place.

Of course with hindsight whoever thought up the whole thing, or at least kept extending it, should be hung, drawn and quartered. Except it filled government coffers, auctioneers, accountants + solicitors coffers at the expense of the little man who took out a loan on the property + thought by paying it off it was a government encouraged pension. Which it was except it all went horribly wrong.

Sponge Bob

gigino wrote: »

Nobody is arguing for the extensification of a single car guarantee to an unlimited sized fleet guarantee. Simply to leave the tax laws re section 23 as they were, now that people, for whatever reason, were hooked on them ( and most would wish they were not ).

If they were hooked on them and built a 'business model' on them I don't care about them.

The CAP model ....lets say capping all S23 and S50 reliefs on the personal aggregate at €20-50k per annum...forces a wannabee investor to behave more rationally in future across all putative tax incentives and not to allocate exclusively to one class.

The unlimited model left us with a Third of a Million Empty Properties

But I am not in favour of outright rundown and abolition.

AvidIrishReader

Sponge Bob, you are right on several fronts: capping is good (but this should have come 7 years ago); and the relief being limited to property has had a terrible effect on society for all sorts of reasons. But having said that, I'm not a professional investor - what I did was simply based on a bit knowledge and common sense.

Carl O'Brien's piece in 'Irish Times' today about suicide in rural Ireland is another consequence of financial decisions taken, partly as a result of S23.

No matter the rights/wrongs of the current situation nor how anyone on this Thread views this loose grouping 'Justice for Investors', we're still in a depressing situation.

Even my previous response shows a lack of compassion for such people, and for that I'm ashamed. It doesn't resolve it.

gigino

AvidIrishReader wrote: »

If you voted for FF, the PDs or even the Greens, then this is the outcome. When you make your bed, you have to lie in it. Sorry, but that's how this unhappy story ends.

Agreed, but many people did not vote for those parties, and they lived frugal lives trying to provide for their old age / rainy day, and they are caught in negative equity / have lost a lost of money - their hard earned savings. It was the governments job to regulate the market.

AvidIrishReader

Agreed too, but in 2007 enough people voted to maintain the status quo.

I once bought £1000 punts worth of Bula Mines' shares - I think it was in 1997 - because a friend of mine had 'inside information' and said their value was going to go threw the roof. Needless to say, they didn't and I got burned, but I learnt from the lesson...

You are correct too in saying that regulation needs to improve, but people themselves need to look inside and make rational decisions based on facts, and not on speculation.

However, having said that, the role of foreign banks in this debacle shouldn't be overlooked either. They're as much to blame for the abundance of cheap cash - which allowed people to borrow pots of money to invest in S23 - as Irish people are for spending it.

gigino wrote: »

Agreed, but many people did not vote for those parties, and they lived frugal lives trying to provide for their old age / rainy day, and they are caught in negative equity / have lost a lost of money - their hard earned savings. It was the governments job to regulate the market.

Pete_Cavan

Treehouse72 wrote: »

Are people seriously telling us that they didn't realise tax code could change?

Hadn't you noticed that it changes every year?

And that it has done so in every year since the foundation of the state?

I have no problem people fighting their corner. But for the love of God don't insult our intelligence by justifying bad investment decisions post facto based on the bogus argument that it was inconceivable the tax code could change.

This is not the tax code, it is a special once off tax incentive, available for a limited period of time and set to last for a fixed period of time. Like I said in my first post on this thread (post #3), this is about consumer protection, you cant encourage someone to buy something based on a specific incentive and then revoke that incentive after the purchase.

Treehouse72

Pete_Cavan wrote: »

This is not the tax code, it is a special once off tax incentive, available for a limited period of time and set to last for a fixed period of time.

Where is this written down? Is it in the original legislation?

And tax incentives are part of the tax code:

http://en.wikipedia.org/wiki/Tax_incentive

Pete_Cavan

Treehouse72 wrote: »

Where is this written down? Is it in the original legislation?

And tax incentives are part of the tax code:

http://en.wikipedia.org/wiki/Tax_incentive

Where is it written down that the tax relief can be revoked at any time?

Unless this was clearly communicated to the purchaser of these properties it must be breach of contract. The tax relief was offered to the purchaser and they accepted the offer by buying the property. Both sides have given "consideration" which forms the basis of a binding contract. Now after the government has availed of the benefit of the properties being built (urban/rural renewal), they are reneging on their part of the contract. I dont know a whole lot about law but Im sure challanges can be brough under breach of contract, estoppel and consumer legislation.

Treehouse72

Pete_Cavan wrote: »

Where is it written down that the tax relief can be revoked at any time?

Just in the Constitution and in centuries of case law.

Pete_Cavan wrote: »

Unless this was clearly communicated to the purchaser of these properties it must be breach of contract. The tax relief was offered to the purchaser and they accepted the offer by buying the property. Both sides have given "consideration" which forms the basis of a binding contract. Now after the government has availed of the benefit of the properties being built (urban/rural renewal), they are reneging on their part of the contract. I dont know a whole lot about law but Im sure challanges can be brough under breach of contract, estoppel and consumer legislation.

You make it sound like you bought the property from the government. You have no contract, explicit or implied, with the government.

whiteonion

The fact of the matter is that Ireland is suffering from serious deficit problems and we need to increase taxation. Ordinary people are being hit, I don't see why the landlord class should have benefits such as tax breaks. It's madness to subsidise housing in a situation where you already have to many houses that are empty.

gigino

Pete_Cavan wrote: »

The tax relief was offered to the purchaser and they accepted the offer by buying the property. Both sides have given "consideration" which forms the basis of a binding contract. Now after the government has availed of the benefit of the properties being built (urban/rural renewal), they are reneging on their part of the contract. I dont know a whole lot about law but Im sure challanges can be brough under breach of contract, estoppel and consumer legislation.

+1.

If the section 23 scheme , introduced and administered by the government,was compared to the SSIA scheme, the current reneging of the government on section 23 investors would be like the government reneging on SSIA account holders a third of the/ way through the SSIA scheme and leaving them with huge losses / confinscating money already invested.

If the government reneges on its promised miserable 10 year tax incentives it offered investors ( e.g. the small person trying to provide for their pension / kids education by buying a buy-to-let with borrowed money ) in the economy who paid a lot of tax up front, what message does that send out to people / organisations who may want to invest in the government or the country in the future ?

krd

Section 23 is socialism.

Justice4investors should call themselves Socialism4speculators.


LET THE MARKET DECIDE!!!!!

djpbarry

gigino wrote: »

If the section 23 scheme , introduced and administered by the government,was compared to the SSIA scheme, the current reneging of the government on section 23 investors would be like the government reneging on SSIA account holders a third of the/ way through the SSIA scheme and leaving them with huge losses / confinscating money already invested.

It’s not like that at all. The government has the power to legislate for taxation at any time and the electorate have the power to change the government if said legislation is not to their liking. But the government is in no way bound to a particular tax regime. In the case of SSIA’s, the government was bound by the terms of the contracts that they entered into with individual investors.

Section 23 tax breaks did not come with any guarantee – assuming that they did is extremely foolish.

gigino

djpbarry wrote: »

Section 23 tax breaks did not come with any guarantee – assuming that they did is extremely foolish.

Depends on what you call a guarantee. The whole point of section 23 / section 27 and section 50's was a promise / assurance from the government regarding the income from the property for 10 years, providing all the government regulations and conditions were met. The purchaser was always tied down by conditions for the ten years eg if he / she sold the property. The government changing the rules now , after it has got all the tax , can be compared to a car manufacturer not honouring a 5 year guarantee after 2 years. Or CIE not honouring a ten year season ticket. Its bad faith. Its only going to make the situation with the banks etc worse, as more defaults are bound to occur. The little man or woman who bought in to the government incentive ( to improve the quantity of rentable accomodation in the country ) and who hoped as a result to be able to save enough for his retirement pension / nursing home fees or kids education , has suffered enough already / is down enough already, without being kicked more.
Anyone thinking of investing in Ireland : the moral of the story is, do not.
The government goes back on its promises and assurances, once it has your money. Send your money abroad. If you are a foreign industrialist, do you really think the government will keep its promise of corporation tax at 12.5% when it has you hooked here, when it reneiged on the section 23 investors ( who paid a lot of money and tax up front - often with borrowed money - on the assurance of tax free rental income for 10 years ? ).

Irish people are seeing what is happening + taking what money they have in Irish banks + putting it abroad. Wise people! The section 23 investors wish now they had not trusted the government + the financial regulator ! Go figure.

Treehouse72

Oh God, give it a rest man. You're spamming multiple threads with this now.

Besides, there's at least a year's moratorium on changes to the scheme, so it's moot for now.

Pete_Cavan

djpbarry wrote: »

It’s not like that at all. The government has the power to legislate for taxation at any time and the electorate have the power to change the government if said legislation is not to their liking. But the government is in no way bound to a particular tax regime. In the case of SSIA’s, the government was bound by the terms of the contracts that they entered into with individual investors.

Section 23 tax breaks did not come with any guarantee – assuming that they did is extremely foolish.

I doubt very much the government would win if this was challenged under consumer legislation. People were actively encouraged by the government to purchase these houses, it is not unreasonable to assume that you would get the fully benefit of the tax relief if you complied with the rules of the tax break, and unless it was made 100% unequivocally clear that the tax relief can be revoked at any time, regardless of whether or not you had fulfilled all your obligations, then the government doesnt have a leg to stand on.

OMD

Pete_Cavan wrote: »

I doubt very much the government would win if this was challenged under consumer legislation. People were actively encouraged by the government to purchase these houses, it is not unreasonable to assume that you would get the fully benefit of the tax relief if you complied with the rules of the tax break, and unless it was made 100% unequivocally clear that the tax relief can be revoked at any time, regardless of whether or not you had fulfilled all your obligations, then the government doesnt have a leg to stand on.

To the "ordinary investor" who has say 2 properties, how much of a difference will loss of section 23 status make. They will still be able to write off up 75% of interest against rent anyway. I can see for the big developers/property managers this will make a massive difference, but to the ordinary investor how much do they stand to loose?

jimmycrackcorm

It would be interesting to see how a court challenge would hold for this...

djpbarry

gigino wrote: »

Depends on what you call a guarantee.

Indeed – there is absolutely no guarantee that tax rates/bands/breaks will not be subject to change at some point in the future.

gigino wrote: »

The government changing the rules now , after it has got all the tax , can be compared to a car manufacturer not honouring a 5 year guarantee after 2 years. Or CIE not honouring a ten year season ticket.

It’s not comparable at all. In the case of the car manufacturer, the law is being broken as (presumably) the owner of the car has a written guarantee. The same is true of a season rail ticket – a contract would be broken. However, a written contract is not drawn up between the government and each and every member of the electorate every time some form of tax legislation is passed in the Dáil.

gigino wrote: »

The little man or woman who bought in to the government incentive ( to improve the quantity of rentable accomodation in the country )...

If that was the aim (and I don’t believe for a second that it was), then they utterly failed.

djpbarry

Pete_Cavan wrote: »

I doubt very much the government would win if this was challenged under consumer legislation.

Consumer legislation? The government is not a retailer.

Pete_Cavan wrote: »

People were actively encouraged by the government to purchase these houses...

And yet, some of us somehow managed to resist.

Pete_Cavan wrote: »

...it is not unreasonable to assume that you would get the fully benefit of the tax relief if you complied with the rules of the tax break, and unless it was made 100% unequivocally clear that the tax relief can be revoked at any time, regardless of whether or not you had fulfilled all your obligations, then the government doesnt have a leg to stand on.

VAT was recently increased here in the UK. When the VAT rate was decreased not too long ago, I don’t remember the British government making it absolutely unequivocally clear that the rate could be increased again at some point in the future. I’m going to sue the bastards – they’ve knocked my whole budget out of whack.

jmayo

TheInquisitor wrote: »

Hellfireclub this would be like you going to buy a car for 10,000. The salespeople saying they'll give you a rebate of 3,000 after the purchase. So the cost to you is 7,000 which is what your budget was. But then wait after you buy the car they say they won't give you a rebate.

How would you feel?

No.1 when he buys the car and gets 3,000 off after the purchase is he asking the taxpayers to pay this 3,000 ?
That is what section 23 owners are asking.
They are aksing the taxpayers to sponsor their investment strategy.

AvidIrishReader wrote: »

Sponge Bob, you are right on several fronts: capping is good (but this should have come 7 years ago); and the relief being limited to property has had a terrible effect on society for all sorts of reasons. But having said that, I'm not a professional investor - what I did was simply based on a bit knowledge and common sense.

Carl O'Brien's piece in 'Irish Times' today about suicide in rural Ireland is another consequence of financial decisions taken, partly as a result of S23.

No matter the rights/wrongs of the current situation nor how anyone on this Thread views this loose grouping 'Justice for Investors', we're still in a depressing situation.

Even my previous response shows a lack of compassion for such people, and for that I'm ashamed. It doesn't resolve it.

Why the fook should we have compassion for such people ?
Most of the Section 23 properties were bought by people who were form outside the areas in which they were built.
They were not going to live there, they were not renting them out to locals.
Case in point, I know one village in Leitrim on the Shannon where estate full of these section 23 houses was built.
They were primarily bought by Dublin based landlords, who saw them just as a tax write off that they may visit a couple of times a year.
They didn't care that they were driving the price of property up locally, which meant locals who really needed a home were being screwed.

Because these properties were section 23 they had an attached premium and this just pushed prices higher.

Did these investors have compassion for anyone who was a FTB in the area ?
Did they fook.

As I said on the thread on this topic in Accomodation & Property, why should the normal taxpayers fund other peoples investments ?
I don't mind the BES or some such which actually is investing in people and companies that would have a long term goal and would produce something.
All this produced was unwanted property.

These people bought these properties not because of where they were, not because they were going to live in them, not because they were good investments (as a section 23 investor admitted), but because they came with a section 23.

All they had going for them was a tax rebate.

These section 23 properties allowed local developers, builders, auctioneers and other connected types get rich all under the pretence that it was bringing development to an undeveloped area.

flutered

as a disabled person i could not buy today, never mind during the boom, the last few budgets have seen my pension been cut, also the extra i got at christmas have been taken from me, why ? the property boom-burst, now these people are requireing more cuts to my pension, because they are not making enough, funny really.

MysticalRain

These greedy idiots helped destroy the country, and now they want a bailout? I swear, this country is becoming a bigger joke by the day.

gigino

The little person who bought a section 23 apartment to let out for the 10 year minimum ( under the government rules ), to provide for his / her old age or kids education, was merely availing of the government incentives to do so. The government got a lot of money ( 50% on average ) of the cost of the property, up front, through various taxes. The country got a plentiful supply of modern property available to tenants which was built to government standards and regulations. The little person did not design or make the tax laws section 23 scheme. The government + dept of finance did that.

Anyway, the current situation seems to be as follows ( I am quoting from the IPOA website on the matter. I am not a member or associated with the IPOA )

IPOA Welcome Finance Bill Section 22 & 23 Reprieve

The Government has seen the light by deferring the commencement of Sections 22 and 23 of the Finance Bill. The abolition of these incentives would have caused severe damage to the property investors of this county, to the banking sector who are already under serious strain, to the taxation system and the economy as a whole. Stephen Faughnan, Chairman of the IPOA welcomed the move and stated that “the impact assessment will show that the budget measures announced would damage the economy, result in wholesale mortgage default, curtail the investment in much needed infrastructure. These measures if brought in would undermine investment in the state and cause mistrust in Public Private Investments for decades to come”.

The IPOA have lobbied extensively and engaged top legal advice in their efforts to change the budget announcement on property based incentives. This will give a breather to the investors of this country who trusted the state and invested on the basis of state incentives in properties like housing, hospitals, nursing homes etc. and were shocked by the Budget Announcement.