Section 90

gmisk

I placed a bid on a house last week.
The initial offer was 147, so I offered 151.
I talked to the EA today and apparently there is an offer of 153 (same under bidder), but this is dependent on the properties status under section 90?!?!
Apparently the vendors solicitor needs to clear this up.

Can someone explain to me in simple terms what this means?

The_Morrigan

I'm guessing this is it - http://www.prai.ie/tenant-purchasers-under-section-90-of-the-housing-act-1966/

seamus

This is probably to do with the issue of ground rents. A lot of older housing would have been built on public land, with the proviso that the owner (or indeed renter) pays a ground rent to the local authority for the land on which their property is sitting - effectively a leasehold agreement.

This has long been abolished, but there is a lot of property still legally under public ownership. Since 1978, it's become a legal requirement that these properties cannot be sold unless the land on which it is built is acquired from the local authority by acquiring a "fee simple", on payment of the outstanding ground rent. This converts it from leasehold to freehold.

From what I understand, this has a tiny fee, a couple of hundred euro in most cases. However, what it does is add red tape to the sale such that the sale cannot be completed until the application has been submitted to the local council and gone through their processes. Which could take months depending on the council.

In this case it sounds like the bidder @ €153k is not interested in waiting for this red tape to be unravelled and will withdraw his offer if the fee simple hasn't been acquired.

hfallada

seamus wrote: »

This is probably to do with the issue of ground rents. A lot of older housing would have been built on public land, with the proviso that the owner (or indeed renter) pays a ground rent to the local authority for the land on which their property is sitting - effectively a leasehold agreement.

This has long been abolished, but there is a lot of property still legally under public ownership. Since 1978, it's become a legal requirement that these properties cannot be sold unless the land on which it is built is acquired from the local authority by acquiring a "fee simple", on payment of the outstanding ground rent. This converts it from leasehold to freehold.

From what I understand, this has a tiny fee, a couple of hundred euro in most cases. However, what it does is add red tape to the sale such that the sale cannot be completed until the application has been submitted to the local council and gone through their processes. Which could take months depending on the council.

In this case it sounds like the bidder @ €153k is not interested in waiting for this red tape to be unravelled and will withdraw his offer if the fee simple hasn't been acquired.

I have never heard of this. My parents have brought a few houses since the mid 1990s with ground rent outstanding. You dont have to buy the ground rent at all.

seamus

hfallada wrote: »

I have never heard of this. My parents have brought a few houses since the mid 1990s with ground rent outstanding. You dont have to buy the ground rent at all.

My info is based on this; http://www.sdcc.ie/services/housing/buying-your-home

The Fee Simple/Ground Rent buy out application process relates to the fact that, before 1978, houses were permitted to be sold although the ground they were built upon still remained in the ownership of the Council. Since 1978 houses cannot be sold unless the ground they are built upon is sold with them.

Maybe I'm mistaken.

Kelly06

If there is a section 90 prohibition note on the folio it just means that's it's the first resale of a tenant purchase property.

The consent of the relevant local authority must be given to the sale.

There are conditions on both the vendor and purchaser. In simple terms the vendor must prove that they are purchasing another property or have taken care of their housing needs in some other way. They must not leave themselves in the position where they need to go back on the housing list for accommodation. In the case of a purchaser they must be "in need of housing" as in purchasing a house to live in. They must not be buying the house as an investment property.

Once the consent is given by the LA they will join in the deed. The land registry will remove the burden on registration. The consent will not be required again. Hope this helps.

S90 has nothing to do with ground rent you can still have a leasehold with a s90 burden

gmisk

Kelly06 wrote: »

If there is a section 90 prohibition note on the folio it just means that's it's the first resale of a tenant purchase property.

The consent of the relevant local authority must be given to the sale.

There are conditions on both the vendor and purchaser. In simple terms the vendor must prove that they are purchasing another property or have taken care of their housing needs in some other way. They must not leave themselves in the position where they need to go back on the housing list for accommodation. In the case of a purchaser they must be "in need of housing" as in purchasing a house to live in. They must not be buying the house as an investment property.

Once the consent is given by the LA they will join in the deed. The land registry will remove the burden on registration. The consent will not be required again. Hope this helps.

S90 has nothing to do with ground rent you can still have a leasehold with a s90 burden

Thanks so much for this that would make sense.
The other bidder is interested in buying the house as a rental investment, were as u am a first time buyer looking to live in it.

Kelly06

gmisk wrote: »

Thanks so much for this that would make sense.
The other bidder is interested in buying the house as a rental investment, were as u am a first time buyer looking to live in it.

If the other bidder is an investor then if the local authority does its job correctly then the sale will be refused to that particular purchaser. IF the bidder is aware of this and lies it's the only way I can see it going through. If there is a investment mortgage I can't see how it can be consented to. Be interesting to see the outcome

MarkAnthony

This is a total pain the the rear end.

The costs involved in conversion to fee simple are mainly associated with costs and registration rather than the actual ground rent. The issue is the permission to sell that can delay things. In my case I got three different stories but we'll park the fiasco that is my purchase.

My main concern would be if the vendor hasn't been organised to get this converted (many people ask for it to be done prior to purchase completion, I think that's where you are) then what else awaits you? Again I may be biased given my bad experience.

Anyhoo - I would go in with a lower bid, taking the leasehold as is, assuming it has more than 70 years left to run on it. If it doesn't it's not good marketable title and you may have issues with your mortgage. It's no issue once you're in, you can convert it but the mortgagee is not going to rely on you doing that, again perhaps why the other bidder needs it done first.