Buying the contents of a house

mickster

I'm in the process of buying a house and I'm also buying the contents of the house but this is a separate deal, however it's dependent on the sale of house going through.
The person that's selling the house wants a bank draft for the contents prior to me signing the contract for house. I need to draw up some sort of agreement which states that the draft is for the contents but that's it's only dependent on the sale of the house going through and if this doesn't happen then it's fully refundable.

Anyone got any suggestions or maybe has come across this before?

Borzoi

mickster wrote:

I'm in the process of buying a house and I'm also buying the contents of the house but this is a separate deal, however it's dependent on the sale of house going through.
The person that's selling the house wants a bank draft for the contents prior to me signing the contract for house. I need to draw up some sort of agreement which states that the draft is for the contents but that's it's only dependent on the sale of the house going through and if this doesn't happen then it's fully refundable.

Anyone got any suggestions or maybe has come across this before?

Sounds a bit odd - let your solicitor handle it, at least that way is safe

JackieChan

mickster,
Make sure you have a full list of whats included in the contents sale.
It would leave a sour taste in the mouth if a nice coffee table or chest of drawers was not there when you moved in when you thought it was included.

Personally I'd probably tell them that I'll give them the bank draft at the signing of the contracts. Could be messy trying to get the money back if you don't follow through with the sale.

mickster

Cheers for the response lads!

Unfortunately my solcitor wont handle it as the reason I'm doing it this is to avoid paying stamp duty so he wants nothing to do with it...

Bluehair

mickster wrote:

Cheers for the response lads!

Unfortunately my solcitor wont handle it as the reason I'm doing it this is to avoid paying stamp duty so he wants nothing to do with it...

Carefull! Very dogey ground to be walking.

I'm loath to advise on tax-evasion but at the very least I would not be putting anything on paper about this transaction.

MorningStar

mickster wrote:

Cheers for the response lads!

Unfortunately my solcitor wont handle it as the reason I'm doing it this is to avoid paying stamp duty so he wants nothing to do with it...

Your solicitor is acting baddly. You are avoiding tax not evading it. It is completely legit to do this. I am assuming you are not buying goods over €7k which is generally the rule of thumb. Do not hand over any money untill the contracts are signed if they insist. A cheque should do but a bank draft should satisfy beyond that.
If you contact the revenue and just ask them they will tell you if it is legal or not. They aren't stupid they are aware of this and should tell you the tolerances.

Dellgirl

Is that not illegal? Dont you have to declare everything that you pay?
I know someone who lost a house to another bidder by this method and she was in the business. She said she was going to report the auctioneer to the IAVI but never did.
Its not ethical? Or is it?

Victor

mickster wrote:

The person that's selling the house wants a bank draft for the contents prior to me signing the contract for house.

Let him sign the house contract (it is then binding on him), hand it to your solicitor, you hand him the money for the furniture, he gives you receipt for XYZ furniture, you sign house contract (it is then binding on you).

ck1

Contents of homes in transactions such as this is considered as passing by Delivery if it is dealt with by your solicitor. Generally, stamp duty is not paid on the purchase of house contents e.g. curtains, carpets, etc., which may pass by delivery i.e. not included in the legal document. However, where they are part of the transaction they may have the effect of moving the stamp duty charge into a higher rate.

This is why your solicitor does not wish to deal with it as he is being asked to take it out of the whole transaction.

MorningStar

Blingarella wrote:

Is that not illegal? Dont you have to declare everything that you pay?
I know someone who lost a house to another bidder by this method and she was in the business. She said she was going to report the auctioneer to the IAVI but never did.
Its not ethical? Or is it?

Why illegal? I was going to buy the furniture from a house I wasn't buying because it was art deco and in amazing condition. The woman who bought the house offered more on the furniture!
There is a little bit of ethical fudging but technically it is a seprate purchase which may be part of the condition of purchase. With certain items it is perfectly understandable, on items like an Arger (sp?) cooker that extra is paid as they can cost €10k-€15k. It is a little abused but by no means illegal. It's only ethical depending on the items bought and price paid. If you pay €7k for a lampshade it is questionable to say the least.

Dellgirl

Why illegal? I was going to buy the furniture from a house I wasn't buying because it was art deco and in amazing condition. The woman who bought the house offered more on the furniture!
There is a little bit of ethical fudging but technically it is a seprate purchase which may be part of the condition of purchase. With certain items it is perfectly understandable, on items like an Arger (sp?) cooker that extra is paid as they can cost €10k-€15k. It is a little abused but by no means illegal. It's only ethical depending on the items bought and price paid. If you pay €7k for a lampshade it is questionable to say the least.

Unethical then. What would happen if it was found out that you had bought the lampshade for 7gs?

MorningStar

Blingarella wrote:

Unethical then. What would happen if it was found out that you had bought the lampshade for 7gs?

The TAX man would claw back the stamp duty and there would be penalties with interest. They need to find out and prove that the lampshade is not worth €7k (or maybe you need to prove that it was). As I said certain items maybe worth such additional money that may not be covered by the fixtures and fittings. It may not be unethical at all. Curtains are sometimes covered and sometimes not and considering they can easily cost €300 a pair it makes a big deal on a bigger house with unusual windows.
As far as I am aware a solicitor is ment to cover it all so that the tax man can investigate if need be. It's the way I have done it and never had a problem so that is why I am surprised about this solicitor. I've used more than one as have the other people so it doesn't make sense to me. It's normally done just to avoid the stamp duty limits and the general rule of thumb is no more than €10k it I think.

landser

MorningStar wrote:

Why illegal?

it is kosher to put the contents of the house into the contract for sale if they are reasonably valued. stamp duty would only apply to the value of the real property and not to the value of the contents.

what is illegal is to inflate the price of the contents being bought in order to artificially reduce the price of the property. if this is done then there is a conspircay to defraud the revenue commissioners.

If the solicitor won't handle it, then i suspect that the original poster is involved in the latter. However, if the solicitor even knows that this is going on, then he should withdraw his services fully, as, if this scam is discovered, and he knew about it and acquiesced, he'll get mre than a rap onthe knuckles from the law society.

ck1

Hi again, just want to clarify my previous message. The way it works it Contents pass by way of Delivery. Stamp Duty is only paid on the purchase cost of the property however if the value of the contents bring the property into a higher Stamp Duty band, then this rate is charged on the purchase price of the property.

Eg. Purchase price €380,000 - First Time Buyer
Contents - €20,000

If you were buying the property solely at €380k then you would be charged Stamp Duty at a rate of €3% on €380k. However, with the inclusion of the Contents your rate on the €380k increases to 6%

MorningStar

ck1 wrote:

Eg. Purchase price €380,000 - First Time Buyer
Contents - €20,000

If you were buying the property solely at €380k then you would be charged Stamp Duty at a rate of €3% on €380k. However, with the inclusion of the Contents your rate on the €380k increases to 6%

The point is the price would not be seen as €380k it would be €400k. If you list the sale of contents seperately the house price wouldn't increase past €380k so you would stay at the 3%. €20k on contents would generally be seen as over an acceptable limit IMHO. Stamp duty is on the cost of the house and nothing more

landser

ck1 wrote:

Hi again, just want to clarify my previous message. The way it works it Contents pass by way of Delivery. Stamp Duty is only paid on the purchase cost of the property however if the value of the contents bring the property into a higher Stamp Duty band, then this rate is charged on the purchase price of the property.

Eg. Purchase price €380,000 - First Time Buyer
Contents - €20,000

If you were buying the property solely at €380k then you would be charged Stamp Duty at a rate of €3% on €380k. However, with the inclusion of the Contents your rate on the €380k increases to 6%

the house is bought at the price you pay for it. the chattels (i.e. contents) are valued seperately and no stamp attaches, even if their value appears on the contract. the contents cannot bring it into a higher stamp bracket, as they do not form part of the property. you do not include contents in the value of the property... ever! the problem arises where you buy a house for say 320K, and you add €3k onto the value of the chattels to bring the purchase price of the property down to a lower stamp level. this is what is illegal

ck1

Generally, stamp duty is not paid on the purchase of house contents e.g. curtains, carpets, etc., which may pass by delivery i.e. not included in the legal document. However, where they are part of the transaction they may have the effect of moving the stamp duty charge into a higher rate.

This is Stamp Duty leglisation and the Stamp Duty department at the Revenue Commissioners will confirm this or you can check out the following Revenue document - Number 9 on page 17 and also page 29.

http://www.revenue.ie/services/foi/s16_2001/stampsv2.pdf

Thomond Pk

Unfortunately in this situation like all threshold related transactions a magic number will arise and if an individual were to bend the rules in this manner they would be in breach of Section 8B "“It is hereby certified (a) that the consideration (other than rent) for the sale/lease is partly attributable to residential property, and (b) that the transaction effected by this instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property exceeds €127,000 / €190,500 / €254,000 / €317,500 / €381,000 / €635,000, and (c) that the transaction effected by this instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration (other than rent) which is attributable to property which is not residential property exceeds €10,000 / €20,000 / €30,000 / €40,000 / €70,000 / €80,000 / €100,000 / €120,000 / €150,000.”

I think you should be aware of it

ck1

Section 8B only applies to properties whereby part is Residential and part is Commercial, i.e Shop with Living Accommodation. There is no exemption to any level of contents. All of the value of the contents is added to the purchase price to dertermain the rate of Stamp Duty.

copacetic

blah blah blah blah blah!

going back to micksters original post, plenty of people do this and solicitors don't like to be involved at all or even be told about it.
You are in a little bit of a sticky situation as why should the vendor sign the contracts until you have given the draft as once they have done it you could decide not to pay for the contents.

What I would do is try to do it all on the same day, and get a receipt for the contents to show you paid the money, write up the receipt saying that the sale of contents is null and void if the house sale doesn't go through and all monies should be returned.
You sign the contracts the day before, the next day you give the draft and the vendor signs the contract.

It doesn't really cover you but at least it is something, but you are basically trusting the vendor not to mess you around...