Onate’s Guide to Pre ‘63 Investment Property

Prospective purchasers of Pre ‘63 investment properties in Ireland regularly come to Onate.

Whilst Pre ’63 properties often make attractive investments, owing to their high rental yield, they can be difficult transactions to execute. So what follows is our guide to ensure buyers are aware of the key issues and common pitfalls to look out for along the way.

Onate has the experience and can-do attitude to work through many of these issues, and is ready to support experienced borrowers in this area.

What is a Pre ’63 investment property?

The term “Pre ’63” or “Pre-63” is used to describe a property that was sub-divided into multiple units prior to the introduction of the Local Government Planning and Development Act of 1963 (the “Act”). The typical Pre ‘63 Property is a large two or three storey Georgian property, containing multiple flats, or bedsits. Following the introduction of the Act, a property owner wishing to convert their property into multiple units required planning permission to do so.  This permission is often difficult to secure for older buildings, hence Pre ‘63 properties are frequently in high demand with investors.

What do you need to consider before embarking on the purchase of a Pre ‘63 property?

Pre-1963 declaration

A purchaser acquiring a Pre ‘63 property (and their Lender) will require evidence that the property was in use as multiple units before the introduction of the Act.

This evidence will generally take the form of a “Pre ‘63 Declaration”, or, as the case may be, multiple declarations. This declaration (or declarations) is required to confirm the use of the property for the period commencing on or before October 1st 1964 to date.

Ideally, the declaration should be provided by the owner(s) of the property for the entire period. If declarations from the owner(s) are not available, the person providing the declaration would need to demonstrate a credible basis for their knowledge of the use of the property during the relevant period.

In order to satisfy a prospective purchaser, the declaration should be accompanied by supporting evidence such as:

(i) reference to multiple flats / bedsits in descriptions of the property in title deeds

(ii) confirmation of multiple use by previous owners’ solicitors in replies to requisitions on title

(iii) historic tenancy schedules

(iv) evidence of separate metering and any other documentation that proves the legitimacy of the declaration.

Often a declaration will confirm that the property was in multiple use prior to the introduction of the Act, but will not specify the exact number of units contained from 1963 to date. This means previous owners could have further subdivided the property, or amalgamated existing units. Depending on the nature of such works, they could firstly constitute unauthorised development for the purposes of the planning acts. Secondly, if works were carried out since June 1st 1992, it could fall within the scope of the building regulations, including the requirement for a fire safety certificate.

Prospective purchasers, and in particular, lenders, will take an extremely narrow view when it comes to any potential fire safety issues, which highlights the importance of detail when it comes to such declarations.

NPPR charge

NPPR (Non-Principal Private Residence) tax was in place from the years 2009 to 2013 for properties that were not resided in by the owner(s). Each unit within a Pre ’63 property is considered a residential property for the purposes of the charge and any purchaser will require a certificate of discharge for each unit.

Previous owners may have considered the entire property one residential unit for the purposes of the charge, when in fact the property holds multiple units. If this is the case, it can lead to significant costs in a resale situation. It is worth asking the seller or sales agent from the outset if NPPR has been paid in respect of all units contained within the property.

 Is the property vacant?

Pre ‘63 properties often come to market in a tired condition, in need of some modernisation.

If the buyer is looking to undergo works on the property, it will likely need to be vacant.  This can pose two problems:

(1)   The income will drop or cease for a period;

(2)   Problem tenants unwilling to vacate may frustrate the process.

Where these issues arise, they can, in certain circumstances, present obstacles to obtaining finance and so, a pragmatic approach from Lenders is required.

Conclusion

Pre ‘63 properties can be a great opportunity to buy and lightly refurbish so they satisfy current living standards and provide essential rental accommodation. But it is important to be aware of all of the potential challenges when embarking on a Pre ‘63 project.

 The financing of these properties can be challenging for the reasons set out.  Onate stands ready to back experienced operators in this area.

This article has been written in collaboration with Eoin Dennehy from Gordon Judge Solicitors.

 If you have any further queries or to see how our lending process works, visit www.onate.com/bridging-loans