Irish Property Buyer 03.07
Foreign affairs
Iirish Property Buyer Magazine
March 2007
If you're using your SSIA windfall to buy a bolt-holt, be sure to limit your exposure to risk, warns solicitor and overseas expert Tom McGrath INVESTING in an overseas property will be a tempting option for many Irish holiday-makers and investors about to reap the benefits of their SSIA. While Spain, Portugal and France have traditionally been hotspots for Irish investors, more and more Eastern European properties are coming on the market with attractive price tags - good news for those with small but significant nest eggs.
For those keen to buy a second home in these territories, the advantages are obvious: direct, cheap flights to a retreat which offers great weather and a simpler, less expensive lifestyle. For those wanting to invest there are other attractions - while some of Eastern Europe is considered risky, statistics are promising - indeed, parts of Poland saw capital appreciation of 75 per cent last year.
However, when buying abroad, you should proceed with care. Many people throw caution to the wind - handing over cash deposits without asking for a receipt or committing to purchases without consulting a solicitor. Quite simply, these are practices they would never do at home.
The results can be disastrous: I am aware of a case where a gentleman bought an apartment in the Canary Islands. When he went out there to take possession, he discovered there was a disco based underneath, which only opened at 2am in the morning. Needless to say, he couldn't rent it.
Another sad case is that of the couple, who were shown an apartment in Bulgaria, which they had agreed to buy. The apartment seemed perfect it had sea views and was located in the centre of town. However, when they turned up a year later they discovered that it had been sold to another family. Their 'new' apartment was in the middle of nowhere. Needless to say, in both instances, they had not used the services of a lawyer. Seeking the advice of an independent reputable solicitor with a good knowledge of the area and the local language is essential. He or she will ensure that the vendor/developer owns the land; if any mortgages/charges or encumbrances are attached to the land; that all building and planning regulations have been complied with; if planning consent will be forthcoming should you decide to alter the property; if there any defects on the tide; if monies paid over are protected by bank guarantees and finally if there is "black money" involved. What's "black money"?
This happens when the seller seeks a portion of the purchase money paid in cash. This lowers the declared purchase price in the title deed. Notwithstanding the fact that this is tax evasion; the purchaser is left with a property that on paper is of a lesser value than the amount actually paid, resulting in a higher Capital Gains Tax (CGT) liability on the sale. Not only it is illegal but the owner will have to pay the difference and penalties if it is comes to light. Such investigations will save tears later.
Recently a couple came to us wishing to buy property in a rural area in Spain which due to legal restrictions could only be rented to someone from the area. It also could not be sold for five years after purchase. Once the couple knew that they were still happy to go ahead, but it might not have suited everybody.
I always advise that there are many, many reputable developers and estates agents out there. However, there are those who take short cuts and who are either unreliable or unscrupulous. Therefore, take care and make sure that you do your homework before investing overseas.