Report on Commercial Real Estate Law
Executive Summary
This paper discusses the most important aspects of commercial real estate in Ireland. The paper focuses on various legal elements particularly the Residential Tenancies Act 2004 and the Law Society of Ireland. These legal provisions have been used to explain what anyone who intends to engage in commercial real estate should know. The paper discusses the aspect of registering a real estate, establishment of the area and adherence to the environmental regulations.
The paper is also based on various Irish legal journals. The introduction depicts the Irish legal system. The analysis, the main body of the paper discusses the legal aspect of the main topic. The recommendation and conclusion part outlines what should be done by the Irish government to promote effective planning and development in the housing sector. This paper can be contains useful information for professionals who sell, lease, manage, or develop real estate.
Introduction
According to Irish government development goals, housing is one of the aspects that have been given priority. Apart from the government, private investors also help in ensuring that the housing sector is developed. In Ireland, housing is considered as an essential factor in human life (Mohr 2018, p37). As a result, real estates are involved in leasing, investing, developing, and financing. Those who engage in real estate business tend to perform any of the actions. Rental is most common in areas where people prefer living in that particular area for a given duration of time. Most likely, their stay determines the period in which they are likely to consider living in a leased house.
Technology has also been used to improve real estate issues in Ireland. The introduction of ‘land direct’ paved the way for various online services. With the use of the system, people can search the land registry map online. They can also create a property alert through the system.
Also, almost all of the services provided by the ‘landdirect’ are free of charge. The system is compatible with desktops, laptops, and even mobile devices. Due to this fact, many people are likely to use ‘landdirect.’ The system has tremendously improved real estate issues in Ireland.
However, the low prevails in almost all sectors of most economies. Commercial real estate is not exempted from the provisions of the law. There are various European Union Laws that provide for the issues about real estate. Apart from the EU laws, different Irish statutes govern commercial real estate.
Anyone who intends to engage in commercial real estate should be aware of the provisions of the law. This report analyses the legal aspects behind a commercial real estate in Ireland. The report aims at enlightening professionals and anyone who sells, leases, develops, manages, and invests in real estate.
Analysis
According to Byrne and McCutchen 2014, Ireland’s legal system is based on the Irish constitution and the court structure. The Irish legal system spells out every aspect of the law for the particular jurisdiction. The laws are provided in various Acts such as the Registration of Deeds and Title Act 2006. About real estate, the Family Home Protection Act 1976 is another crucial legislation.
Such Acts are used as points of reference for cases on commercial real estate. The interpretation of the law is carried out by the court system. Ideally, the Irish legal system is based on legislation and common law. The aspect of common law is brought about by the fact that Ireland is a member of the European Union and that it is one of the legal aspects in many countries.
According to the provisions of the law, there are no legal restrictions on ownership of a real estate by non-residents. However, the law also provides that a thorough analysis of the buyer should be carried out before selling real estate.
The analysis should include the identity of the buyer and the sources of funds. The main aim of such practice is to reduce the cases of money laundering in the jurisdiction. Everyone who intends to engage in commercial real estate should be aware of the ownership requirements (Dickson 2018, p22).
In Ireland, real estate included any immovable property. Such properties include land and any building and fixtures in it. The law provides that there is no distinction of title in an instance where one person owns the building and the land. In some cases, the owner of the building and the owner of the land can be different.
In most cases, the owner of the land is always the owner of the building (MacGregor et al., 2018, p22). Generally, the titleholder of the property is considered as the owner in the eyes of the law. The owner is entitled to the right to sell the property. The sale should be made following the provisions of the law.
According to the Law Society of Ireland 2016, land should be registered. The Property Regulation Authority is a state body that regulates real estate transactions in Ireland. The body also ensures that each piece of land is registered under the name of the owner. The title of ownership is given under registration under the PRA.
Since 2006, the body has registered many properties in Ireland. Having been established under Regulation of Deeds and Title Act 2006, the body has operated under the state. The government has provided more significant support to the body. The central role of PRA is to prevent the existence of unregistered property. Based on the terms and conditions of the PRA, anyone who incurs losses due to any practice by the PRA will be indemnified.
The law provides that registration of land is mandatory if such land is acquired after 1st January 1967 by a statutory authority. Also, registration of land is mandatory is such land is acquired based on the provisions of Land Purchase Acts. These two aspects show that any real estate acquired in Ireland should be registered under the statutory authority (Williams and Budic 2016, p208).
Moreover, the deeds should be registered in the registry of the deeds or the land registry. Those who intend to acquire immovable properties such as land should take note of the importance of registration. Many law scholars hold that there is no requirement that documents and titles should be registered by it is a good conveyancing practice that those who acquire property should do.
The legal title passes from the initial owner of the property to the buyer when the price is paid to the seller, and the transfer of the deed is done. Purchasing land is just like other types of contacts. The consideration has to be paid in return to the provision of the property.
According to section 52 of the 2009 Act, the overall beneficial interest passes to the buyer or the enforcement of the legal contract. After the sale has been completed, the initial owner ceases to hold any beneficial interest in the property. In some cases, the seller may retain liability of contractual terms after the completion of the sale.
Apart from the price of the property, the buyer is also responsible for discharging some costs. Such costs include stamp duty, legal fees, search fees, Local Property Tax, commissioner of oath’s fee as well as architect’s fee. The law provides that the buyer should incur such additional costs in making an enforceable contract. About costs, the seller is protected from spending on the property that he is yet to sell (Walsh and O’Mahony 2018, p34). Therefore, anyone who intends to buy a land or any other immovable property should be prepared for what he is expected to pay for.
Real estate lenders have access to finances. As far as money to finance real estate is concerned, various legislation are used to guide both sellers and buyers. Some of the legislation include Bill of sales (Ireland) Act 1879, Agricultural credit Act 1978, and the Central Bank Act 1942-2014. Over the years, these Acts have been used to regulate and to ensure that those who engage in buying and selling of properties do so in good faith.
In other words, such legislation guides the general public, particularly those who are intending to engage in commercial real estate business. The government and other non-governmental organization work together to ensure any purchase of real estate are made according to the provisions of the law.
The implementation of the law is considered to be an essential factor in commercial real estate. Ideally, the buying and selling of real estate incorporate the use of a lot of money. Therefore, those who are involved in the business are likely to be keen on the provisions of the law to present any fraudulent activity.
According to the provisions of the law, the lender needs to protect itself by default from the borrower. This provision aims at ensuring that the lender is safe from any negative implications that may arise. The lender protects itself from the borrower by obtaining a contractual suite of covenants as well as other undertakings and warranties from the borrower.
As a result, the lender is likely to prevent any form of adverse action that may be instituted by the borrower. This practice is most common in mortgages. Notably, various mortgage companies in Ireland offer mortgages to those who intend to invest in real estate. The law acts as the bridge between the lender and the borrower (Coutney 2017, p2).
The methods of enforcing security in real property depend on the terms of the mortgage and the law. Before a mortgage contract is made, the borrower and the lender should agree on the terms and conditions. The terms and conditions act as the determinant of what is expected from the two parties.
The lender should accept the terms and conditions before the mortgage contract is made. The law of contract holds that one party should accept the offer to undertake an enforceable contract. Likewise, the mortgagee and the mortgagor should come into consensus in terms of the conditions of the mortgage. If the borrower does not accept the terms and conditions, such contracts would be considered null and void.
In commercial real estate, there are big-ticket transactions as well as smaller transactions. However, the law provides that the terms should be recorded on a formal agreement. The Loan Market Association precedent is used for more significant transactions. Some lenders, such as Banks in Ireland, use bespoke loan agreements. This is mostly used for smaller operations. In respect of security interest, registration is considered an essential element.
The formalities on the particular property depend on whether it is registered or not. Besides, the Irish Companies Registration Office plays a key role in matters concerning securities (ICGL 2019). A relevant filing is lodged to the Irish Companies Registration Office to perfect the security of the particular company that has created a charge over real estate. Such procedures ensure that the whole process is done in an orderly manner. Some of the provisions are also outlined in the Companies Act 2014.
The law also protects the lender against any claims from the borrower. Also, the law protects real estate from other creditors. Contractual subordination is one of how the lender can be protected. As the name suggests, contractual subordination involves where the senior and the subordinate lender agree. Therefore, the provision is made that the senior lender should receive the full amount before the subordinate lender. The senior lender is paid the full amount of the subordinated debt. This strategy protects the lender from any form of fraud that is likely to occur during the sale of real estate.
Inter-creditor arrangements are a common practice in Ireland. It is one of the methods that are used to protect lenders. In regards to the implementation of this strategy, junior and senior lenders are used. Moreover, an inter-group lender and the borrower play a vital role in the protection of the lender and anyone who is involved in the transaction.
The Ireland law society emphasizes the security of the lenders because property loans are some of the riskiest ventures. Without such protection, lenders can easily suffer losses. The law comes in to prevent the occurrences of such losses. Structural subordination is also one of the methods of protecting the lender. It arises where the senior lender lends to a company in a group of companies.
Like any other contract, the security taken by the lender can be voided under certain circumstances. The 2014 Act sets out the conditions under which the charger set out by a company that is in a blink of insolvency may be rendered void. Ideally, an insolvent company may not act as security. Those who invest and manage real estate need to understand the provisions of the law regarding security that can be accepted by the lender to avoid any form of negative implications.
Section 12 of the Residential Tenancies Act 2004 holds that landlords have various obligations that they should meet. One of the commitments is to notify the tenants of the name of the person that is authorized by the landlord to act on his behalf as far as the time of tenancy is concerned. This is a mandatory obligation that every landlord should adhere to.
The landlord should also be responsible for the structure of the dwelling member, such as repairs of time to time and any other relevant concern that might be raised by the tenants. Such obligations are set by the law to ensure that landlords are accountable for a breach of the contract.
Section 16 of the Residential Tenancies Act holds that tenants have various obligations that they should adhere to. Tenants are obliged to pay the landlord or any authorized agent the specified amount of money when it becomes due. Moreover, the tenant should not behave within the dwelling in a manner that breaches the contract.
The tenant should also abide by the rules and regulations stipulated in the Housing Act of 1992. By doing so, the landlord and the tenant are likely to live in harmony. The law provides a guideline that both parties should follow to prevent any misunderstanding or even breach of the contract.
Residential Tenancies Act 2004 plays an instrumental role in commercial real estate. Section 18 of the Act states that no contract should be made out of the terms of sections 12 and 16. In other words, the contract should incorporate the obligations of the two parties as stipulated by the Act. Notably, most contracts are based on requirements. Therefore, landlords and tenants should also comply with the provisions of the Act. Any person who intends to engage in commercial real estate should be aware of such regulations (Newell 2016, p34).
Section 14 of the 2004 Act prohibits the landlord from penalizing the tenant under various circumstances. In an instance of a dispute between the tenant and the landlord, the procedures laid in the Act should be followed. According to this section, the landlord should inform the tenants of his intention. The landlord should not do breach the law by acting against the provisions of section 14. Tenants are protected by the law as far as penalties are concerned.
The availability of rules and regulations that govern commercial real estate in Ireland has provided solutions to different problems between tenants and landlords. Various courts of the land have played a key role in dispute settlement. The professionals who sell or lease real estate should be aware of the dispute resolution procedures.
If any issue arises, they will be able to follow the right channel and procedure toward the solution. Anyone who engages in commercial real estate has a legal right to seek aid from relevant authorities in Ireland. Therefore, landlords should be aware of the fact that the tenants can sue them in a court of law for acting contrary to the provisions of the 2004 Act.
The 2004 Act is also a useful tool as far as leases are concerned. The Act provides that lease should not be more than 35 years. Many people leas their real estate between periods of six months to 35 years. Moreover, the house to be leased should meet the Housing Standards for Residential Houses 2008 and the amended legislation of the Residential Housing Standards 2009. These standards focus on the facilities of a particular house.
Any hose that does not contain the specific facilities as prescribed under regulations should not be leased. Leasing is one of the popular activities that are carried out by many people in Ireland. Many people prefer leasing a house to selling it. A leased property can be recovered with ease as compared to a sold property. Therefore, those who are planning to engage in real estate business should decide whether they want to lease or to sell their property.
The law also provides that landlords should not set the rent at an amount higher than the market rent. In this case, market rent is considered as the amount that the willing tenant that has not occupied the premises is ready to pay, and the landlord is willing to accept in consideration of other factors such as the market prevailing rates.
The rules governing market rent were set by the Planning and Development (Housing) and the Residential Tenancies Act 2016. The rules enacted under this Act were predictability measures. These rules have prohibited landlords from setting rent above the market rent hence protecting the rights of the tenants. The law also allows the tenants to stay in the rented accommodation facilities for a particular period after the initial six months.
Planning and development are considered an essential aspect of real estate. The Planning and Development Act 2010 stipulates the required measures that should be taken before constructing a house. Zoning is regarded as an essential issue in terms of place, sustainability, and the landscape. Those who intend to build real estate should ensure that the particular area is inspected to ensure that it complies with the provisions of the Planning and Development Act 2010-2017. By doing so, landlords will be able to avoid future challenges that might be brought about by the landscape of the premises.
The European Union Regulations stipulates that environmental impact assessment should be done on the particular area that the real estate is to be established. The EU regulations are supported by Environment Protection Agencies and other waste management establishments. The authorities work together to ensure that the landlord and any other professional that engages in leasing or selling real estate comply with the environmental regulations.
The environment is an essential aspect of any establishment. Both tenants and landlords should adopt effective sustainability measures to address environmental issues in specific places. Even though real estates can be established in different areas, sustainability measures should be taken care of.
Planning and development permit is required for the establishment of real estate and other properties. According to Buildings Control Regulations, such permissions should be granted by local authorities. A real estate that is constructed against the provisions of the Building Control Regulations may be deemed to lack permission.
However, the law enables those who develop, manage, and lease real estate to acquire permission from the relevant local authorities. The permission should be given before the construction. This applies to both business and residential establishments (Thuillier and Daid 2015).
The introduction of the commercial lease register was one of the important moves in the housing and development sector (Wylie, 2014). The register states the terms and particulars that are associated with various types of leases. Such particulars should be disclosed in a public register. These provisions promote transparency in commercial real estate. Just like any form of business, landlords should be transparent to assure the tenants that the properties are safe. Notably, commercial leases are freely negotiated, provided that the statutory provisions are met. Commercial leases are common in metropolitan places such as towns.
According to Irish Tax policies, stamp duty is imposed on the transfer of a real estate or any other property. The stamp duty on residential property is 1% up to a 1,000,000 Euros and 2% on any amount above the threshold. Notably, the stamp duty is imposed based on the price of the particular real estate. The relevant Irish authorities ensure that any landlord who is transferring a real estate pays the stamp duty. Anyone who does not comply with the provisions of the law is likely to face charges in a court of law. Due to the availability of technology, stamp duties for the transfer of property can be filled online via Revenue’s e-stamping system.
Recommendations and conclusion
Concerning the rule of law, every person who intends to engage in commercial real estate should have a clear background of the requirements. The Irish government should enforce the various aspects of the law to ensure that all landlords and tenants adhere to the provision of the law.
The courts should be given powers to charge those who are found guilty of breaching the law related to commercial real estate. The local environmental authorities should also create awareness on sustainability measures to protect the environment. For instance, they can advocate for the use of carbon-free elements for the construction of houses and other properties.
In conclusion, commercial real estate is based on various statutes. Apart from the Residential Tenancies Act 2004, other regulations, such as the Planning and Development Act and the Law Society of Ireland 2016-2018, play critical roles in the establishment and management of the real estate. Landlords and tenants should comply with the provisions of the law to transact amicably. Also, the Irish government plays an instrumental role in the planning and development of housing and the residential sector. Generally, landlords and tenants should be aware of their rights and obligations.
