trends legal magazine

Real Estate No 8

Ireland – BHSM LLP

Could the compulsory purchase of vacant properties be the answer to the housing crisis? | TRENDS Real Estate No 8

Introduction

A recent announcement from the Irish Government regarding the proposed Compulsory Purchase Order (“CPO”) of vacant properties in Ireland went relatively unaddressed and unnoticed in Irish news in December 2021.

As part of the State’s “Housing for All” plan, implemented by the Irish Housing Minister, Darragh O’Brien, it is suggested that a CPO Programme be engaged to “… tackle vacancy in towns and villages…” in both cities and in rural communities.

Making use of the yet to be commenced sections on CPO powers under the Land Development Agency Act 2021 (“the LDA Act”), it is envisaged that Local Authorities and State Bodies will use funding from the Housing Finance Agency to purchase up to 2,500 vacant properties by 2026. It is intended these would be used as social housing or for onward sale to the Irish homeowner.

What is a Compulsory Purchase Order

A Compulsory Purchase Order, often referred to as a “CPO”, is a notice served by a State Agency, such as a Local Authority, for the compulsory purchase of a premises or part of a premises.

While we are familiar with the concept being used for the construction of motor ways, or to facilitate the expansion of the LUAS service, this is the first time the Government will attempt to implement the use of CPO’s for the purpose of obtaining property for use as residential properties, both for the social housing and to sell back to public market.

Process

After a Statutory Body decides to go forward with a CPO, the owning party will be served with a notice of the CPO.  A newspaper notice will also be published and An Bord Pleanála will receive a submission for approval.

Types of CPO

A State Authority can acquire the land permanently, temporarily or, can acquire specific rights over the property / land such as easements, rights of way, or rights for service, substrata, and/or water rights.

Your Rights

While there are different procedures based on the type of CPO involved, the following rights are available to any party who has received a CPO notice:

  • A right to object to the CPO
  • The right to compensation based on the market value of the property
  • The right to be left in the same financial position after the CPO as before the notice issued and
  • A right to access Statutory Arbitration where a decision on compensation cannot be reached

Timelines apply for the right to object, and it is important to obtain legal advice as soon as Notice of a CPO is received.

Objections

While there are different procedures based on the type of CPO involved, the general process below is followed.

Once a CPO notice has been served, an affected party is entitled to object, enter negotiations, and where necessary involve an arbitrator.  Those which are successful and held valid are usually objections which have been made on planning or legal grounds.  It is not currently known what objections will be considered valid where a vacant property is the subject of an LDA Act CPO.

Where an objection is received, a public local enquiry is held, at which, affected parties can formally put their views forward. However, if no objections are raised, An Bord Pleanála can confirm, amend, or reject the CPO without the requirement for a Public Enquiry. Any decision by An Bord Pleanála will be subject to an objection period. Once the objection period passes, the CPO will become operative.  Once Operative, the only further recourse available is to challenge the CPO by way of Judicial Review.  A CPO will remain operative for a three-year period. Once lapsed, a new notice must issue.

Compensation

Where a property is the subject of a CPO, the owner is entitled to compensation in the form of consideration for value. Once the CPO is Operative the relevant State Authority involved may serve a Notice to Treat on the affected parties and will then commence negotiations as to the assessment of compensation due.

Assessments for compensation fall under a non-exhaustive list of headings which can include the following:

  • Value of land
  • Diminution in value of retained lands
  • Costs arising from acquisition
  • Disturbance caused
  • Loss of profits caused

A basic requirement is that the owner is entitled to the market value of the property and should be left in a similar position as to when the property was acquired.  In the current booming market this may not be of much comfort to the owner.

Where no agreement can be made the matter must be referred to the Property Arbitrator.

Notice of Entry

It is important to note that the amount of compensation need not be agreed for the CPO to be acted upon and the Authority can serve a Notice of Entry prior to any money having been exchanged.

Tax

It is important to also note that sale of land which results in a gain for the landowner will still be subject to Capital Gains Tax at a rate (currently) of 33%.

Will my Property be affected?

The LDA Act envisages the targeting of Vacant Properties in line with the definition of the Vacant Site Register.

In Ireland, the requirement for Local Authorities to maintain a Vacant Site Register was introduced under the Urban Regeneration and Housing Act 2015.  This is a register of property located in each Local Authority’s jurisdiction which are considered suitable for housing but have not yet been put forward for development. To be considered “vacant”, the site must consist of residential land being more than 0.05 hectares and located in an area where there is a need for housing. The site must also not be in use for an extended period of time or may be what is known as “Regeneration Land” which is land other than residential land where the site is having a negative impact on the existing amenities or character of the neighbourhood (i.e. vacant industrial sites).  A property can be added where it is deemed vacant for 12 months or more.

Notice of Entry onto the Vacant Site Register

A Notice to the owner will be served of the Local Authorities intention to include the property on the register. The register will contain the location of the site, to include a map, its current market value together with the name and address of the current owner.

Levy

All sites included on the register are subject to the Vacant Site Levy. The vacant site levy is currently 7% of the market value of the land. This legislation is currently under review and subject to a possible increase in the future.

Right to Appeal

An appeal can be raised to any notice received but same must be done so within 28 days. Where an appeal is unsuccessful the owner may submit a further appeal to An Bord Pleanála. Where unsuccessful, the Vacant Site levy will apply and the property becomes at risk of a CPO.

How might this affect Irish Developers

The enactment of the CPO provisions of the LDA Act raise concerns as to what criteria will be used for the assessment of CPO’s of vacant residential properties or if the standard 12 month vacancy (or such other yet to be determined time period) will be deemed the only requirement for a CPO.  This could raise particular concern where a project is ongoing, and a particular block of city housing is being purchased for the eventual redevelopment or rezoning.

While the legislation is yet to commence, there will likely be confusion and disagreement as to how the provisions will apply, and it is expected to be met with resistance from developers.

Written by:

Solicitor

Rachel Nangle

rnangle(et)bhsm.ie

Article from – TRENDS Real Estate No 8

The Law Firm Network is a network of independent law firms originated in 1989. Our members are not affiliated in the joint practice of law; each member firm is an independent law firm and renders professional services on an individual and separate basis.