Fundamental change to Irish property transactions introduced
If you are considering buying or selling a property, a recent development has now changed how property transactions will proceed in Ireland.
From 1st January 2019, the sale and purchase of property has moved to a pre-contract investigation of title (PCIT) system. This is one of the most fundamental changes to be introduced into Irish real estate practice in more recent times.
What does this mean?
The Law Society has published the new 2019 Contract for Sale, which will now be the standard contract used in the sale of property in Ireland. Up until now, the Contract for Sale assumed that a certain minimum level of investigation took place before contracts were entered into, with detailed investigation following between the exchange of contracts and completion.
The new 2019 Contract introduces a new regime, whereby a full investigation of title is carried out before contracts are signed.
Key takeaways:
- The general conditions of sale will remain subject to amendment by special condition so that parties remain free to contract on terms of their choosing, appropriate to the commercial realities of the transaction. However, serious issues that might compromise the transaction should now be apparent at an earlier stage in the process and before parties are bound to the transaction.
- The new process achieves transparency because all property title queries will be dealt with and resolved in advance of contract signing. Crucially, when the buyer and seller sign the contract under the PCIT system, the buyer is automatically deemed to have knowledge of all issues relating to the title and to have accepted them, leaving only extremely limited grounds for a buyer to raise queries or object to any title concern thereafter.
- This change should also see borrowers engaging earlier with their lenders to ensure they are satisfied with the title being offered as security for the borrowings before the contract is signed.
- The impact of the change will be more evident in sales and purchases by auction or tender. Such transactions will require a full investigation of title pre-contract, however, as it is not certain that this will lead to a binding contract, there will be an increased cost risk for these types of transactions.
In summary, whereas practice has already evolved to a full investigation of title before the contract is signed as a result of increasing complexity and regulation in all aspects of real estate and property ownership, the new regime will be more efficient and more in tune with the commercial realties of such transactions.
Those contemplating either a disposal or acquisition of real estate would be advised to engage their lawyer as early as possible in the process. This will minimise the potential for delays arising from the lack of the necessary comprehensive documentation and information, ensuring that contracts are successfully exchanged as soon as possible.
Article by Eimear Coughlan
For more information on how O’Flynn Exhams can advise you on this topic, please contact Eimear Coughlan at ec@ofx.ie or +353 21 4277 788.