The risk of being underpaid or saddled with significant tax liabilities is one of the reasons farmers should carefully consider new partnership deals promoted by developers, a legal expert said.
The warning comes after one of the country’s biggest homebuilders launched a campaign in recent months to encourage farmers to partner up to develop more land.
In some cases Glenveagh Properties will be willing to offer substantial non-refundable deposits to secure a farmer’s support for a project.
She launched the campaign with the aim of overcoming what she sees as a “big drop” in the amount of building land coming onto the market.
The deals mean that farmers receive an upfront payment if the developer is able to apply for a building permit.
Glenveagh then bears all the costs associated with an extensive application to a local authority.
If a development permit is granted, the final selling price will be higher than the farmer would have expected if he had sold at the beginning of the process.
Local authorities last month released maps showing which landowners will face a new 3-part property tax due to be introduced next year.
At a recent information meeting on the new tax organized by the Irish Farmers’ Union, lawyer James Staines said there are a number of elements of developer partnership agreements that landowners should carefully consider before signing contracts.
You must be aware that any contracts you enter into could expose you to significant capital gains tax liabilities
He said landowners need to seek advice on whether the purchase price offered by the developer is the best deal for the land.
“It might be worth your while doing some research, bringing in a specialist auctioneer who is used to residential property and seeing if the price being offered is a good price,” Ms Staines said.
He added that the developer may not necessarily pay the full value of the property as they have put time, effort and expense into the project and “want to make their margin on it.”
“It can be worthwhile to look at the planning yourself or together with others, because that increases the value of the property considerably.”
However, he said this is a specialist area with a lot of costs, information and details.
“It might not be for everyone and is a benefit of dealing with a developer,” he added.
The tax implications of a deal will also be very important.
“You need to be aware that any contracts you enter into could expose you to significant capital gains tax liabilities. You have to factor that into the price,” Mr. Staines said.
Affected landowners have been reminded that the deadline for submitting applications to local authorities to have their land removed from the scope of the tax or to have their land reclassified is January 1st.
The new tax aims to capitalize land for residential development across the country and will apply to qualifying land at a rate of 3 percent of market value from 2024.
The tax will be based on the market value of the land, and the Housing Department has said approximately 20,000 to 22,000 acres will be within the scope of the tax by the end of this year.
It is believed that 90 percent of this land is currently used for agriculture.
https://www.independent.ie/news/farmers-are-warned-over-new-land-deals-with-developers-42245386.html Farmers are warned about new land deals with developers