Transfer of Dwellinghouse or Site

29 June 2023


I wanted to share a recent case with you related to issues on transferring a site which also comes up from time to time in queries to I have a recent example of where parents are transferring a site to a child but an informal transfer happened many years ago. So in this case 15 years ago a child took possession of a house and then through their own funds built a property on the site and now wishes to regularise title. In this case a question can arise as to what is being transferred: is it a residential property or just the site? Just some principles that come into play.

As one would know if you own the land, you own all the buildings that are on the land. This is sometimes referred to in the maxim cuius est solum, eius est usqu ad coelum et ad inferos, roughly translated as “the owner of the soil is to be taken to own also everything up to the sky and down to the centre of the earth”. Therefore one could take the view that the parent owns the building constructed by a daughter on a site owned by a parent. This principle is further codified in s. 3 of the Land and Conveyancing Law Reform Act 2009 which defines land as including “buildings or structures of any kind on land.”

However notwitstanding the seemingly absolute nature of this principle it can be modified by equity and in particular the concept of the implied or resulting trust. So in this case where the monies associated with the building have been expended by a daughter and not the parent (unless there is some document or clear intention to the contrary) an implied trust of ownership arises in favour of the daughter. In this situation then the parent holds the building on trust for the benefit of the daughter.

When it comes to transfer of the property and the question of stamping of the document and the value to be placed on the property, one can take one of two approaches.

One could take the view that title to the site was transferred long ago when the child took possession of the site and that not only is the building now held in trust by the parent but in fact all of title is held in trust by the parent and all that is passing is bare legal title. As a consequence no stamp duty arises as the transfer constitutes a transfer from a bare trustee to a beneficial owner.

While there are attractions to this position from a stamp duty point of view it does create CGT and CAT implications. If one takes the view that ownership transferred when the child went into possession, then capital gains should have been paid on that “disposal” at that time. This means that a CGT return should be done now which will have penalty and interest implications. Further, the site constitutes a gift for CAT and while likely to be below the threshold should be noted for future aggregation.

The other view (and the more commonly adopted approach) is to take the position that the transfer constitutes a transfer of commercial property only. This means that an up-to-date value of the site only (ignoring the building) is conducted and stamp duty is paid at the 7.5% rate on the value of the site. Some valuers at time struggle with the concept of valuing a site now with no building on it, but generally there should be no problem in obtaining an up-to-date value of the site and ignoring the building.

Again the same CGT position applies as referred to above but without the imposition of a surcharge or interest.

In addition, in these types of cases one cannot avail of the stamp duty and capital gains tax relief based on transfer to a child relief. This relief is for the purpose of making it more tax efficient to transfer a site to a child to allow a child build a dwellinghouse. The relief is not available if there is a building already on the site.

Hope this helps and remember if you have any probate, tax or capacity queries or issues please reach out to me through the query service on the site. Colm Kelly