Q My question is in two parts. Firstly, I own a small house in a Dublin suburb with a very long garden attached and with an exit to the cul-de-sac behind me. I plan on seeking planning permission for a small single-storey house in the garden and selling the existing house. What are the issues I need to consider?
Secondly, I understand I would not have to pay capital gains tax on the existing house as it is my primary residence. How long would I have to live in the new house before I could sell it on without incurring capital gains tax?
A In answer to the first part of your question, providing a dwelling in the rear garden of an existing house is usually only acceptable in principle where there is an exceptionally large plot or where the site has the benefit of rear access.
As there is access to a cul-de-sac to the rear in this case, the principle may be acceptable, subject to compliance with a range of quantitative and qualitative criteria. This would also be subject to confirmation that the site is zoned for residential development.
The key issues that would need to be addressed would be the impact of the proposed new dwelling on the existing house and neighbouring properties, in terms of overshadowing, overlooking and general loss of amenity.
It would need to be established whether the existing and proposed house would be provided with sufficient private open space, the requirement for which will be set out in the relevant development plan for the area.
The separation distance between opposing windows of the existing and proposed dwellings would need to be of a sufficient distance to ensure privacy, generally 22 metres. The scale and design of the proposed new dwelling would need to reflect that of the existing and neighbouring properties.
It would need to be confirmed that the access to the cul-de-sac is suitable. Issues which can potentially increase the difficulty of providing a dwelling in a rear garden include if the existing dwelling is a protected structure and if the area is designated as a conservation area.
It is recommended that the local planning authority be consulted initially in relation to the acceptability in principle of the proposal.
John Spain is a chartered surveyor and member of the planning and development professional group of the SCSI
To answer the second part of your question, in theory, one day spent in your new house could deem it your primary residence and ensure that you enjoy principal private residence relief on the sale, exempting you from capital gains tax.
The reality is a little more nuanced – you need to be able to demonstrate to the Revenue that the new house was indeed your “only or main residence”, and the length of time that you stay in that house will go towards creating a convincing argument one way or the other. There is no rule of thumb as to how long this should be, but the longer the better.
Other factors that may be considered by Revenue would include your intentions regarding the new house from the outset (the type of mortgage you take out would form part of the evidence in this regard, ie a long-term capital plus interest loan is more indicative of a PPR intention than an interest-only loan), how soon was the new property advertised for sale, etc.
Also, if you have more than one residence available to you, there is a procedure whereby you can write to Revenue to agree which one is your PPR.
Dónal Leahy is a tax director at Baker Tilly Ryan Glennon
Q A house that we own was recently very badly damaged by fire. The insurance company that we had cover with agreed eventually, after many months, to indemnify us for the damage. This claim is on-going and the work is expected to take many months if not years.
Our problem is that the insurance company will no longer provide us with any sort of cover (even third-party public liability) while the repairs are taking place. We know that when builders are on site their insurance should cover any public liability, but that doesn't cover us when there are no builders on site. We have tried numerous insurance companies but the response is that nobody will provide cover while there is a claim outstanding. The building is unoccupied.
A Unfortunately, when a property is unoccupied it is very difficult if not impossible to get insurance cover as the perceived risk of a problem arising with unoccupied property is much greater and thus insurance companies are not interested/willing to provide the normal insurance cover .
What is particularly surprising here is that the reinstatement works could take years to sort out. This is very unusual as it would be normal to be able to carry out this work within a matter of months, even if the fire was very extensive and completely destroyed the property.
The scenario here suggests that there is perhaps a dispute over the scope of the work for which the insurance company is allowing versus that which is being claimed, and this creates its own set of problems.
The insurance companies follow industry norms in terms of what is covered and the rates provided. All too often this is much less than that actually required to reinstate the premises and the insured can lose out in this regard.
It is our experience with many insurance claims these days that the insured has to put some funds of their own into reinstating the property following fire damage in order to restore it to an appropriate level.
The only way that you will be able to get out of this difficulty is to push on and ensure that the reinstatement works are carried out and completed as soon as is practical.
Unfortunately, it is not acceptable to wait for the insurance company to act and it is up to the insured to mitigate their loss by ensuring that the works are carried out within a reasonable time frame.
It is also in your interest to ensure that the claim is agreed and finalised as soon as possible, as once again you are the one that is losing out by not being able to insure the property in the meantime and, in this respect, if there is any ambiguity or doubt over the claim you should seek assistance from a registered claims assessor who will steer you through the process.
I have no doubt that when the claim has been finalised and the works carried out you will find it a relatively straightforward matter to have the house reinsured and thus it is important that you reach this stage as soon as possible.
The matter will also be somewhat improved as soon as builders start on site, as they will be responsible for some insurances including public liability and hopefully all-risk insurances.
It should be noted, however, that this is not an all encompassing policy and thus you are very exposed by being uninsured until such times as the matter is resolved.
In short, there is no easy fix to this problem until you agree/finalise the claim and have the works completed.
Val O'Brien is a Chartered Building Surveyor and member of the SCSI, scsi.ie
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