Q&A

Must we pay tax on the granny flat?

Q Some years ago we converted our garage into living accommodation for my mother. It is a detached, one-bed house with the usual facilities, ie small kitchen, etc, and it could be construed as a “second house”. Do I have to pay the €200 tax (or does she pay it?)

A The key thing to remember about the legislation is that it is a tax that applies to all residential property – with some exclusions and exemptions. The biggest exemption is if the property is your principal private residence which is why it is widely referred to as a “second home tax”. There is an exemption for so called granny flats. Does your mother pay you rent? If she does then you – not her – would have to pay the €200 tax. Most granny flats such as yours will not incur the tax for three reasons: they are lived in by a relative; the granny flat is no more than 2km from the residence of the owner (presumably your garage is only a couple of metres from the house, if that); and the granny flat is lived in rent-free. There is a helpful website at www.nppr.ie.

Should we help sister by buying her home?

Q My younger sister has got into some difficulty with the apartment she bought three years ago with her boyfriend. They have since broken up and he has lost his job. She was unable to meet the repayments on her own and put the apartment on the market in February. The price now being asked is below what they owe on the mortgage and there is still no interest. My brother and I are considering bailing her out by buying the apartment as an investment to let her move on with her life. We are getting conflicting advice from family, and any impartial advice would be appreciated.

A This sounds very generous but you are thinking with your heart not your head – never the right way to think when an investment property is concerned. This is not just your sister’s problem, it is also her ex-partner’s, who presumably is on the mortgage/deeds and legally liable for repayments/debts. What is their plan to sort out the problem? The negative equity liability will be less of a burden on your sister when it is divided in half.

You presumably intend to fund this purchase out of savings as no financial institution will lend you money to buy a property at above market value. If you have this sort of spare cash, and want to buy property as a long-term investment, then you have a huge choice open to you – and an over-priced apartment does not sound like one of them.

Also you would be buying with your brother which, no matter what legal protections you put in place, could be difficult in the long run (if you fall out/fall on hard times, etc). There are other ways to support your sister, ie giving her your spare room rent-free until she gets back on her feet, giving her an interest-free loan to cover some of her share of the negative equity, helping her get legal or financial advice and so on.

Your questions

Send your queries to Property questions, The Irish Times, The Irish Times Building, 24-28 Tara Street, Dublin 2 or email propertyquestions@irish-times.ie. This column is a readers’ service and is not intended to replace professional advice.