What to consider when building on the farm

Question: I am considering building a house on a site on the family farm. My parents would prefer if I did up the farmhouse they live in and to build on separate living quarters but my partner is not too keen. She gets on with my parents but equally wants space and a modern well-insulated house.

How do we go about getting the site transferred? And what do we need to consider when trying to get a mortgage for a new build?

Answer: Increased building costs, difficulty in securing planning permission and the availability of the Vacant Property Refurbishment Grant (VPRG) has resulted in a fall off in the number of adult children taking a site to build a house on the farm.

So it is worth considering where the existing farmhouse fits into the overall picture. Many families nowadays are considering renovating the family home and building on separate living quarters for one or other generations.

That said, with parents living longer and wanting independence, there is generally a desire to have two houses to facilitate generational renewal on farms.

Planning permission

Planning permission is generally sought before the site is transferred in case the position of the house needs to change with planning considerations. You will then have to organise a valuation both for the bank, as part of the mortgage, and also to ascertain how much tax, if any, is due arising from the site transfer.

The bank will provide you with a list of their approved valuers and you will need to instruct one from that list.

As the planning permission is specific to the applicant and generally there is a requirement to occupy it as a home for a minimum period of time, this impacts the market value of the site.

For the site transfer, you will also need to furnish your solicitor with a land registry compliant map of the site to be transferred, as marked out by an engineer.

If the site does not bound a public road, the engineer will have to mark out a right of way to get to that site on the same map. You should ensure that the map of the site encompasses whatever other services are required, eg septic tank, percolation area, water supply to a well if necessary.

You and your parents will need to be independently advised by your respective solicitors in relation to the site transfer. If you are getting a residential mortgage, your solicitor can act for you and the bank in putting that in place. To save time and expense, it would be worth having the legal documentation to have the site transferred and the mortgage documentation signed at the same time.

Consequently, you should contact your bank and ask them to forward the mortgage pack to your solicitor so that they have it available when you attend him/her to have the site transfer documentation signed up.

Income tax rebate

You could potentially qualify for the income tax rebate for first time buyer’s worth up to €30,000. The Help-to-Buy incentive consists of a rebate of income tax paid over the previous four years.

To qualify for the scheme, applicants must take out a mortgage of at least 70% of the purchase price (or, for a self-build, 70% of the valuation approved by the mortgage provider). To claim the relief, you must be a first-time buyer, buy or build a house between 1 January 2017 and 31 December 2029 and live in the property as your main home for five years after you buy or build it.

Stamp duty refund scheme

Where a site is transferred, stamp duty at 7.5% will apply to the transfer. However if you commence building on the land within 30 months of the date that the site was transferred (and before 31 December 2025), you can qualify for a refund of a maximum of 11/15th’s of the stamp duty if you paid at the 7.5% rate.

You must complete building work within two years of the Local Authority acknowledging the notice as valid and claim your refund within four years of that date.

Disclaimer: The information in this article is intended as a guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. Email aisling@agrisolicitors.ie