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Like any other property, residential apartment blocks require management services if they are to function effectively. As part of the legal structure in multi-unit developments, such as apartment and town-house complexes, a Management Company is incorporated at the out-set, which each owner joining the Company as a member when they purchase their unit.
All the common parts and services within any complex are vested in this Company - these common areas can be internal and/or external and/or structural. The company has responsibilities to all the members to ensure that the common parts are maintained to a high standard for the enjoyment of all concerned. The company, which in effect belongs to the members, is responsible for the maintenance and upkeep of all the open spaces and services. In the case of an apartment block, the company is also responsible for the upkeep and maintenance of the buildings. Similarly, all the owners individually have a core responsibility to the company to perform certain obligations, set out in the Lease Agreements, including payment of service charges etc.
So, a situation exists where the Management Company has clearly defined responsibilities to its members and the members likewise have particular responsibilities to their Management Company and to each other. The Company, like all limited companies, is managed by a Board of Directors or a Board of management. At the very beginning until all units are sold in a development, the Board of Management normally comprise the Developers and/or their Solicitors or Solicitors staff. When all the units are sold the control of the Company is handed over to the owners themselves, who elect their own board.
Section 23 Type Relief provides tax relief for the capital expenditure incurred on the construction, refurbishment or conversion of rented residential accommodation. Section 23 Relief is a tax deductible rental ("Case V") expense or loss. Any rental loss created as a result of this deduction may be set-off against any other Irish rental income of the taxpayer in the current or subsequent periods.
The relief is calculated by reference to the price paid to the property developer. The price paid for the site does not qualify for relief, therefore calculation of the relief is based on a percentage of total cost. The developer will usually identify the percentage (usually 80-95%) of the total costs incurred by him which relate directly to the construction/ conversion. This percentage is the qualifying amount of the purchase price paid. Thus, an apartment costing €200,000 which has a qualifying cost of 90% would attract a Section 23 allowance of €180,000. To illustrate how this relief can be used, take the following example. An apartment costing €200,000 may have a 90% qualifying cost of construction of €180,000. The qualifying cost of construction is, in effect, the "Section 23" allowance/deduction and can be written off against all Irish rental income in the first letting year. Thus, a landlord with sufficient other Irish rental income could potentially save €79,200 in tax (assuming the landlord pays income tax at the marginal rate of 42% plus 2% levies), reducing the cost of the apartment to €120,800 (before stamp duty). Any unused relief can be carried forward against any Irish rental income indefinitely.
Main Conditions
Certain Section 23 conditions must be satisfied. In particular, a Certificate of Reasonable Cost must be obtained from the Minister for the Environment and Local Government and the dwelling must comply with certain floor area conditions.
It must be let in its entirety as a residential dwelling without previously having been used, and must continue to be let for a period of 10 years from the date of first letting, although a temporary vacancy as a result of a change of tenant does not trigger a clawback. A clawback is triggered when a person who has claimed Section 23 relief either disposes of or causes the property to cease to be a qualifying Section 23 property.
Some examples of when a clawback would occur include the sale of the property, the transfer of the property as a result of death or the use of the property for a non-qualifying purpose (e.g as a business premises or owner-occupation). However, it is important to note that the clawback will only apply if the sale/transaction takes place within 10 years from the date on which the house was first let.
Section 50 of the Finance Act, 1999 provides for a scheme of tax relief for rented residential accommodation for third level students. The purpose this initiative is the provision of additional rented accommodation to relieve current supply pressures in the private rented sector. The legislation provides that 'relevant guidelines' may be issued by the Minister for Education and Science, in consultation with the Minister for the Environment and Local Government, with the consent of the Minister for Finance.
These guidelines are intended to assist developers and designers in formulating proposals for student residential development.
The guidelines have been prepared with a view to ensuring that the overall standard of design and construction of accommodation being provided would promote the objectives of the Student Residential Accommodation tax incentives. These guidelines include:
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