My father is in a nursing home the last two years and the family home is lying vacant. My partner and I would love to purchase the home and pay out my siblings and the Fair Deal scheme as part of the sale. Under the Fair Deal scheme is this possible?
I understand 7.5 per cent for every year he is in care will be deducted from the sale of the house, capped at three years but whether we can start this process while he is still alive is unclear.
My siblings are happy for us to buy the home after it is valued. We are first-time buyers expecting our first child in February and eager to leave the rental market.
It seems such a shame to see properties lying vacant when there is such pressure on housing and so many people – especially those in your position as first-time buyers – are struggling to find anything they can afford.
This was one of the idiosyncrasies with the Fair Deal scheme. Until recently, it was actually to the financial benefit of the family to leave the home unoccupied rather than do anything with it. If you rented it out, 80 per cent of the net rent was immediately payable as part of your father’s Fair Deal financial contribution. If you sold it, things were even worse.
As you note, under Fair Deal, the contribution from the family home is 7.5 per cent – or half that if a spouse, partner or dependent was living there – but this was capped at three years of contributions, unlike the ongoing assessment of any other assets over a €36,000 limit. So the maximum charge against the family home was 22.5 per cent.
But, under the rules in place until recently, if the house was sold, the three-year cap disappeared and any money raised from the sale of the property was subject to the 7.5 per cent levy for as long as your father was in nursing home care under Fair Deal.
It was a daft arrangement, absolutely guaranteeing that families around the State would leave their family homes empty to limit the financial hit.
The good news for you and many other buyers is that those rules have changed. Since last October, it is now possible to sell the family home and still keep that three-year cap on contributions in place.
So how does that work for you?
You say your father has been in nursing home care and availing of Fair Deal for two years now. You are looking to move quickly ahead of the birth of your child to complete this deal and you have sensibly canvassed the views of your family and made sure they are happy with the arrangement. It’s amazing how often such seemingly straightforward things can cause little family fissures but fortunately there is none of that here.
There’s absolutely nothing to stop you purchasing the home as long as it is at market value. If you were to buy below the market value, it could raise capital acquisition tax issues as the difference between the price you paid and the market value would be seen as a gift to you from your father. Your siblings’ insistence on market value makes this a moot point in your case.
In terms of valuation, make sure your lines of communication with the family are clear. Are they happy with just one valuation? Are they happy that you select the valuer? It doesn’t matter in terms of tax or Fair Deal, more as a case of ensuring your family is fully bought in to whatever arrangement you put in place.
Most importantly, the whole point of the recent changes in the rules is that you no longer have to wait until your father has died before purchasing the house.
However, there are steps that need to be taken once the deal is done.
In normal circumstances, the Fair Deal contribution on the family home is met by way of a nursing home loan which is redeemed by Revenue on behalf of the Health Service Executive once the nursing home resident has died. In such circumstances, the family has one year to clear the loan before facing interest charges.
However, where the house is sold, the window for clearing any outstanding loan is reduced to six months.
When your father or the family signed up for Fair Deal – and a nursing home loan to cover the contribution on the family home – they will have had to give details of the “relevant accountable person” or “personal representative” – ie the family member or solicitor responsible for repaying the loan when your father died.
Once you buy the house, this person will need to notify whatever Fair Deal office they have been dealing with. They will need to ensure that the nursing home loan is paid up to date – ie for the two years and whatever months have passed from his signing up to Fair Deal by the time you buy the house. The balance between that and the full three-year contribution will be due at the end of the third year of your father’s stay in the nursing home.
Good luck with it.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to firstname.lastname@example.org. This column is a reader service and is not intended to replace professional advice