William O’Connor, Solicitor and Partner at P. O’Connor & Son, solicitors, recently featured in the Irish Times Property Clinic where he answered a readers question regarding property tax. You can read the article below and or you can access the Irish Times article here.
Following a recent bereavement of a parent, the family home has been left to all of the children as “tenants in common in equal shares” with the proviso that one of the children, who has lived there all their life, has the exclusive right of residence for the duration of their lifetime or for as long as they wish. This is not contested as it was always understood that this family member would have the right to remain in the house for the duration of their lifetime.
An issue has arisen in that this person in residence is now looking for the other siblings to pay an equal share of the annual property tax and the buildings insurance as they are all equal owners of the property. The other siblings think this is unfair as the family member in residence is living there rent-free. Is there a legal obligation on the non-resident owners to pay the property tax and the insurance?
Unfortunately, it’s not that unusual for issues like this to arise when a property is inherited by multiple family members. A right of residence is a right to live in a property and does not give the holder ownership of the property. For capital acquisitions tax purposes the value of a non-exclusive right of residence is a lesser value than a life interest.
One of the children was given an exclusive right to reside in the dwelling house. This means that the individual has an “interest for life” in the property or to put it another way, the right to live there for as long as they wish or until they pass away. The property is owned by all the children as tenants in common in equal shares but burdened with the exclusive right to reside.
When a property is owned by two or more persons as tenants in common each is the owner of a due proportion of the property. When such a tenant dies their proportion of the property can be disposed of by their personal representatives.
For tax purposes, an exclusive right to reside in a property is the equivalent to having a life interest.
The Revenue states that a person is liable for Local Property Tax (LPT) if they have a right to reside in the property for life, or for 20 years or more, or if they have a right to reside in the property to the exclusion of all others.
A person is obliged to pay LPT if they are the owner of a liable property on the liability date unless they are exempt. The liability date is November 1st in the preceding year.
Depending on the date of death, the personal representatives of a deceased owner may be liable for the first payment of LPT. The personal representatives of the deceased owner are liable, but if the beneficiary under the will is occupying the property then it is that beneficiary who is liable to pay the tax.
If there are more than one owner they need to agree who will make the LPT return and pay the tax. If no one pays the tax, Revenue can collect the Revenue estimate of the LPT liability from any of the owners.
However, if as in this case, one of the owners has a right of residence and is living in the property, he/she will be liable for payment of the LPT to Revenue unless the contrary is proven.
If the occupant owner fails to pay the LPT there are a number of options available to Revenue to ensure they fulfil their obligations under the Act.
The second part of your question concerns insurance.
The other children are not entitled to receive rental payments in return for the exclusive use and enjoyment of the property. All of the children are responsible for maintaining the asset, however the child who is in occupation has a greater obligation to protect the property and cannot do anything that will diminish the value of the asset.
The occupant is not obliged to buy insurance; however, the other children may be entitled to damages if the actions of the occupant make the asset less valuable.
Despite the absence of an obligation on the occupant to buy insurance, it’s clear the family home should be adequately insured. Although the other children are not in occupation they do hold a beneficial interest in the property and need to protect same.
While no one is obliged to have insurance on a property – presuming it’s mortgage free – it is a valuable asset that needs to be protected. The best course of action may be for all parties to meet and come to an arrangement based on their rights and obligations.