The business of land letting has become much more complex due to changes in legislation introduced in recent weeks.
The Property Services Regulatory Authority have introduced formal engagement rules for persons who are engaged in the auction, sale, letting, leasing or licensing (including conacre) of land.
The rules therefore apply to letting agents, auctioneers, estate agents, property management agents.
All of these persons are obliged to obtain a licence from the Property Services Regulatory Authority.
Obtaining a licence can be a major ordeal — with applicants requiring relevant full-time experience in three of the preceding five years, or designated qualifications as well as professional indemnity insurance, tax clearance certification, and an accountant’s certification of proper financial controls regarding client accounts.
The licence application fee stands at €1,000, with an annual renewal costing another €1,000 — a fairly sizeable financial for any would-be land agent.
The business of land leasing has been professionalised. I spoke with Ernest Forde and John Hodnett of Hodnett Forde Auctioneers, Clonakilty, about the changes. They are one of the largest players in the land leasing market.
Ernest described the new regulations as having both positives and negatives.
“The main drawback arising from the changes for both land letting agents and for landowners is the sheer volume of paperwork which now must now dealt with.”
A simple conacre agreement requires a landowner to sign a 12-page engagement letter, and that doesn’t even include the actual conacre or licencing agreement itself.
The new regulations are adding to the level of administration required, with agents required to maintain records for significant time periods.
On a positive note, there have been some benefits for land-owners who had been letting their land at below its real market. This has been the case where some landowners who availed of services from persons with little experience in the land market.
Another benefit arising from the change has been a more careful consideration by both landowner and tenant of their existing arrangements, such that newer arrangements are better tailored to each person’s circumstances.
The shakeup is also resulting in landowners giving greater consideration to longer term lease arrangements.
Over recent decades, there has been very little increase in leasing, and it pales into insignificance compared to the amount of land let in conacre arrangements.
Currently, approximately 18% of land is made available by conacre and leasing, but with leases accounting for just a couple of per cent of that.
The low level of interest in leasing is surprising to many, given the major tax break in leasing, now in place for several years, whereby landowners who enter a qualifying lease of at least five years can avail of an income tax exemption of up €12,000 per annum.
The change in regulations governed by the Property Services Regulatory Authority, as well as tax reforms introduced by Budget 2014, which loosened up the rules for landowners to avail of Capital Gains Tax reliefs on leased land, are creating a new wave of interest in land leasing.
Land leasing has been strongly supported in the current agri-taxation review, offering hope that the last remaining impediments will be lifted – such as inability for close family leases or for corporate leases to qualify for the tax relief.
Meanwhile, the new land letting regulations are likely to quell the number of agents involved in leasing and conacre arrangements, with some solicitors and part-time estate agents likely to opt out from this type of work.
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