New home stage payments to be phased out

TALKS aimed at scrapping the controversial stage payment method of buying new homes have entered the final stages.

The Government confirmed yesterday that it is discussing with the construction industry the fine detail of an agreement in principle it reached with the Construction Industry Federation last year to phase out stage payments.

A Department of the Environment spokeswoman said its housing policy section hoped the talks would be concluded quickly.

Minister for Housing and Urban Renewal Noel Ahern, who announced the agreement in principle last July, is expected to make an official statement shortly, the spokeswoman said.

Stage payments for new homes exist in certain areas of the country only.

The method ceased to exist in and around Dublin in the early 1980s, when a city solicitor was successfully sued by a client in relation to the matter.

As a consequence of the court action, Dublin solicitors declined to handle conveyancing transactions that involved stage payments.

But the method still exists in Cork, parts of Kerry and Limerick, Sligo, Galway and Mayo.

It is also used for the purchase of one-off homes.

The buyers of new homes in newly-built estates in areas where stage payments exist are obliged under the terms of their house purchase contract to pay the builder in installments in line with the progress of the building.

In some cases, house buyers are paying up to half the cost of their mortgage before construction is completed and before they have occupation of the property.

It is estimated that, on average, stage payment schemes cost purchasers up to €7,000 more on interest than if they purchased through a non-stage payment scheme, according to a recent report commissioned by the Law Society of Ireland. Up to 25,000 houses are purchased each year through stage payments, the report found.

It also found that Irish house buyers were paying an extra €175 million in loan interest annually.

Rather than introduce legislation on the matter, Mr Ahern moved last year to get developers to phase out the stage payments on a voluntary basis.