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Living the death of the Irish property boom | 105 comments (105 topical, editorial, 0 hidden)
Re: Living the death of the Irish property boom (none / 1)
I'm still looking forward to (a link to) Chris Cook's diary about how to set up a house as an LLP.  I don't understand it yet (I'm not good at tax laws). but from what he says, I think it'd meet many criteria for older people who would like to release some equity in their property without "giving the property back to the banks".  I also think it'd have an effect if later illness(es) involve(s) various expenses, where at present the value of the property is considered (if I understand the situation correctly) an asset which can be used to pay for treatment--which leads to people selling their houses for treatment and spending all the money (down to £17,000?) on tretament, eg a nursing home.  Not that those who can afford such expenses shouldn't or couldn't pay, but that under an LLP "wrapper" (even "wrapper" I don't quite understand!) the property would work in a different way so there would be different possible outcomes.

The above only showing how little I understand...wot I just rote.

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 08:01:36 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
In France, the legal way is "SCI":

http://fr.wikipedia.org/wiki/Soci%C3%A9t%C3%A9_civile_immobili%C3%A8re

It's used by non maried couples, for example the Royal-Hollande one.

by Laurent GUERBY on Mon Mar 26th, 2007 at 08:32:01 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
You mean somethign along the lines of this?

"It's the statue, man, The Statue."
by Carrie (migeru at eurotrib dot com) on Mon Mar 26th, 2007 at 08:33:24 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
In France inheritance is along the direct bloodline which means that if Colman and I own a property in France and one of us dies that persons share (assuming owned jointly) is inherited by that persons living blood relatives.  If we had children, the children would inherit. This means the surviving spouse now only owns 50% of the property.  The kids own the other 50%.

If we bought our property through an SCI then we would own share sin teh company.  The company would own the property.  The shares can be left to anyone either of us wants to leave them to.  So I could say that I wanted my shares to go to Colman or the-man-in-the-moon. The shares will nto go automatically to the bloodline relative.

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

by Sam on Mon Mar 26th, 2007 at 08:52:17 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Ooops...should have used spellcheck...

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde
by Sam on Mon Mar 26th, 2007 at 08:53:57 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Could you also write a will which stated "I wish my half of the property to go to Colman"?  It's all so complicated, but I thought wills over-rode anything else--as long as the will is backed by paperwork etc...justifying the statements from the will.

("I leave Buckingham palace to Billy Bragg" etc...)

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 09:16:35 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Not in that bizarre law they have in Europe.
by Colman (colman at eurotrib.com) on Mon Mar 26th, 2007 at 09:18:57 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
So if you have a living blood relative (do brothers and sisters count?  Where's the cut off point), you can't give all your money to the donkey sanctuary by writing in a will "I bequeath all my assets to the donkey sanctuary"?

Don't fight forces, use them R. Buckminster Fuller.
by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 09:22:35 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
You can't even necessarily do that in Irish law, and I think English law would be similiar.
by Colman (colman at eurotrib.com) on Mon Mar 26th, 2007 at 09:32:51 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
English law:

If your domicile is England and Wales you can dispose by will of anything in England and Wales and any moveable property which you have abroad and you can dispose of it to whom you wish and to the exclusion of your family unless

you have restricted yourself by contract, e.g. by entering into an agreement to create and not revoke mutual wills; or
it is something which does not pass to your personal representative on your death, e.g. jointly owned property held as joint tenants; or
it is a contract in which your personality is an essential element, e.g. a contract to paint a portrait or to write a book; or
it is property you do not own (e.g. assurance policies taken out by you on trust for another) and over which you have not been given a power of appointment; or
the property has been 'nominated' and the nomination has not been revoked; or
it is property the disposal of which is restricted by its nature, e.g. some rights in immoveable property such as a personal licence or permission to use or cross the land of another, or shares in some small companies; or
it is your body; or
statute law restricts your right to dispose of it in the way you wish.

(Completely OT, when did people start spelling the verb "lose" [past tense: I have lost my donkey; present tense: did you lose your donkey?] as "loose" [adj: "Yr trousers are so loose, they're hanging below your bum"  "It's the fashion, man.  Get hip grandad."  "You'd find it easier to walk and run if that's where your troursers were.  Around your hips, I mean."  "Man, you're not getting much are ya?"  etc...]  Did someone change the rules?  Is it an american spelling?  Can I publicly state that the verb which means "to misplace an object or other item so that you can't find it again" is To lose (and not toulouse)  (or even too loose)

Re: my question about signing deeds over to the children:

One trap is to think that IHT can be avoided by passing over the deeds of your house to your children but continuing to live there. Regardless of the number of years since the gesture, unless you have paid a full commercial rent, it will be regarded as a "gift with reservation" and part of the estate.

I can't find any laws stating that you can't bequeath your property to whomever you wish.  The "Make A Will" sites all mention that if you don't write a will, the blood-line rules follow, but they don't say that they still (at least in part?) over-ride the contents of the will.

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 10:15:21 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
(Completely OT, when did people start spelling the verb "lose" [past tense: I have lost my donkey; present tense: did you lose your donkey?] as "loose"

I don't think I do this (but maybe?) but I do write 'looser'. Especially when it is to be pronounced 'loohuuser'.

by someone (s0me1smail(a)gmail(d)com) on Mon Mar 26th, 2007 at 10:19:53 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Do native English speakers also do this, or just foreigners?

I suppose it's possible, given that they can't tell a principle from a principal.

"It's the statue, man, The Statue."

by Carrie (migeru at eurotrib dot com) on Mon Mar 26th, 2007 at 10:21:48 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Bad native English speakers.
by Colman (colman at eurotrib.com) on Mon Mar 26th, 2007 at 10:27:51 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
I started seeing it written by americans.  I assume(d) they wrote it because they'd never seen the verb "to lose" written down and then they saw someone (not our someone of course) write "Make sure you don't loose your map" and assumed it was correct.

But then I thought, "Surely everyone has seen the word "lose" written down?  "Lose" and "lost" surely appear in children's books, not to mention the adjectives "loose" and "looser".

The knot started slipping
The rope became looser
He struggled and struggled
And said, "It was you sir,
Who tied me up tight
You thought "I win, he loses!"
But now that this rope is loose
Ah!  See who chooses
To win or to lose!"

And with that up he stood
And the winner was the loser
And this rhyme is rubbish, I know,
But educational
Stop laughing at the back!



Don't fight forces, use them R. Buckminster Fuller.
by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 10:32:12 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
Books! What century do you come from?

"It's the statue, man, The Statue."
by Carrie (migeru at eurotrib dot com) on Mon Mar 26th, 2007 at 10:32:59 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 4)
Heez 1 of those 20C loozers.
by Colman (colman at eurotrib.com) on Mon Mar 26th, 2007 at 10:34:25 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
I's an old man from the 20th century, sir.

(Though I doubt if there are all that many parents reading bedtime stories to their children from screens just yet.)

(Though I could be wrong.  'Tis fascinating watching the wheel of time turn and realise that yes, what you thought was one of the "facts of life" is, in fact, soon to be part of "What they used to do", where "they" means "me".)

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 10:36:42 AM EST
[ Parent ]
Oh yes (none / 1)
At least Americans do. Drives me crazy. Can't they even try saying it out loud?

In terms of pet peeves, loose for lose comes between it's for its (surely the most annoying of all) and lead for led (which I'm now seeing even on supposedly edited sites like HuffPo and Salon).

by Matt in NYC on Mon Mar 26th, 2007 at 12:15:08 PM EST
[ Parent ]
Re: Oh yes (none / 1)
I used to write "lead" as the past tense of "lead".  I don't know where I got the idea from.  I thought "led" was american.  But there's no way of reading "lead" as a verb without hearing the "ee".  He lead them up to the top of the hill...

Don't fight forces, use them R. Buckminster Fuller.
by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 04:32:28 PM EST
[ Parent ]
Re: Oh yes (none / 1)
Well, it works with "read", why shouldn't it work with "lead"?

"It's the statue, man, The Statue."
by Carrie (migeru at eurotrib dot com) on Mon Mar 26th, 2007 at 05:34:26 PM EST
[ Parent ]
Re: Oh yes (none / 1)
Good question.

I think it must be to do with other uses of the word.

A dog lead

I lead him away.

A good read.

I read it at work.

Hmmm.  Maybe "lead" has more "ee" uses, so the brain sees "lead" and hears "leed"?  But then, what about "lead" weights?  It was made of lead.

A conundrum wrapped in an enigma...until someone solves it.

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 06:11:24 PM EST
[ Parent ]
Re: Oh yes (none / 1)
I'm more annoyed by your/you're, thewir/they're. Their is two/too two...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Mar 26th, 2007 at 05:44:35 PM EST
[ Parent ]
People make those mistakes (4.00 / 2)
all the time.  I catch myself just firing away and not proof reading and do it from time to time myself.

It's a little hard on the eyes but it beats spending the extra time proofing.

by HiD on Tue Mar 27th, 2007 at 07:26:37 AM EST
[ Parent ]
Re: People make those mistakes (none / 0)
As maybe Migeru hinted at it upthread, some errors are more apparent to native speakers and others more apparent to non-native speakers -- I guess this is a case of the latter.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Mar 27th, 2007 at 10:00:41 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Maybe it's just me...but I read "looser" as loo sir, not loo za.

You, sir, are a looser!

You, za, are a loo za!

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 10:23:40 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
(Not you, sir, of course!)

Don't fight forces, use them R. Buckminster Fuller.
by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 10:37:27 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
Wills can be challenged in court on all sorts of grounds. I don't know how much of the Irish law is shared with English law on this.

It's not an area I'd depend on Internet information for at all ... lots of complicated, arcane, ancient laws in play.

by Colman (colman at eurotrib.com) on Mon Mar 26th, 2007 at 10:20:38 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 4)
Ah, found it!

By the Inheritance (Provision for Family and Dependants) Act 1975 certain family members and other dependants can make a claim against your estate if you don't make provision for them in your Will.

Surviving spouses and civil partners are in a special position in that the court may well order that they should have a "fair share" of the family's assets which, in a wealthy family, may be a great deal more than only sufficient to live on. Ex-wives (and indeed ex-husbands) are also entitled to claim so long as they have not remarried. They are quite likely to receive something if there was a maintenance order at the time of death, but not if there had been a "clean break" at the time of the divorce.

Other members of the family who were dependant on the deceased, e.g. children, may claim a share of the estate if the Will does not give them one, but they are not likely to receive a higher sum than "maintenance". "Children", incidentally, can be any age at the time of their parent's death, not just minors.

The other main class of person who can claim under the Act are cohabitees -- defined as living as husband and wife for 2 years or more at the time of the death. In this case, the cohabitee does not need to have been strictly dependant on the deceased in order to receive provision.

The main purpose of making a Will is, of course, to ensure that your wishes are carried out after your death. If there is a possibility that the provisions of your Will may fall foul of the Inheritance Act, yet you have good reason for what you do, you can set out your reasons in a special document called an Inheritance Act Statement. For instance, if you have given their "inheritance" to one of your children during your lifetime and want to exclude that child from your Will, you can say so in the statement. While Inheritance Act Statements are not binding on the court in the event that your Will is disputed, the court is more likely to rule in favour of upholding the provisions of the Will if it can see that you have a reasonable motive for what you do.

http://www.cch-solicitors.com/wills/contest.htm

(Forgot a couple of links in the other posts...oops.)

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 10:21:31 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
That's the sort of thing I'm talking about.

A 1975 law? I wonder if did our normal cut-and-paste or whether that was a revamp of earlier rules.

by Colman (colman at eurotrib.com) on Mon Mar 26th, 2007 at 10:24:18 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
From Sam's post-course rants on the topic - during the period she spent studying inheritance law for tax exams there were some fascinating dinner conversations - there is some really ugly case-law here where people bring up all sorts of presents, trips and differences in clothing or whatever that their siblings received when they're challenging wills. Incredible stuff.
by Colman (colman at eurotrib.com) on Mon Mar 26th, 2007 at 10:27:20 AM EST
[ Parent ]
Fascinating (none / 1)
There's the stuff of a few hundred good old-fashioned English country house mysteries in that one post!

I particularly love the idea that someone would imagine they could bequeath a contract for an uncompleted portrait.

by Matt in NYC on Mon Mar 26th, 2007 at 12:22:22 PM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Bloodline goes as far as they can stretch it.  For example...Look at that story recently about the French Royal relative in India. As far as I can remember...if a person in Ireland dies intestate an dthey can find NO bloodline relatives then the State becomes the beneficiary of their estate!!

If they have a will and leave everything to the donkeys then so be it...unless a blood relative pops up and successfully convinces a court that they are entitled to something!

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

by Sam on Mon Mar 26th, 2007 at 09:42:07 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
In Ireland spouses inherit from each other tax free and once the estate passes to the kids each kid has a threshhold up to which they can inherit from parents of in excess of €478k (increases slightly each calendar year). Anything over that is taxed at 20%. In the UK there's a exemption limit on the entire estate value up to £255,000.  After that tax is payable on the remaining value at 40%.

So...you when buying your property abroad you need not only a will in that country, but also proper tax  and legal advice...otherwise that stack of treasure you were hoarding starts to be eroded by the wrong people...

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

by Sam on Mon Mar 26th, 2007 at 09:34:14 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
In French law, one can't repudiate children. 50% of the shares of the SCI will still go to the children.

Actually it is more complicated in case of joint ownership : surviving spouse gets usufruit, right to use the property until s/he dies, whereas the children get the naked property.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Mon Mar 26th, 2007 at 09:17:21 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Which is then not an issue because both spouses are dead - but if a surviving spouse has a partner what happens there?  Can the shares be transferred to the non bloodline partner on death of the remaining original spouse?


We are all in the gutter, but some of us are looking at the stars. Oscar Wilde
by Sam on Mon Mar 26th, 2007 at 09:20:55 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
In swedish law children has the right to (at least) 50% of the inheritance, divided equally. For example, if you are one of four children you have the right to at least 12.5%, while if you have only one sibling, 25% will be yours for sure.

Surviving spouse has the right to "unmoved living" (orört bo), which puts a lower limit on how little she (or he, though it is more common that men die first) can be left with. The rest will then be inherited upon the surviving spouses death.

It gets really complicated when you have children who share only one parent.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Mar 26th, 2007 at 01:50:41 PM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Something like that, only expanded.  There are three main roles in an LLP.  Assuming on "outside" investor, then the interest parties would be:

  1. Parents
  2. Children
  3. Renter

At present, the property is the parents'.  They could, I suppose, sign the deeds over to the children for 1p or 1 cent or somesuch.  There are laws about doing this within a specified period before death, but if parents were to do this when they hit sixty, then I'm supposing the property would be the childrens'.  But there may be legal issues around that.

In the LLP model, I assume the property becomes the LLP, then the parents and the children take on specific roles (maybe there needs to be a third person, a solicitor of some kind or just a friend of the family?, who "manages" the LLP.  There would be (....fill in the blanks because this is what I'm missing...) and so, when the surviving parent, say, needed or decided to move into sheltered accomodation, a tenant for the property could be found and that tenant would (...fill in more blanks here...) meaning that money for the sheltered accomodation was freed up, no selling of the property was necessary and (....more blanks here related to inheritance tax and other such matters...)

Hence my request for a diary or maybe links to something that would fill in these specific blanks.  An real example hopefully, with info. on

a) The necessary legal wherebywhats
b) The various "agreements" between the parties (and associated legal wherebywhats

and I'm already confused!

Thing is, a lot of us will find ourselves in this position either as parents or children, and I'm all for ET developing beyond just 'aving a chat (which I enjoy mucho) and into...well, developing our ideas of "ways forward" into practical action beyond the type type read read.  And the LLP-House scenario seems to me to be one of those possibilities.

Growing indoor herbs might be another...

Also, "How to sort out your business so you only have to work six months a year....and can then use your super-duper international rail ticket to travel lazily from place A to B imbibing....other places and other...er....imbibable...er...imbibes....ach...

So, I'm hoping that Chris can help out, even if just to paint a wide picture--just enough for me to see how it might help, eg, me when I am old and doddery (next Tues week, I think.)  I would, of course, be happy to pay Chris or A.N. Other-Expert a decent rate for any hours they could put in to help me actually set up such an LLP, but for now I'm still at the "I like the idea but...I don't quite understand it" stage.

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 09:13:52 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Assuming no outside investors.

Don't fight forces, use them R. Buckminster Fuller.
by rg (leopold dot lepster at google mail dot com) on Mon Mar 26th, 2007 at 09:17:09 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 2)
Or outside Occupiers....

Simplifies things considerably.

You don't need a "Manager" per se.

But you still have family "Occupiers" and "Investors" plus a "Trustee", where you may bring in someone you trust (even a solicitor - if they would do it) in case people go under buses etc.

Individuals eg Mummy and Daddy, could be Members of all three stakeholder "groups" while other family members may only be Investors (especially when Junior leaves home, or when Mummy and Daddy get divorced).

So who needs a "pre-nup", or even a will?

You can extend this "family corporation" to acquire a property in which Junior lives etc etc

In the LLP ownership and control do not go together as in Companies.

I think it will be particularly interesting to family businesses who always have the problem of passing the family biz down through generations while retaining control.

Or of bringing in competent managers and keeping their interests aligned with those of the family.

Or of letting outsiders invest so that some family members can "cash out" yada yada

An LLP is limited only by one's imagination.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 26th, 2007 at 12:39:59 PM EST
[ Parent ]
Looks just like (none / 1)
a straight corporate setup with shares etc.  LLC just simplifies the paperwork perhaps.  

There are plenty of corporations with 2 classes of shares -- some voting, some non voting.  Ford Motor is the biggest example I can think of.  The Fords only own about 10% of the company, but have a much greater piece of the voting stock.

Not dissing LLCs as much as failing to see the big advantage in re-labeling.

by HiD on Mon Mar 26th, 2007 at 09:49:47 PM EST
[ Parent ]
Re: Looks just like (none / 1)
I really think you are comparing chalk and cheese.

All Ford is doing is splitting ownership between two classes of financial investors. The company is otherwise structurally no different from any other as between the relationship between owners and everyone else aka "costs".

The difference is that the "Capital Partnership" variant of LLC's and LLP's brings the investors and users of investment on the same side.

The "Principal/Agency" problem of "the Corporation" - which requires the whole panoply of Company Law, Sarbox and all the rest - simply does not exist in this model.

If you need any evidence of the attractiveness of such a structure to investors you only need to look at the phenomenal growth in Canadian Income Trusts, which now extend to virtually the entire Canadian capital market.

This occurred despite the tax issues, management issues (an entrepreneurial trust is an oxymoron) and the complexity and costs of trusts (which is why accountants and lawyers love them).

Investors demonstrably like to share the Gross revenues with the  management.

Would you rather drink the water before it goes into the bath, or after it comes out of the plug-hole?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Mar 27th, 2007 at 03:59:31 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (4.00 / 3)
Hmmm...talking about LLP's are we, rg ?

Well, here's the Sorcerer to help out his Apprentice
 ;-)

The reason the "Land Partnership" changes the game entirely is that it enables that bundle of rights and obligations we think of as "property" to be bundled and shared around in entirely new ways.

ie an entirely new form of tenure of indefinite duration - an "evergreen lease" - whereby for as long as you rent the Land and the Capital invested in it you pay an agreed  "Capital Rental".

It also means that "Real Property" need never be bought and sold again, although "Occupiers" and "Managers" of it, and Investors in it, may change over time.

The key is that the "freehold" is put into "Trust" with a "Custodian" Member of the LLP or LLC - exactly in the same way that massive firms like State Street and Northern Trust act as "custodians" of shares while the "beneficial interest" is traded increasingly furiously on the casino's we call Stock Exchanges.

Having done this it is merely a question of who lives in the property, who invests in it, who manages it and what the relationships are between them.

French Law is interesting in respect of inheritance, and it would be interesting to see how this structure would intersect with it, with the property itself in trust.

This wrapper offers a neat IHT mechanism in that it is possible to transfer "Equity Shares" to one's kids and then to pay a "Capital Rental" to them (if you don't the Revenue will tax you on the benefit) and continue to live there.

But hey, that's no problem if you actually pay them not in cash but in more "Equity Shares".

The problem comes when you want to move. You have to convince the new "Occupier" to take on this radical new mechanism.

Well, when you tell him that all he needs to pay is an agreed "Capital Rental" - that if he pays more he starts buying "Equity Shares" in the property and that the outcome is much cheaper in cash terms - BECAUSE HE DOESN'T HAVE TO REPAY LOAN PRINCIPAL - then who knows, you might even get people interested.

If not, just rent it out conventionally and rent somewhere else. The model interfaces perfectly well with the existing mechanisms.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 26th, 2007 at 11:13:31 AM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
I fail to see how this solves the problem of the elderly person with a paltry pension that doesn't pay the bills. Unless the "reverse mortgage" mechanism is replaced by
  1. valuing the property
  2. dividing it up into equity shares, initially all owned by the elderly owner
  3. the "investor" buys equity shares one by one from the pensioner, until the latter dies.


"It's the statue, man, The Statue."
by Carrie (migeru at eurotrib dot com) on Mon Mar 26th, 2007 at 05:41:29 PM EST
[ Parent ]
Re: Living the death of the Irish property boom (none / 1)
Correct.

The owner pays his "Capital Rental" not in cash but in more "equity shares".

If you run the spreadsheets the result is much less toxic than the other options: "reversions" (where the investor takes a punt on how long Granny is going to live) and "roll-up" mortgages at 2% over building society base rate, where the interest rolls up and (at today's rates) the mortgage doubles in 10 years.

So in the perfect world a pensioner could go to his pension fund and have it invest in his home.

For the pension fund it's a REIT clone (LLP's being tax transparent), but simpler and without the management conflicts of the REIT's the Treasury came up with.

Each pension fund could have stakes in a "pool" of its pensioners' properties.

For the pensioner it's the most equitable form of equity release there is.

It's a pity the Chancellor made it impracticable for UK pension funds (I won't bore you with the technicalities).

But that leaves the field wide open for overseas funds - particularly petrodollars looking for a GENUINELY Islamic home - unlike most of the hypocritical crap sold as "Islamic" investment at the moment.

There is over £1 trillion in UK property owned by the over-65's free of mortgage, much of it (unlike public housing rapidly being brought up to "Decent Homes" standards)falling into disrepair because the occupants can hardly afford to live, never mind maintain their homes in good repair.

In Newham, I understand maybe 40% of properties fall into this category.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 26th, 2007 at 06:29:01 PM EST
[ Parent ]
Yoga and Cook-Jutsu (none / 1)
I was pondering the following example.

Suppose you can run a small Yoga studio on the following (average) annual budget:

Revenue: £100k (fees)
Expenses: £85k (£45k teachers' wages, £20 admin costs, £18k space rental, £2k maintenance)
Profit: £15k

Alternatively, you can buy the space for, say, £250k and pay the £18k/yr in mortgage payments.

Is there a non-toxic way to raise the £250?

One could value the business at £750k put it in trust, sell £250k worth of "equity shares" to buy the property, and pay 1/3 of the revenue (the total of "rent" and "profit" above) to the holders of the equity shares.

At the other extreme, one could value the business at £1.39M, put it in trust, keep £210k worth of equity shares for oneself, and sell £250k worth of equity shares to outside investors. This results in paying 18% of the revenue to the external holders of the equity shares, and 15% to oneself.

In the first case, the equity shares have an expected return of 13.3%, and in the second of 7.2%

Am I totally off?

The problem, in any case, is finding people who, collectively, have £250k to spare. The mortgage solution just requires (say) £25k, together with the "bank magic" of (say) 10% "reserve requirement".

"It's the statue, man, The Statue."

by Carrie (migeru at eurotrib dot com) on Mon Mar 26th, 2007 at 07:08:27 PM EST
[ Parent ]
couple of real problems (4.00 / 2)
  1. you can't just "value" a business at 750K or 1.4MM.  You have to find someone willing to take the other side of such a valuation (ie an investor who agrees that the business is worth that much and buy some % at that valuation).  With a profit of only 15K/year and a building worth 250K, I don't think too many investors will be excited to cough up the rest of those large sums as "goodwill".  Those ROR calcs are meaningless unless you can find someone who will accept the risk on that basis.

  2.  There is no "bank magic".  They are taking titular ownership of the building in exchange for 250K of depositor/bank stockholder cash.  The money doesn't come out of thin air despite what the anti moneylender crowd say.  To create leverage, banks have to borrow too.  Perhaps it's a house of cards, but there is no magic.

What makes borrowing 250K to buy a building from its owner toxic?  Paying interest?  In that case is paying rent to a landlord also toxic?  Getting the use of something without buying it or making it yourself costs something.
by HiD on Mon Mar 26th, 2007 at 09:46:47 PM EST
[ Parent ]

Living the death of the Irish property boom | 105 comments (105 topical, 0 editorial, 0 hidden)
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