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Vendors Beware: Water Charges Not Just Another Utility Bill

08/03/2016

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Ireland

Significant changes to the way in which water charges will be dealt with on the sale of a residential property have been brought about by the commencement of Section 48 of the Environment (Miscellaneous Provisions) Act, 2015 (“the Act”) on 1st January 2016. Neil Dineen, Associate in the Property Unit explains how water charges can no longer be considered to be just another utility bill as a seller’s solicitor is now required to ensure they are paid on a sale, even when act...

Significant changes to the way in which water charges will be dealt with on the sale of a residential property have been brought about by the commencement of Section 48 of the Environment (Miscellaneous Provisions) Act, 2015 (“the Act”) on 1st January 2016. Neil Dineen, Associate in the Property Unit explains how water charges can no longer be considered to be just another utility bill as a seller’s solicitor is now required to ensure they are paid on a sale, even when acting for a seller who conscientiously objects to their payment.

We do need to bear in mind that given the uncertainty which has arisen from the recent General Election and the different positions of Fine Gael and Fianna Fail, the issue may well be revisited in the near future.

The provisions set out in the Act apply to any sale or a voluntary transfer of a residential property that is liable for water charges. It should be noted that Section 47 of the Act obliges the owner of a dwelling to register as a customer with Irish Water (IW) or if the owner is not occupying the dwelling they are obliged to give IW details of the person who is.

Section 48 provides as follows:

  1. The seller of a property must pay IW any water charges which are due in respect of the property.
  2. The seller must provide their solicitor with a certificate of discharge from IW to confirm that all water charges have been paid, or alternatively, a statement from IW that the water charges are not the liability of the seller, which latter statement might be obtained where a tenant or some other party is liable for the payment of the water charges.
  3. Where the seller does not provide the certificate or statement as outlined above, the seller’s solicitor is obliged to contact IW and to request details of the amount due by the seller to IW. IW will then issue a certificate of discharge or a statement to the solicitor outlining the amount of the water charges due on the property.
  4. IW will only furnish this statement by post as there are data protection issues in relation to the issuing of the information by e-mail.
  5. Section 48 then requires the seller’s solicitor to withhold sufficient sums from “the net proceeds of sale remaining (if any)” to pay the water charges which must be paid to IW within 20 working days of the completion of the sale.
  6. However the reference in Section 48 (3A) (5) to the net proceeds of sale means that if there is no money left over after the repayment of any mortgage and the costs of the sale, then there is no obligation on the solicitor to pay the water charges from the sale proceeds.
  7. In this case the seller’s solicitor must notify IW of the fact that there are no net proceeds of sale, within 20 working days and it appears that the solicitor’s obligation ends there. Although it is not provided for in Section 48, IW have indicated that they will issue an ackowledgement in respect of such letters received.
  8. In these circumstances, there are no adverse implications for the buyer of a property, who would have no responsibility for the payment of the unpaid charges and such unpaid charges can not become a charge on the property.  Indeed there are no grounds on which a buyer’s Solicitor should concern themselves with the issue of water charges, unless the seller is asking the buyer to pay additional monies on completion, by apportioning water charges paid in advance.
  9. The commencement of section 48 will have little practical significance in a sale by a Receiver or a Bank as mortgagee, given that it is most unlikely that there will be any net sale proceeds, in such sales. However there will be an obligation on the seller’s solicitor to obtain a statement of the amount due from IW (at the outset) and to notify IW of the fact that there are no net proceeds (on completion).
  10. The obligation on the Receiver or Bank in such a case to pay the water charges would still remain and so the “no net sale proceeds” exemption, only applies to the Solicitor’s obligation to pay the amount due to IW from the sale proceeds.
  11. The obligations here rest solely with the seller’s solicitor and so they have no bearing on the certification of title by a buyer’s solicitor or a solicitor acting for a Bank.
  12. These changes will cause some difficulty for a solicitor dealing with a seller who objects to the payment of water charges, as it will require the solicitor to make the seller aware at the outset of the sale process, that they may be unable to act in the sale if the seller does not agree to allow the deduction and payment of the water charges to IW. In this context it is understood that IW were to notify their customers of the change.
  13. It is not clear how the obligations of the solicitor under Section 48 are to be discharged where there is a gift/voluntary transfer of a property, where water charges remain outstanding. In such circumstances there are no net sale proceeds (unless it is only a partial gift) and so it would appear that the solicitor for the party making the gift can discharge their obligations by obtaining a statement of the amount of water charges due at the outset and then writing a letter to IW confirming that there are no net sale proceeds, within 20 working days of the sale completing.
  14. In summary the obligations of a seller’s solicitor under Section 48 will be discharged by either:
    • Obtaining a certificate of discharge issued by IW from the seller.
    • Obtaining a statement issued by IW from the seller, stating that the seller is not liable for the water charges.
    • Where there are net sale proceeds – deducting the water charges due, paying them to IW and receiving a receipt.
    • Where there are no net sale proceeds - obtaining a statement issued by IW from the seller setting out the amount due or writing a letter to IW confirming that there are no net sale proceeds, within 20 working days of the sale completing.

Please note that this article is for information purposes only and does not constitute legal advice. Specific advice should always be taken in given situations.

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