Wednesday, 27 May 2015
Topical Issue Debate
Property Tax Exemptions
I thank the Minister for taking this Topical Issue today regarding the exemption from local property tax for those people afflicted by pyrite in their homes. It is Government policy, as announced by the Minister for Finance, that homeowners who have pyrite-affected homes should be exempt from local property tax. The regulations regarding the exemption from the local property tax are set out in the Finance (Local Property Tax) (Pyrite Exemption) Regulations 2013, SI No. 147 of 2013. This statutory instrument is used by Revenue to either provide the exemption or not and Revenue is following it to the letter, as is required by law.
Revenue is currently issuing letters to homeowners all over Fingal and the rest of Leinster stating that if the homeowners do not provide a certificate detailing core testing of the sub-floor hardcore material and showing the qualifying significant pyrite percentages that the homeowner will not be able to obtain the exemption. Revenue has provided a timeframe of 28 days to comply. As the Minister is aware, the cost for core testing of the sub-floor is in the region of €2,500 to €3,000.
The Pyrite Resolution Board does not require a core test for acceptance into the national remediation scheme. It does not require core testing of the sub-floor hardcore material to verify significant pyritic damage. In the majority of cases a building condition assessment to level 2, in accordance with Irish Standard 398-1:2013 has sufficed. The strict measurement as required by SI 147 of 2013 to demonstrate significant pyritic damage is not required by the PRB to validate applications for the scheme but is required by the Revenue for exemption purposes. To have to spend €3,000 to gain an exemption for a far lower amount is nonsensical. This problem must be resolved. SI 147 needs to be changed to reflect what is happening in practice.
Having examined the text in the statutory instrument it appears a simple edit by the Minister for the Environment, Community and Local Government could resolve the problem quickly. Page 3 of the document I have handed to the Minister begins:
“significant pyritic damage” in respect of a residential property, means a property which—Replacing the word "and" at the end of part (a) with "or" would effectively apply the same criteria for "significant pyritic damage" as is applied by the Pyrite Resolution Board for inclusion in the pyrite remediation scheme.
(a) has a Damage Condition Rating of 2 or a Damage Condition Rating of 1 (with progression) established on foot of a Building Condition Assessment carried out by a competent person under and in accordance with I.S. 398-1:2013, and
(b) has sub-floor hardcore material classified, by the appropriate competent persons, as susceptible to significant or limited expansion, established on foot of testing the sub-floor hardcore material.
Many houses affected by pyrite are in estates where HomeBond previously did core sampling for certification of pyrite levels. HomeBond stated that it would be cost-prohibitive and wasteful in the extreme to core test each property. Many homes have a building condition assessment in accordance with I.S. 398, detailing a damage condition rating of 2, and have been accepted by the PRB for inclusion in the pyrite remediation scheme. They are in the current schedule of works and a contractor is currently on site. They have not been required to carry out a core test, but because they do not have a core test Revenue is refusing exemption. Any home that is accepted by the PRB into the scheme for remediation obviously has pyrite and should, as a matter of course, be exempt from local property tax. The problem is the wording of the statutory instrument. It needs to be changed urgently. The simple solution I have presented today will do this. It can be done almost overnight because it is secondary legislation. I look forward to a positive response.
The pyrite panel appointed by the Minister for the Environment, Community and Local Government recommended that consideration be given to providing an exemption from local property tax where damage from pyritic heave had been proven by testing. This was to be proven in accordance with a National Standards Authority of Ireland standard capable of determining if there was reactive pyrite in the sub-floor hardcore materials and if it had been subject to pyritic heave.
Irish Standard 398, titled "Reactive pyrite in sub-floor hardcore material - Part 1: Testing and categorisation protocol" was published on 29 January 2013 by the NSAI in response to the panel's recommendation. Accordingly, section 10A of the Finance (Local Property Tax) Act 2012, as amended, provides that an exemption from the charge to local property tax will apply for a temporary period of at least three consecutive years for residential properties that have been certified under the Finance (Local Property Tax) (Pyrite Exemption) Regulations 2013, SI 147 of 2013, made by the Minister for the Environment, Community and Local Government, as having significant pyritic damage.
The regulations set out the methodology for the assessment of dwellings to establish significant pyritic damage. These regulations require that homeowners demonstrate significant pyritic damage in accordance with the NSAI standard I.S. 398. To be eligible for an exemption from local property tax a liable person must have a damage condition rating of 2 or a damage condition rating of 1 with progression, established on foot of a building condition assessment, BCA, carried out by a competent person in accordance with the NSAI standard, and have a sub-floor hardcore material classified by the appropriate competent person or persons as susceptible to significant or limited expansion, established on foot of testing the sub-floor hardcore material.
The purpose of the building condition assessment is to demonstrate damage and to inform whether sampling and testing of the sub-floor hardcore of the residential property should be undertaken to confirm that such damage arises from pyrite. The building condition assessment does not involve any invasive internal or external inspections to a residential property and, on its own, cannot be used to state conclusively that reactive pyrite is present in the sub-floor hardcore of the property.
Grievances about the operation of the LPT exemption centre on the cost that must be incurred by a property owner in verifying that his or her property has been damaged by pyrite.
I made a commitment to examine the local property tax and any impacts on LPT liabilities as a result of property price movements. In this regard, Dr. Don Thornhill is conducting a review to consider and make recommendations in the context of property price developments on what adjustments, if any, might be made to the system to achieve relative stability of LPT payments by liable persons. Dr. Thornhill chaired the interdepartmental group on the design of a local property tax in 2012. The review will address a number of other issues concerning the LPT, including the relief from LPT for owners of pyrite-damaged homes and how the anomalous issue that has arisen in this regard can be resolved satisfactorily. I expect the review by Dr. Thornhill will be completed by summer 2015.
Resolution of the pyrite LPT relief issue may necessitate a change in the relevant provisions of the Finance (Local Property Tax) Act 2012, as amended, or the Finance (Local Property Tax) (Pyrite Exemption) Regulations. If it is the case that legislative change is required I will examine with the Revenue Commissioners the possibilities for applying any change on an administrative basis in advance of such legislative changes. I am mindful that the issue the Deputy has raised needs to be addressed and I am keen to reassure him and the homeowners affected that the situation is receiving attention.
I thank the Minister for his reply. I have nothing seriously to add to what I have said, but I will summarise the position. Will the Minister accept that a solution to this could be along the lines of the way I have advised, in which case the change to the statutory instrument would have the effect of delivering what people are entitled to?
The exemption for pyrite-affected homes is Government policy. This exemption is being denied by Revenue because of the wording of the statutory instrument and this is an issue for the Department of the Environment, Community and Local Government. The Minister could deal with the anomaly in the way I have suggested. I have provided one solution. The drafting and legislation people could come up with something different.
People are on 28 days' notice to come back in terms of verifying that they have undertaken core test and have the results, at a cost of €3,000. Certainly I would be happy to work with officials from the Department of the Environment, Community and Local Government to explain the problem and how it could be addressed.
Applicants who have spoken to officials from the Revenue Commissioners have indicated the officials are sympathetic to the situation. They know people are getting their houses remediated because they have pyrite yet they cannot get an exemption on pyrite grounds because of this statutory instrument. The Minister suggested in his response that there could be ways of doing it involving the Department of Finance.
However, I am advising a simple solution involving the Department of the Environment, Community and Local Government that could deal with the issue in a clever enough way.
I thank Deputy Ryan for raising this issue. First, I accept there is an anomaly and that it is along the lines pointed out by him. Second, I am waiting for Dr. Thornhill to advise me on how to remediate this anomaly. He may suggest an amendment to the Local Property Tax Act 2012 or he may consider, in line with the Deputy's proposal, that an amendment to the statutory instrument would be sufficient. I do not know whether the Deputy's proposal will resolve the problem but I will refer it to my officials and have it examined by Dr. Thornhill. As soon as I come to a decision, I will introduce whatever change is required administratively so people will not have to wait for the Finance Bill in the late autumn. The Revenue Commissioners will accept a commitment that we intend changing and apply the law as if it had been changed.