A recent law which has yet to be activated by the Minister of the Environment requires that water charges are paid before closing a house sale and, if water charges are not paid, the solicitor dealing with the sale will have to discharge any arrears owed directly to Irish Water out of the sale proceeds.
The Environment (Miscellaneous Provisions) Act 2015 introduces this new requirement and adds yet another step in the legal procedure for selling a house:
- Before completing a sale the property owner must pay any outstanding water charges.
- The owner must provide to his or her solicitor a certificate or statement from Irish Water confirming that no water charges are owed.
- If the owner fails to do this, his or her solicitor must request the certificate directly from Irish Water.
- If any water charges are owed to Irish Water which the vendor has not paid, it becomes the obligation of that solicitor to withhold the arrears from the proceeds of sale and pay it to Irish Water within 20 working days of completing the sale.
The payment to Irish Water by the solicitor is out of the net proceeds of sale, after paying the mortgage and other liabilities relating to the sale. So, for example, if the outstanding mortgage exceeds the sale price the full sale proceeds will be paid to the bank and there will be nothing left for Irish Water.
Water charges remain politically controversial, with an apparently high rate of non-registration and non-payment. However, if a house owner has decided not to register or pay but wishes to sell the house, the issue of payment is taken out of their control.
The Law Society objected to solicitors becoming involved in the collection of water charges on the basis that it would effectively make solicitors tax collecting agents for the State and would lead to delays and higher costs. When the new law was being considered the President of the Society wrote to the Minister of the Environment outlining his concerns:
The Law Society of Ireland is not taking a position against water charges. However, we are increasingly concerned about having yet another responsibility for tax collection being placed on the shoulders of solicitors and adding to increased delays and expense for consumers.
Nevertheless, the law passed and will require solicitors to become involved in correspondence with Irish Water in many house sales.
Most sections of the Act were commenced on 31 August 2015 but this provision was not. It is not clear when the Minister might impose this obligation on solicitors but it is likely to happen in the near future.
Anyone selling or intending to sell a house should avoid any unnecessary delay in the transaction by having all water charge payments up to date and having an account statement demonstrating payment.
If you are thinking of buying a new house, you might be interested in our recent post 5 tips for buying a home.