The Irish government has increased the rate of stamp duty payable on the purchase of residential units (houses and duplexes), where 10 or more such units are acquired by one party (or by one party and a "connected party") over a 12-month period, to 10% from the current rate of 1% on the first €1 million (and 2% on the value in excess of €1 million). In the event that the 10 units are acquired in multiple transactions across a 12-month period, the higher rate of stamp duty will be triggered on the acquisition of the tenth unit and applied retrospectively to the initial nine units.

The legislation exempts residential units in "apartment blocks" from this increased stamp duty. The definition of an apartment block as a multi-storey building comprising no fewer than three apartments with common or group access therefore does not apply to all units in BTR developments and modern purpose-built apartment blocks, but also the majority of units in what are known as "pre-63 developments" where typically large Georgian houses were divided into multiple units prior to 1 October 1964 (being the day of coming into force of the Local Government (Planning and Development) Act, 1963) and which have been a feature of large portfolio sales in recent years, such as the Belgrave collection.

In its press release announcing these changes, the government stated that the acquisition of apartments would not be caught by the 10% rate as "Apartment developments face significant viability challenges and there are clear indications that any additional cost burden in apartment developments would have significant negative consequences for supply, and consequently impact on our future housing model, in particular for urban living". This acknowledgement underscores that the Irish government recognises the benefit that large institutional entities bring in terms of facilitating the availability of rental housing stock in urban areas.

The legislation does not provide a carve-out for residential units within a retirement or assisted living facility, or purpose-built holiday house developments, and therefore investors in these facilities are likely to be subject to the increased duty unless amending legislation is introduced. Also, while the transactions which prompted the government to bring in the increase involved newly constructed housing developments, the legislation applies to all affected relevant residential units irrespective of when they were constructed.

As with recent stamp duty changes on the transfer of shares in companies and units in Irish Real Estate Funds/ICAVs which predominantly derive their value from land, this legislation contains anti-avoidance provisions which would see the transfer of such shares or units subject to the increased duty. As a further anti-avoidance measure, the legislation also provides a connected persons test that would deem the 10-unit threshold to have been reached where the units are acquired by connected persons within the 12-month time frame. A connected person is the same as a connected person for the purposes of the Taxes Consolidation Act 1997.

The legislation provides that any party who has entered into a binding contract for residential units prior to 20 May 2021 shall be entitled to rely on the existing stamp duty rates prior to the legislation, provided it enters into the stampable interest in respect of the acquisition before 20 August 2021.

These changes do not directly impact on forward fund transactions as, in those cases, the property at the time of the transfer of the land is unlikely to constitute residential property. However, it will impact on the potential pool of onward purchasers/investors available to the purchaser as those parties would be subject to the increased duty if they acquire/invest when the units are completed.

At the same time, the Minister for Housing is introducing new planning guidelines to prohibit the bulk-buying of houses and duplexes and, in turn, increase the stock of housing units available for sale to owner occupiers by way of a circular under Section 28 of the Planning & Development Act 2000. The Minister has also indicated that further amendments will be made via the Affordable Housing Bill 2021, which was first introduced on 11 May 2021. These amendments will allow a local authority to designate a specified number of houses and duplexes with a pre-determined range of at least 0-50% in a development for owner occupiers, similar to requirements under Part V of the Planning & Development Act 2000. This designated number of houses and duplexes will be in addition to the Part V requirements and therefore could lead to up to 70% of units in a development being ring-fenced to a certain body of purchasers. As with the stamp duty amendments, the indications are that apartment blocks will not be impacted by these changes.