Local Property Tax Clearance: What Vendors Need to Know

Nicole Bateman, Solicitor

Local Property Tax (“LPT”) is an annual charge on residential properties. LPT clearance is an important part of any residential property sale. An outstanding return, an unverified exemption or a historic valuation issue can delay completion, particularly in the case of higher value properties.

For that reason, the LPT position should be checked at the beginning of the transaction rather than left until shortly before closing.

What can cause a problem?

It is not enough to simply check whether there is an outstanding LPT balance. The relevant returns must be filed, and any exemption relied upon must have been verified by Revenue.

A property can, for example, show a nil balance but still require further action where an exemption has been claimed but has not been verified.

Valuation can also be important. LPT operates by reference to specific valuation dates, including 1 May 2013, 1 November 2021 and 1 November 2025. For higher value properties, the valuation history can affect whether the property qualifies for general LPT clearance.

When is specific clearance required?

Revenue provides for both general and specific clearance.

General clearance may be available where the relevant conditions are met. For example, one of the tests applies where the sale price does not exceed €500,000 in Dublin or €400,000 outside Dublin. Other valuation-based tests may apply to properties above those thresholds.

Where the conditions for general clearance are not satisfied, the vendor will need to apply to Revenue for specific clearance using Form LPT5. The LPT5 requires an explanation as to why the sale agreed price does not come within any of the general clearance conditions. Supporting valuation evidence and documentation will be required to support same.

Revenue’s current guidance indicates that specific clearance applications are processed within 12 working days, so this should be factored into consideration when completing the sale of your property.

Why is this particularly important for high-value properties?

A high value property is more likely to require consideration of the valuation-based clearance rules. A transaction may therefore involve more than simply paying an outstanding LPT liability.

Before putting a property on the market, vendors should establish the following to prevent delays prior to completion:

1. whether all LPT returns have been filed;
2. whether there are any outstanding liabilities;
3. whether an exemption has been claimed and verified;
4. what valuations were declared at 1 November 2021 and 1 November 2025; and
5. whether general or specific clearance will be required.

Addressing these matters early can avoid an LPT issue becoming a last-minute obstacle to completion.

What happens if the sale is around 1 November?

The timing of a sale can also be relevant. A person who owns a residential property on 1 November is liable for the LPT charge for the following year, even if the property is subsequently sold. The LPT paid by the vendor will then be apportioned between the vendor and the purchaser up to the date of completion.

For example, a person who owns a property on 1 November 2026 remains liable for the 2027 LPT return even if the property is sold shortly afterwards.

Conclusion

LPT clearance should form part of the early preparation for a residential property sale. This is particularly important for high value properties, properties with historic exemptions and transactions where the valuation or sale price may require specific clearance.

Early review gives the vendor and their advisers time to deal with any outstanding returns, payments, exemptions or valuation issues before they affect the completion date.

Dislaimer of Liability: This insight article is provided for general information purposes only and should not be relied upon as legal advice. Readers should seek specific legal advice tailored to their individual circumstances before taking or refraining from any action. Holmes O'Malley Sexton LLP, its partners, employees, agents, and affiliated entities disclaim all liability, to the fullest extent permitted by law, for any loss or damage arising directly or indirectly from reliance on the information contained in this publication.