The Law Society has asked the Minister for Finance to exempt house-building agreements from the 1 per cent VAT increase announced in the Budget.
Failing that, it has asked Mr McCreevy to allow a transition period on the old rate for those who signed contracts on or before Budget day.
Otherwise a number of house-buyers risk not being able to complete their purchases and losing their deposits, said Mr Patrick Dorgan, chairman of the society's conveyancing committee.
They could even be at risk of being sued by builders for breach of contract and damages for any losses the builder might have through resale of the property.
Mr Dorgan said builders had been adding the additional 1 per cent VAT to their prices since January 1st, although the Finance Act had not yet been passed.
There was a clause in most building contracts, clause 6, which allowed for an increase in price if building materials increased in cost or if there was an increase in VAT, he said.
Most solicitors had the section relating to building materials taken out, but not that relating to VAT, as that tax could go down as well as up. No one was raising the issue that builders were not entitled to add this increase to the purchase price, just as other prices had gone up.
He said solicitors knew of instances where the additional 1 per cent in VAT, added to the loss in the first-time buyers' grant, put the purchase of a house just beyond the reach of clients who were already mortgaged to their utmost capacity.
It could involve additional costs of about €7,000, which many clients were unable to raise. "It's a double whammy and effectively it's retrospective taxation."
Failure to raise the additional money would mean that where a contract was signed, but could not go ahead, the deposit would be forfeited, said Mr Dorgan. If staged payments had begun, it could mean even bigger losses, depending on how many staged payments had been made.
The additional VAT also encouraged bad practice, Mr Dorgan told the Minister in his letter, as purchasers may be enticed to pay over the whole price before January 1st to avoid the increase.
This gave them no leverage if the house was not completed, and if the final snag list was not attended to. Consumer protection and the enforcement of building standards would inevitably suffer if people felt forced to rush completion of the contract.
The Law Society sent the letter to Mr McCreevy on December 13th last. It has received neither a reply nor an acknowledgement, Mr Dorgan told The Irish Times.