No legal reason Government can't limit sale of new homes

The Government has expressed its intention to prevent new developments from being acquired by investment funds and ensure availability for first-time buyers. An outright ban on the purchase by investment funds of developments outside of city centre cores or high-density areas is being considered. Another option being analysed is imposing planning conditions on new developments requiring a percentage of units to be sold to first-time buyers.

These plans all involve controlling the category of prospective purchasers to whom a developer can sell, raising the fundamental question of whether the State is free to legislate to restrict the right to transfer property. That question, and its constitutional dimensions, prompted the Government to consult the Attorney General on its plans.

Article 43.1.2 of the Constitution prohibits the State from abolishing the “general right” to transfer, bequeath or inherit property. This means that any total prohibition on the transfer of land would likely be found to be unconstitutional. The question is how much restriction of that “general right” would be permissible before the right would be held to be in substance abolished.

In the absence of legislative restrictions on the right to transfer, this question has never been determined by the Irish courts. However, in 1984, the courts considered the other “general rights” protected in article 43 bequest and inheritance.

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Right to inherit

The Supreme Court interpreted the Succession Act 1965 to mean that illegitimate children could not recover property under the legal rules of intestacy, which determine how property is distributed when an owner dies without leaving a written will. In finding that this did not unlawfully interfere with the right to inherit as protected in article 43.1.2, it stressed that it is the general right to inherit property that is constitutionally protected, not any particular right to inherit, and that the State could accordingly prevent succession to property in appropriate cases.

This suggests that the Constitution does not guarantee a protected core of rights of transfer, bequest and inheritance for all owners in all circumstances. It prohibits the general abolition of these aspects of the institution of private ownership. For example, if the sale of property was prohibited in all circumstances, or if wills in general were rendered wholly ineffective through a change in the law, the Constitution would likely be infringed.

Conversely, the sale of property could be lawfully prohibited in some circumstances falling short of outright abolition. The question is how significant and wide-reaching an interference with one of the protected aspects of ownership would need to be in order to constitute an unlawful interference with the general right.

In the private law context, the validity of conditions restricting the category of individuals to whom land can be transferred has been tested. The courts have held that there must remain a significant pool of persons to whom an individual can transfer property once a restriction is applied. Partial restrictions that are too limiting in their effects, for example, limiting sale to within particular families, have been found to be void. This suggests that in determining whether a restriction on transfer goes too far, courts are likely to scrutinise the breadth of the class of prospective transferees that remains open.

Planning permission

The planning context will be another significant factor in any assessment of the constitutionality of new restrictions on transfer. Where landowners choose to develop in ways that require planning permission, the Supreme Court has held that the State can control development in the public interest, even if that results in some loss of value to the owner. In reaching that conclusion, the court emphasised the fact that grants of planning permission generally increase the value of benefitted land.

In practical terms, a planning law approach to this issue would likely mean that it would be a condition of a grant of planning permission that a first-time buyer quota would be met in a development. It is not clear whether compliance would apply only to the purchase of properties “off plans”, with a buyer subsequently enabled to sell on freely, or whether developments would include units to be permanently reserved for first-time buyers. The latter approach would impose ongoing restrictions on the transferability of properties and would sever the link with the benefit of a grant of planning permission.

Confirmation of compliance with a planning condition would need to be evidenced as part of the conveyancing process for each sale within a development. Planning authorities would also need proof of compliance. This would create a significant new workload surrounding property transactions, with related costs likely to be borne in part by purchasers. It would increase public involvement in presumptively private legal relationships. For example, the Land Register is confidential, with access primarily based on the consent of the registered owner.

Notwithstanding these practical challenges, the proposals being considered should not be ruled out for constitutional reasons. Private ownership is, at an institutional level, a permanent aspect of the Irish social and political structure and its core features, including the right to transfer property, are protected against abolition. However, owners’ powers over specific property are not sacrosanct in respect of either development or transfer.

What is contemplated is novel and complex. However, it is potentially achievable within the parameters set by the Constitution for controlling the exercise of property rights in the interests of the common good.

Rachael Walsh is assistant professor at the School of Law, Trinity College Dublin.