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THE MAGAZINE OF THE INSTITUTE OF PROFESSIONAL AUCTIONEERS & VALUERS

The

SUMMER 2004

PROFESSIONAL

ANNUAL CONVENTION 2004 SHANE ROSS GIVES HIS VIEWS

INTEREST RATES THE ONLY WAY IS UP Eoin Fahy


contents W E L C O M E

T O

T H E

P R O P E R T Y

P R O F E S S I O N A L

Welcome to the Summer 2004 edition of the Property Professional magazine.

Our recent AGM and Annual Convention in Rochestown Park Hotel, Cork was a major success and I would like to thank all those members who took the time to attend. There was a record attendance this year which shows the growing strength of the Institute as the representative body for auctioneers and estate agents nationwide. By coming together for the Annual Convention, members benefit from their conversations with each other as well as from the panel of speakers who addressed the main session. I appreciate that it is not easy for members to get away from home and business for a full weekend but I think those who did make the effort went home refreshed and re-invigorated. The Annual Convention is also a great social occasion, of course, and those of us who participated in the game of golf on Friday afternoon enjoyed it very much as we also did the general convivial atmosphere of the weekend. I would like to congratulate the Institute’s new President, Richard Nagle on his election and I look forward to working with him over the next 12 months. Richard has a long record of achievement for IPAV and I know he will continue to work even harder to further the Institute during his term of office. I would also like to congratulate the new Senior Vice-President Willie Farrell and Junior Vice-President John Shaw.

Liam O’Donnell

THE PROPERTY PROFESSIONAL IS THE MAGAZINE OF THE INSTITUTE OF PROFESSIONAL AUCTIONEERS & VALUERS 129 LOWER BAGGOT STREET, DUBLIN 2. TEL: 01 6785685 FAX: 01 6762890 E-mail: lodonnell@ipav.ie Website: www.ipav.ie CEI Website: www.web-cei.com

IPAV, as you are aware, is affiliated to the Confederation of European Estate Agents (CEI) and it is now possible for members to display some or all of their properties in six languages on the CEI website. (Details appear elsewhere in this magazine). As we enter the summer period, the main item of interest to us is the new Review Body established by the Minister for Justice, Equality and Law Reform which will examine all aspects of the profession. Already a Sub-Committee has been established by the Institute and we will be monitoring events very closely. Finally, the summer period also means a break and some well earned rest for most auctioneers and estate agents. I would like to take this opportunity to wish you an enjoyable holiday, either at home or abroad. Best wishes

Liam O’Donnell Chief Executive

Interest rates – ‘The only way is up’!

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Picture Special - Annual Convention

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Chief Executive Officer Liam O’Donnell F.I.P.A.V.

Editor Tim Ryan Tim Ryan Communications Tel: 01 6624649

Publisher Design Room Tel: 01 4979022 info@designroom.ie

The Role of the Private Residential Tenancies Board

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Investment Potential in the New EU Member States

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Fine Art Presentations!

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If you would like to ADVERTISE in next year’s Diary, contact the New Publishers or speak to Mary Cruess Callaghan on 087 9881260 email: info@designroom.ie Views expressed by contributors or correspondents are not necessarily those of IPAV or the publisher and neither IPAV nor the publisher accept any responsibility for them.

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MESSAGE FROM

THE PRESIDENT It gives me great pleasure to say how honoured I am to be elected President of IPAV for the coming year. I have had a long association with the Institute but I am particularly delighted to hold its highest office at this time. Firstly, I would like to pay tribute to my predecessor Paul Gartlan for doing such a wonderful job and to all previous Presidents who, together, have helped to shape the Institute into what it is today.

Richard Nagle President

I was also delighted to host the very first IPAV AGM and Convention in Cork on May 21 and 22 last. It was a very successful event and I would like to sincerely thank all of you who attended. I know it is not possible for everybody to get away as it is a busy time of the year and details of the main contributions appear elsewhere in this issue. I would like to thank all our guest speakers even if, in some cases, we did not agree with all they had to say! In my address to delegates I stressed a few points which I think are very relevant to us at the present time. On the education front, the major development has been the transfer of the entire adult Education programme to IT Colleges, where possible. To date, the arrangement is working very well. The running of Continuous Professional Development courses is now essential to any professional organisation and I will be making this one of my priorities during my presidency. Attendance levels at our recent Regional Seminars have been very encouraging indeed. As a Cork-based auctioneer I meet young couples practically every day of the week. Consequently, I am very conscious of the very high cost of houses that continue to be way out of the reach of first-time buyers. Something needs to be done about this and nobody is in a better position than the Government and the Minster for Finance. This is another priority which I have set myself during my term. IPAV will be addressing this in our Budget submission later this year and in other appropriate forums as they arise. A third priority for me is to ensure that IPAV plays the fullest role possible in the forthcoming review of our profession set up by the Minister for Justice, Equality and Law Reform recently This review will cover all aspects of the Auctioneering profession in Ireland. In my view, it is both timely and necessary and we have nothing to fear. This will be the most significant development in our profession in recent years and we will be keeping a close eye on developments. These are just some of the issues that are of concern to me and which I will be highlighting over the next 12 months. I look forward very much to your support and to meeting as many of you as possible during the year.

Richard Nagle President

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INTEREST RATES – ‘THE ONLY WAY IS UP’! A VARIETY OF ISSUES AFFECT THE LEVEL OF PROPERTY PRICES AT ANY GIVEN TIME. THESE FACTORS INCLUDE GENERAL BUSINESS AND CONSUMER CONFIDENCE, THE STRENGTH OF ECONOMIC ACTIVITY, THE DEGREE OF RESTRICTIVENESS IN PLANNING POLICY, AND SO ON. BUT FEW, IF ANY, OF THESE FACTORS ARE AS IMPORTANT AS THE LEVEL OF INTEREST RATES. WE REMEMBER, FOR EXAMPLE, THE HUGE RESIDENTIAL PROPERTY CRASH IN THE UK IN 1989/1990 WHEN INTEREST RATES ROSE SHARPLY. IN THIS ARTICLE, ECONOMIST EOIN FAHY TAKES A LOOK AT WHAT IS LIKELY TO HAPPEN TO THOSE INTEREST RATES OVER THE NEXT COUPLE OF YEARS, AND – MORE IMPORTANTLY - HOW THEY ARE LIKELY TO IMPACT ON THE PROPERTY MARKET.

Eoin Fahy

Obviously, since the introduction of the euro, Irish interest rates are set by the European Central Bank (ECB), which faces the difficult task of setting one interest rate for all 12 countries which form the euro zone, even though some of those economies may need low interest rates, and some may need much higher rates. This “one size fits all” policy has benefited the Irish property market over the last few years as, even at a time when the Irish economy was growing at a fast pace and when Irish inflation was high, we still had very low interest rates because the rest of the euro zone generally had low economic growth and low inflation. This may have been a headache for Irish policy makers who wanted to rein in high inflation but couldn’t use interest rates to do so. However, it was certainly great news for property owners in Ireland! With mortgage interest rates at around 3%, is it any wonder that house prices continued to rise and rise? The current very low level of interest rates is of course due to the sluggishness of the euro zone economy. Although the US economy came out of recession and began a reasonably strong recovery in early 2002 and while even the Japanese economy grew strongly in 2003, the eurozone economy had a very poor year in 2003, basically failing to grow at all. Taking into account population growth, in fact, real living standards probably fell in both 2002 and 2003 in the eurozone, which is highly unusual. On top of that, the “membership rules” of the eurozone (more formally known as the “Stability and Growth Pact”) stated that governments could not come to the rescue of their economies by cutting taxes or increasing spending, if doing so would push up the government deficit to 3% of GDP or more – and many countries in the euro zone were so close to that 3% limit even before their economies slowed down that they could do very little to help boost growth. More recently, of course, those “membership rules” were essentially scrapped but, by that stage, the damage had been done. Now, however, the poor economic performance in the euro zone is beginning to reverse. Although 2004 will not be a great year for growth, it will nonetheless be the strongest that we have seen since the height of the boom in the year 2000. This better pace of growth is probably due more to international factors than to “home-grown” policies – the rest of the world is growing very quickly this year and this is helping euro zone exports. Nor is the domestic economy on the flat of its back – it is being

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helped by the same low interest rates that have been driving Irish property prices higher – but it is not as strong as the exporting sectors.

2% GROWTH Importantly, next year is also expected to see stronger growth. A survey of a large number of economic forecasters shows that the euro zone economy is expected to grow by 2% next year, and I suspect that in fact the outturn may even be a little higher than that. Now, put yourself in the seat of a decision maker at the European Central Bank (ECB). Economic growth has already picked up a little and is set to improve further, if the economists are correct. Inflation has risen from around 1.5% a couple of months ago to around 2.5% today, mostly due to a rise in oil prices. And those oil prices show little sign of declining, which means the outlook for inflation could remain poor for some time. Yet interest rates are exceptionally low, due to the weakness of the economy over the last few years. Is it not time to put up interest rates to prevent inflation getting too high? The answer is probably no. Yet! The recovery is still sufficiently fragile enough not to take the risk of putting up interest rates prematurely and snuffing out the recovery too early. But it’s still fairly clear that, for interest rates, “the only way is up!”. This will clearly have an impact on Irish property price trends, but before turning to that impact, it is first necessary to quantify the likely scale of interest rate increases.

LOOK AT HISTORY Let’s start by looking at history. Interest rate cycles over the last twenty years or so in Ireland have generally seen rates rise by three to five percent from the trough, leaving aside, of course, the currency crisis in 1992/1993 when they rose through the stratosphere! If that scale of increase occurs this time around, mortgage interest rates would rise to around 7% or thereabouts. For the average first-time buyer, buying an average house, that could amount to around €500 per month in additional mortgage payments! To say that that would have a significant impact on the Irish property market is a distinct understatement.


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get back to that level, as economic growth in the euro zone improves and inflation picks up. Then, in the following year or two, as growth accelerates still further as we move further and further away in time from the slowdown, it is likely that the level of interest rates will rise still further, say by another percentage point or so.

A RISE OF 3% So let’s bring all this theory back to brass tacks. A reasonable estimate is that official interest rates will rise by around 3% over the next two to three years. What will this mean to typical borrowers, and thus to residential property prices? But of course history is deceptive. Firstly, and most importantly, interest rates in Ireland are set by the European Central Bank, and not by the Central Bank of Ireland. So to see what history can tell us about the likely scale of interest rate increases we need to look at what European interest rates have increased by in previous interest rate cycles. Here, we see that (see chart) interest rates have been a good deal less volatile. Although in 1990/1992, interest rates did rise sharply, it was as a result of the re-unification of Germany, which led to a massive boost to the German economy as many millions of former East German citizens found themselves able to shop for western consumer goods for the first time. This was clearly a once-off issue, and led to German interest rates rising by about 6% to 10%. More typically, however, interest rate cycles in Germany (and other similar European countries) have been a good deal smaller. In 1999, for example, as the boom reached its peak, European interest rates rose from around 3% to a peak level of just over 5%. Another way of assessing the scale of interest rate increases that are coming down the track is to establish what the “neutral” level of interest rates might be. Economists generally agree that the “neutral”, or normal level of interest rates is whatever the ECB’s inflation target is, plus the likely long-term level of economic growth. The ECB’s inflation target is generally accepted to be somewhere below 2% - let’s say 1.5% for the sake of argument. Now, we need to add the normal level of economic growth to that, which is probably around 2.25%. This gives us a “neutral” level of interest rates of a little less than 4%, with a margin of error around that of half a percent or so. All this means that, at least according to economic theory, European interest rates are now about 2% below their average, normal or neutral level. And it seems fairly clear that at some point over the next year or two, we will

Well, for first time buyers of an averagesized house with a 90% mortgage, their mortgage payment would rise by (very) approximately €250. For borrowers who have already bought their house, this will be a sharp and unpleasant shock but I still doubt that it will lead to real problems in the property market, including widespread repossessions and so on. There are a number of reasons for this view, including the fact that a substantial number of new borrowers fix the interest rate on their mortgages for anything from one to five years. While the rate they pay will eventually rise when the fix runs out, at least it gives them some breathing space to establish themselves financially before the monthly mortgage payment rises. Secondly, the absolute amount (€125 per month per person, assuming both are working) is not huge. And finally, it is always open to borrowers to renegotiate their loan to a longer term – perhaps taking a thirty year mortgage instead of a twenty year mortgage in order to reduce the size of their monthly payment. All in all, there would be some pain, but not the type of bloodbath that we saw in the UK in the late 1980s. Remember that UK interest rates rose by close to 10% at the time and peaked at an amazingly high 15%.

today. All other things being equal, that could conceivably lead to a drop in house prices of 20%. But all other things, fortunately, are not equal! As already mentioned, the use of thirty year mortgages instead of the standard twenty years would help. Similarly, the rise in the interest rate on fixed rate mortgages over the next couple of years is likely to be significantly smaller than the 3% increase that I have assumed for variable interest rates, further reducing the impact. And, of course, we cannot forget that the Irish economy is set to grow by around 4% to 5% per year. Bringing all this together then, the rise in interest rates set to happen over the next two to three years could reduce the prices paid by first-time buyers ability by around 20%, at the extreme. But set against this is the fact that incomes and salaries could rise by an amount almost equal to that over the same period. Offset one against the other and we can reasonably assume that house prices, for first-time buyers at any rate, will be broadly stable over the period. This would mark a significant slowdown from the recent pace of growth, but at the same time would be a very long way from the property crash that the UK saw at the end of the 1980s, when interest rates rose there. * Eoin Fahy is Chief Economist with KBC Asset Management

But for potential buyers, who at the end of the day are the people who set the price of houses, the situation would be more difficult. A rise of 3% in the mortgage rate, bringing the rate to around 6%, would significantly reduce the buying power of potential buyers and using some reasonable assumptions, we could say that for a given amount that they could afford every month, a house-buying couple could pay 20% less for the house of their dreams after interest rates rise by 3% than they could

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DISPLAY YOUR PROPERTIES IN SIX LANGUAGES ON THE CEI WEBSITE! IPAV members can now have their properties uploaded onto the CEI website where they will be displayed in six languages. 4PM has been appointed as the technology partner of IPAV for this purpose. The CEI (Confederation of European Estate Agents) is one of Europe's largest professional estate agent organisations, with over 25,000 members in 13 European countries (Austria, France, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, Portugal, Romania, Spain, the United Kingdom and the Slovak Republic). The CEI represents over 60,000 operators in the real estate market. IPAV is a member of CEI and has arranged for members to publish all of their properties on this international website and on four Irish websites for a flat fee. The CEI website is an exciting new channel for IPAV members to develop relationships in Europe with their counterparts and promote their company and property listings abroad. All properties on the CEI website will be translated into six languages automatically online.

* Portfolio is the software programme that will be used to update the properties to the CEI website but can also take care of the updating of your own website. IPAV members can sign up for a FREE portfolio account by calling 01 4972550. The cost of publishing all of your properties in Europe is only €65.00 per month. * Updating your website is a known headache in the property market but this has been made easy by 4PM Portfolio because it can also plug into your own website so you only have to update one place and it sends the information automatically to everywhere you want it to go. * It provides the agents with an advanced search engine and content management system. Portfolio offers a comprehensive and well-established software package providing a cost effective, maintainable and professional presence on the internet. The product can be wired into your website, giving your company an advanced and professional online search facility.

www.web-cei.com

IPAV PRICES SURVEY 2004 IPAV members will shortly receive a survey form for this year’s half yearly survey of property prices. The survey is one of the Institute’s most important publications and is of major interest to Government departments, members of the public, the media and other interested parties. The form will not take more than a few minutes to complete and you are earnestly requested to fill in the required details at your earliest convenience and to return it in the FREEPOST enveloped provided.

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ANNUAL CONVENTION 2004

CORK AUCTIONEER IS NEW IPAV PRESIDENT The new President of the Institute of Professional Auctioneers & Valuers (IPAV) is Richard Nagle of Global Properties, Cork. He was elected at the recent AGM of the Institute, which took place at Rochestown Park Hotel, Cork. Richard Nagle has a long association with IPAV, having been a key figure in establishing the Institute’s education courses at Cork College of Commerce. He has been a member of National Council for many years. Global Properties is a family-run business with offices at 12 Cook St. and Main St., Ballincollig employing a total of 15 staff. Richard’s two sons, Barry and Con are both directors of the firm which specialises in all aspects of the property market. He is married to Celia and the couple also have two daughters, Pauline and Valerie.

RECORD TURNOUT FOR IPAV CONVENTION A RECORD CROWD OF OVER 200 ATTENDED IPAV’S AGM AND ANNUAL CONVENTION WHICH TOOK PLACE IN ROCHESTOWN PARK HOTEL, CORK, ON MAY 21 AND 22. The new President is Cork auctioneer Richard Nagle of Global Properties who succeeds Paul Gartlan of Property Partners Gartlan. The new Senior Vice-President is former Fianna Fail senator Willie Farrell and the new Junior Vice-President is John Shaw of Limerick. Guests of IPAV for the weekend included André Groot, President of the Confederation of European Estate Agents and Melfyn

Williams, President of the National Association of Estate Agents (UK). The weekend kicked off with a golfing competition in Water Rock Golf Club Midleton on Friday, sponsored by the Irish Examiner. The overall winner was Valerie Walsh, (daughter of Richard Nagle) with a score of 34 points. The sun beamed down on the players who later retired to Rochestown Park for some refreshments. Prizes for the competition were presented by Rose Mulcahy, Property Manager of the Irish Examiner.

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Guests at this function were the Lord Mayor Cork, Councillor Colm Bourke and his wife Mary. The after-dinner speaker was the GAA’s Micheál Ó Muircheartaigh and later delegates danced the night away to the sounds of Joe Mac and his band.

Saturday was business day with delegates hearing presentations from Brian O’Neill, Director of the Private Residential Tenancies Board, Senator Shane Ross and Martin O’Mahony, Chief Executive, Property Team.

IPAV wishes to thank all the weekend sponsors which included;

Senator Ross, who is known for his outbursts against auctioneers, received a polite but cool reception from delegates. There was a lively exchange of views between him and the delegates.

The Irish Examiner

Meanwhile, partners and families were brought on an entertaining trip to Kinsale where they enjoyed the many delights of this historic town. Peter Brady, winner in the Category 1 section of the Golf Competition is presented with his prize by Rose Mulcahy, Property Manager, the Irish Examiner

Social highlight of the weekend was the Convention Banquet which took place on Saturday night, sponsored by the Irish Examiner.

The Irish Independent

The Irish Times Property Partners Property Team Home Care Products


ANNUAL CONVENTION 2004

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GOVERNMENT MUST ACT FOR FIRST-TIME BUYERS A GOVERNMENT MOVE TO HELP FIRST-TIME HOUSE BUYERS WAS AMONG THE PRIORITIES LISTED BY NEW IPAV PRESIDENT RICHARD NAGLE IN HIS ADDRESS TO THIS YEAR’S ANNUAL CONVENTION. THE FOLLOWING IS A SUMMARY OF HIS REMARKS

EDUCATION The Institute continues to lay a very heavy emphasis on education and on Continuous Professional Development for existing members. Our full and part-time courses, continue to thrive at our seven centres throughout the country. The major development during the past year was the transfer of the entire adult Education programme to IT Colleges where possible, as has happened here in Cork.

Pictured at the Annual Convention were Willie Farrell, Senior Vice-President and Richard Nagle, President. Firstly, I would also like to pay tribute to my predecessor Paul Gartlan who did a fantastic job for the Institute. Paul was a dedicated worker and devoted an awful lot of time to the Institute over the past year as well as running a very successful practice in Monaghan. I would like also to acknowledge the contribution of past Presidents to the Institute which, in no small way, has helped it grow and develop beyond our wildest dreams and made it the success it is today.

Pat Davitt, Liam O' Donnell and Oliver Dempsey at the Barrowvale Technology Stand at this years Convention.

The refurbishment of our offices at No 129 Lower Baggot St., Dublin was finally completed during the past year and we now have top quality offices for the benefit of our members and staff. Its Conference rooms are used on a virtual daily basis for lectures, meetings and courses and members from around the country regularly use these facilities when in Dublin.

For the first time, the lecturers were employed directly by the IT colleges rather than by IPAV as heretofore. I am glad to report that the new arrangement is working very well. I am delighted to confirm that plans are in train to run the two year full-time course leading to a Certificate in Auctioneering & Estate Agency in Cavan IT for the first time in the 04/05 academic year. I am also delighted to confirm that for the first time, too, a total of 15 holders of the Certificate in Auctioneering & Estate Agency are studying by distance learning for a B.Sc. in Property Management at the College of Estate Management at the University of Reading. I wish them well in their studies. I would like to express my gratitude to the Education Advisory Committee and, in particular, to our Education Officer Peter Brady for his ongoing efforts in this regard. The education needs of our existing members were supplemented by our various Seminars which were held in a number of venues throughout the country. Judging by the attendance at these lectures, it’s a facility we will need to expand in the future.

MORE NEWS FROM THE IPAV CONFERENCE IN CORK Barrowvale Technology had a FREE DRAW at the IPAV Conference this year to promote the development of their new Property CRM Back Office database package. The lucky winner of the Barrowvale Draw for the Fujifilm A210 3.2MP Digital Camera worth over €249 was Con Nagle, Global Properties, Main St.Ballincollig, Co. Cork. the property professional

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continue to flow in without giving back virtually anything to help first-time buyers in return. In addition, we now have the spectre of new development levies coming down the line from the local authorities causing a further hike in prices. And steel prices have recently rocketed with a possible significant increase in the price of new properties. Where will it all end ? The outlook for firsttime buyers is very pessimistic, unless the Government makes significant moves in the December Budget.

COMMITTEE ON THE CONSTITUTION

Auctioneer Donal Shine receives his golf prize from Rose Mulcahy

PROPERTY REVIEW Last year was another good year for our profession. Many of the strong demand factors that have underlined the property market continued and house prices remained firm. Looking at the rest of the year from this vantage point, it would appear that the overall rise in property prices for 2004 will be of the order of 10 per cent. Despite the lure of properties abroad in sunnier climates and in the new EU member states, there is still a very strong investment sector in the domestic market. One of the key factors here is demographic forces. The continued growth in population, net inward immigration and changing household patterns, along with the large scarcity of good quality accommodation have all helped fuel the housing market. Many of our eminent property commentators who have got their predictions horribly wrong over the past 10 years are beginning to come onside and have changed from predicting the imminent demise of the housing market to suggesting a soft landing!

- costing €300,000.00, the Government pockets a cool €135,000.00, without scarcely an acknowledgement! Where else does the Minster for Finance get such easy pickings? And all this for taking no risk of any kind. After all, it is the developer who takes 100 per cent of the risk.

FIRST-TIME BUYERS If the Government is serous about helping first-time buyers, then it has got to reduce in a significant way the amount of money it takes from the sale of new houses. That is my first message as President of this Institute. There are numerous ways they can do this. I don’t need to outline them here but act they must for young buyers. Seven years ago, new homes provided 3 per cent of the total Government tax take. That is now up to 9 per cent, a trebling of the tax take in just one sector. Such a happening would cause an outrage in other sectors of the economy but the Government has managed to let this easy money

Recently, the Joint Oireachtas Committee on the Constitution published its Report on Property Rights. IPAV made both a written and oral submission to this Committee and we welcomed many of its findings. The report does highlight many of the problems and suggests a number of ways they might be tackled. However, IPAV will await the details of any legislation that may be published by the Government later. IPAV has always cautioned against intervention in the market which had very mixed and mostly negative results in the recent past. As outlined in our submission, market forces generally deliver the most desirable outcome and, where possible, they should be left to operate as freely as possible. As the level of house building reaches a record high, the housing market in Ireland is likely to reach balance within a few years. In regard to compulsory purchase of property by local authorities and other state bodies, we would warn against any blunt rule of thumb such as purchase at agricultural value plus 25%, a move that would probably lead to many long and protracted High and possibly Supreme Court cases. This idea was contained in the

The Institute is very conscious of the very high cost of houses, particularly in Dublin and that first time homes continue to be way out of the reach of first-time buyers. Something needs to be done about this and nobody is in a better position than the Government and the Minster for Finance himself. It is nothing short of a scandal that 45 per cent of the price of a new house reverts to the Government in one of half a dozen separate taxes and charges. If you take an average house price – and it is almost impossible to talk about an average as it all depends what part of the country you mean Don Walsh, who was second overall receives his Golf prize from Rose Mulcahy

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original Kenny Report of 1973 which is now 31 years old. A new and more modern thought-out process is now required. On the question of a Constitutional Referendum, IPAV has always argued that there is no need for one and the supply of property can be increased simply by reforming the planning process as is outlined in the Report.

REGULATION We then come to the Committee’s recommendation that auctioneers and estate agents should be regulated by an independent body or the State. IPAV has no problem with regulation and we have long regarded the situation, whereby anybody can go down to the District Court and get a licence as long as the local Garda Superintendent has no objection, as unacceptable. Clearly, this is grossly inadequate in an area where we are handling other people’s money. The Institute has long addressed the area of regulation itself.

REVIEW BODY The Institute of Professional Auctioneers and Valuers warmly welcomes the announcement by

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the Minister for Justice, Equality and Law Reform of a review of the Auctioneering Profession. This review will cover all aspects of the Auctioneering Profession in Ireland and is both timely and necessary as the last review was in the 1960’s. This is the most significant development in our profession in recent years and we will be monitoring developments with interest. We have already formed a Sub-Committee for this purpose and we are represented on the Review Body itself by our Chief Executive, Liam O’Donnell.

CEI On the broader front IPAV continues to play a positive role as an active member of the Confederation of European Estate Agents. Our Chief Executive continues to represent us at Board level and I am looking forward to representing you where necessary at European level in the 12 months ahead. As your President, I intend to make our voice louder and to make it heard where it matters. But most of all, I look forward to your support and help during my term of office.

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SENATOR ROSS GIVES HIS VIEWS ON AUCTIONEERS AND AUCTIONEERING A SUGGESTION THAT IN FUTURE AUCTIONEERS AND ESTATE AGENTS MIGHT NOT HANDLE DEPOSITS WAS ONE OF THE CONTROVERSIAL SUGGESTIONS PUT FORWARD BY OUTSPOKEN SENATOR SHANE ROSS WHEN HE ADDRESSED IPAV’S ANNUAL CONVENTION.

Stock Exchange has had to do it and my time in stock-broking taught me that it was impossible for people in small communities to make objective, clinical forensic decisions about their peers. The complaints procedure is flawed from the very beginning.

GUIDE PRICES

Pictured at the Annual Convention were (l - r): Willie Farrell, Senior Vice-President IPAV and Senator Shane Ross, Guest Speaker. The Sunday Independent Business Editor received a polite but courteous reception from the audience in the Conference Hall. In an unscripted address to delegates, Senator Ross said he wished to highlight a few regular complaints which he hears voiced about auctioneers. The following is a summary of his remarks: When I write pieces about property sales it provokes as big a mailbag as I get almost about the banks. That’s the reality. They just come pouring in. It may be that you are insulated by the fact that it’s been an immensely prosperous time for auctioneers and the rising property prices are in your interest. The general public is not satisfied with what is going on. There would not be a Review Body unless the Government was dissatisfied with what is going on. We’re all in a time of change and immense scrutiny. It is quite fantastic that you can become an auctioneer without anything other than €12,700 and going down to the District Court, lodging the money and off you go selling houses. Everybody knows that the responsibility of doing that is immense. The attitude of the law and courts to that is cavalier to say the least. Houses are to

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most people the most important asset they will ever own. It is of immense significance what price they get for it. To think that some people are selling their houses through people that are utterly unqualified in this area is very, very alarming. People need protection in this area very badly.

SELF-REGULATION There is a huge move in all areas of professions against self-regulation. It’s particularly important in Ireland because it is such a small place and everybody knows each other and it is likely they will know somebody that will come up for some disciplinary offence or for breaches of the Code. This is not Germany or the United States. This is a small community with small numbers in the professions and where people are interdependent on each other and where there are all sorts of invisible links which are not declared. It is not necessarily pointing a finger at people for behaving in an improper way but there are hidden pressures in a society which makes selfregulation utterly and totally unsuitable. The accountants’ body has to do it. The

The issue of guide prices is probably more applicable to the IAVI. I cannot find any virtue in the utterly misleading guide prices that have been published in newspapers. Guide prices are always under the final sale price. The consistency of that is enough evidence that it is deliberate. I have sold properties. Invariably the advice I have been given is to put in a guide price that is well below the price that is expected to be attained at the auction. That seems to me to be deliberately misguiding. What the guide price is, in reality, is a bait for the innocent fish who are sitting out in the pond looking to find somewhere to live. One could forgive that even if you believed that everyone understood the game. I often hear auctioneers saying; ‘Don’t worry, they know we’re lying so it doesn’t matter! Everyone knows they’re 30 per cent below. So they just add 30 per cent.’ That just is not true. There are hundreds of thousands of potential buyers out there many of whom we know see a guide price and still despite the publicity expect the property to sell there or thereabouts. But it never happens. And what I find offensive about that is not just that is deliberately misleading but that the people who do this describe themselves as valuers! How can you be a valuer if you consistently can’t get your valuation right? That’s the problem I see. If the valuations came in at a higher level sometimes and a lower level sometimes, that would be fair enough. It’s not an exact science.

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PICTURE SPECIAL ANNUAL CONVENTION 2004 PICTURE SPECIAL

Pictured at the Annual Convention were: Richard Nagle, New President and AndrĂŠ Groot, the Netherlands, President of CEI.

The top table at the Annual Dinner in Rochestown Park Hotel, Cork.

Richard Nagle, New President and Padraig Lynch, Dingle, Munster Council Member.

Pictured at the Convention were (l - r): Mairead Ryan, Tipperary; Catriona Barry and Damian Ryan from Sherry Fitzgerald Ryan Talbot, Thurles; Mark Mullins and Linda O'Rourke from Global Properties Cork

IPAV Staff Laura Raleigh, Valerie Mogerley, and Joe Denny with Richard Nagle, President

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Picutures by John Sheehan Photography

Valerie Walsh, overall winner in the Irish Examiner Golf Competition receives her award from Rose Mulcahy, Property Manager, the Irish Examiner


ANNUAL CONVENTION 2004

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PICTURE SPECIAL ANNUAL CONVENTION 2004 PICTURE SPECIAL

At the Annual Convention were (l - r): Cllr. Colm Burke, Lord Mayor of Cork; Richard Nagle, IPAV President and Sports presenter Michael Ó Muircheartaigh.

(L - r): Keith Murphy; Jacqueline Daly; David Daly; Louise Daly and Sandra Kiernan of Daly Auctioneers at the Convention Dinner.

(L- r): Martin O'Mahony, Property Team O'Mahony Auctioneers, Dublin; Richard Nagle, IPAV President; André Groot, President, CEI and Brian O'Neill, Director, the Private Residential Tenancies Board.

Pictured at the Annual Convention were: John Kennedy and Peter Newbury of Rentman.

Pictured at the Annual Convention Dinner were (l - r): Geraldine and Timothy O'Connell , Mallow with Carol Crosse from Limerick. the property professional

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Continued from page 14 But in this case it’s always an exact science because it’s always below the level. This must be remedied if confidence in the auctioneering industry is to be restored.

FINANCE HOUSES I am very uneasy about the practice of auctioneers running finance houses of their own. I think it’s very wrong that people who are selling houses should also be organising loans to buyers. There is a huge conflict of interest there. If I’m selling a house and a subsidiary of my company is arranging the money for the buyers I’m benefiting from those loans. I am going to be tempted to sell not to the top bidder but to the person who is borrowing the money from which I can benefit. There are many auctioneers in Ireland now organising these finance houses and who are benefiting from the loans of buyers as well as the sellers. That is a clear conflict of interest. If there are no Chinese walls in that company - and I don’t believe in Chinese walls - the person selling may well find out the strength of the person buying. I also feel very uneasy about the holding of booking deposits. I think that people buying houses suffer under the clear misapprehension that when they give booking deposits to an auctioneer or estate agent that it has some sort of legal standing. It has none and everybody knows

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that. Yet deposits are taken regularly by auctioneers who give that impression. The reason of course is because auctioneers want to protect their commission! That is not a satisfactory way of operating as it confiscates a certain amount of money that has no legal standing. I see no reason why auctioneers need to handle clients’ money at all. It only leads to difficulties, wrong accusations, suspicion about who is getting the interest. I think that’s a reform that could be introduced.

THE MEDIA There’s always been a tense relationship between the auctioneers and the media. Property supplements are craven in the service which they give to auctioneers. There is no doubt that they puff houses in a somewhat unrealistic way which must give many people here a great deal of satisfaction. That is OK I suppose, providing everybody understands they are puffs. There has been a tendency on occasions, which makes me uneasy, when auctioneers try to influence editorials with advertising. Auctioneers are very big advertisers in the media. I have come across instances of advertisers trying to use that as leverage to ensure that there is very little criticism of them as a body. I have no doubt that in some situations that works. That’s probably re-assuring for some but alarming for me. In

Independent Newspapers it does not have an awful lot of effect. That’s because the Independent Group is a pretty strong and prosperous group and it can afford to resist. I think that is a very regrettable tendency in certain quarters and I exclude the IPAV from this. It’s something that should not be tolerated by any newspaper or any auctioneers’ association. It is unforgivable that the freedom of the press should be threatened by people with financial clout.

WHICH To back up what I have said I am sure some of you are aware of a survey by WHICH magazine a while ago. This is about perception, it may not be about fact. WHICH did a survey in the UK. Only 1 in 10 of those asked thought auctioneers were trustworthy. 70 per cent said their agents misled them. 41 per cent believed that by law they needed qualifications, when they didn’t. 50 per cent had complaints about their agents. They also believed that 6 out of 10 estate agents broke the law. They also believed that they favoured people who were using their own mortgage. There really is no Government Department to regulate auctioneers. Justice issues the licence. It’s been a bit of a free for all for many years. I think the situation is soluble. I think the upcoming Review Body is a great opportunity for everyone.


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AUCTIONEERS – A POSITIVE APPROACH! IPAV NATIONAL COUNCIL MEMBER AND CEO OF PROPERTY TEAM, MARTIN O’MAHONY, GAVE A POSITIVE VIEW OF AUCTIONEERS TO THE ANNUAL CONVENTION. THE FOLLOWING IS A SUMMARY OF HIS REMARKS

Martin O’Mahony, FIPAV

From reading the newspapers and observing the media, it appears to me that, from time to time, various professions become the target of the media. The media are often known to hunt in packs and so auctioneers have in recent times been their victims in the same way that lawyers or insurance brokers are also often targeted. We can cope with the criticisms but we are entitled to give a response. Let me be the first to say I have nothing against the media making valid criticisms and often they do highlight issues that otherwise would go unnoticed, the latest probably being the AIB rip-off of foreign exchange commissions. Fair dues to the likes of Charlie Bird, George Lee and others for doing a very good job. They serve society well.

But let’s look at what IPAV has done to date by way of regulation. IPAV has a long tradition in self-regulation. All new applicants for membership must have completed at least the basic Certificate in Auctioneering either by the full-time route at our centres in Dublin and Cork or at any one of our seven part-time centres throughout the Republic and Northern Ireland. The syllabus for these courses is set either by the Colleges themselves or our Education Advisory Committee which is made up almost entirely of independent outside nominees, all experts in their field. Of course, many of our students go on to study to Diploma level here in Cork College of Commerce and to Degree level at the University of the West of England in Bristol.

We all need an independent media to keep us on our toes. But we also need a wellinformed media who know their subject. Often, in their writings on the auctioneering profession, this is blatantly not the case.

IPAV invests heavily in education and in Continuous Professional Development for our older members. So as far as I am concerned, our members are highly trained individuals who are experts in their field and capable of providing a thorough, professional service.

REGULATION

In addition, before becoming members, all applicants must have a minimum of two years experience where it matters - on the ground practising under the watchful eye of an experienced member.

These days one of the buzz words around is ‘regulation’ for all professions and this is a good thing. IPAV has long believed that the current situation, whereby anybody can go to the local District Court and, provided the Garda have no objection, walk away with a licence and set up shop is incorrect. While we totally favour competition, there has to be a modest level of educational requirement, particularly as auctioneers fall into the area of professions who handle other people’s money.

COMPENSATION FUND But we recognise that auctioneers, like all others are human, and they do make mistakes.

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Guide prices are in fact a device used by a small handful of auctioneers and estate agents in the greater Dublin area to save them answering the phone to hundreds of queries. But they are generally unreliable, to say the least and give the impression almost of some sort of agreement to sell. But how could you possibly give a price of a house going to auction and undertake that it will be sold within 10% of that figure? If that were the case, why not just sell the house at 10% of the guide price and have no auction! That is the only logical conclusion.

Pictured at the Convention were (l - r): Michael O'Leary, Enniscorthy; Richard Nagle, and Tom Crosse, GVM, Limerick.

IPAV has long been aware of the need to protect members of the public and their funds. So, firstly we have put in place a comprehensive Compensation Fund into which all members contribute and which is there to provide compensation should any member get into financial difficulty and be unable to meet his or her liabilities. And just a note on the record of the Compensation Fund to date. It was set up in 1986 and, in the intervening 18 years, there have only been three claims in total, one of which was for just €1,270.00. Not bad for an organisation that has 700 members in practice! We are also aware that members of the public do have genuine complaints to make from time to time against members. So we have in place a Disciplinary Committee which analyses all serious complains – we do get some frivolous ones – against our members. The membership of that Committee which used to consist entirely of experienced members was broadened a few years ago to include two outside members, both of whom are widely experienced and experts in their field. They are Tony Ensor, a solicitor and former President of the Incorporated Law Society and Kieran Hickey, a former Chief Executive of the Eastern Health Board. Their appointments ensure a huge degree of openness and transparency in our dealings with complaints and the system is working very well.

In this regard, I would like to ask Senator Ross what controls are in place to monitor journalists who are far more influential in what they write than auctioneers. To my knowledge, there is no Disciplinary Committee of any kind, no Press Council although it has been long talked about. In fact, there is precious little auctioneers or anybody else can do when they feel aggrieved other than write a letter to the editor or write to the so-called “Readers’ Complaints Officer” about whom we hear very little these days. There is always the ultimate course to sue and go to court but here again the costs are totally prohibitive for the ordinary citizen. I would like Senator Ross to highlight these issues in the Seanad and to see him write about them in his columns!

What is forgotten, of course, is that the auctioneer has a duty to his or her client to secure the best possible price. Members of the public and journalists appear to be ignorant of the fact that the auctioneer is employed by the vendor alone in exactly the same ay as the solicitor or the surveyor. Yet, what purchaser would employ the vendor’s solicitor. There could be a conflict of interest and rightly so. In the same way, a would-be purchaser who wishes to get a realistic estimate of the value of a property should employ the service of another auctioneer or estate agent who knows the particular area. Auctioneers are not just qualified to sell property. They are equally qualified to value properties for auction or sale by private treaty, to value property for mortgage purposes and to give expert opinion in court or elsewhere. Perhaps, we are our own worst enemy in not promoting our other skills and the view of auctioneers in the public eye is a very narrow one indeed.

GUIDE PRICES But there are weaknesses in our system. I’ve mentioned one earlier – the easy route to securing a licence. There is another – the thorny issue of guide prices about which Senator Ross has developed something of an obsession. IPAV has never supported the idea of guide prices or worse still, the notion that the guide price should be within 10% of the selling price. In my view, both are a nonsense and should never have been introduced. They should also be abolished forthwith! Shane Ross

Continued on page 20 18

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Continued from page 18

REVIEW BODY As many of you will be aware, the Minister for Justice, Equality and Law Reform has recently set up a Review Body to look at all aspects of our profession. We have welcomed this development and we are glad to have been asked to appoint a representative to it. And we have already done so, by nominating our Chief Executive Liam O’Donnell. I look forward to hearing the deliberations of this Committee and its final recommendations which are still some way down the line.

As matters stand, the auctioneering profession is already extremely well regulated by both its representative bodies, IPAV and the IAVI. In fact, I would go so far as to say Irish auctioneers are among the best regulated in Europe. It is clear to us that standards are not high in some countries and this is something that needs to be addressed perhaps at EU level. But that is a matter for another day.

Finally, could I say the proof of the pudding is in the eating. Why, if all what Senator Ross has to say is true, do 85% of all house sales go through auctioneers compared to figures as low as 40% elsewhere in Europe? The answer, ladies and gentlemen, I believe is very simple. It is because auctioneers provide a professional service and do a thoroughly professional job for their clients!

The idea for this review came, partly at least, from the pressure exerted by Senator Ross and his NUI colleague, Joe O’Toole in recent Seanad debates. It is now open to the senators to make a submission to this Review Body where it will be examined in detail. I hope that from this Review Body, we will be presented with a comprehensive set of recommendations which will put auctioneers on a par with any profession in this country or elsewhere.

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Diary 20 05

Richard Nagle, President congratulates John Shaw, new Junior Vice-President.

The Property Diary 2005

GVM Property Sales

The Property Diary 2005, an essential desk tool for all IPAV members, will be published on November 1. As usual, all paid up IPAV members will receive a complimentary copy.

THE INS TITUTE PROFESS OF IONAL A UCTION EERS & VALUER S

The Prop erty

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Diary 20 05

This year, the publishers, Design Room, are offering members the opportunity to have their own NAME ENGRAVED on the FRONT COVER, thus making it an ideal Christmas gift for clients and friends alike. The cost for this service will be € 45.00 (ex vat) Per copy subject to a minimum of 10 Diaries. If you wish to order copies, please fill in the form and return to address below

GVM Property Sales THE INS TITUTE PROFESS OF IONAL A UCTION EERS & VALUER S

Name of IPAV member:____________________________________________________________________________________________________ Address: ___________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________ Telephone No.: ___________________________________e-mail address: ___________________________________________________ COMPANY NAME ONLY (ie no logo’s can appear) TO BE ENGRAVED ON COVER (IN BLOCK CAPITALS) FAX TO: 01 4977097 ________________________________________________________________________________________________________________________ No. of copies (minimum no. of 10.): _____________________________ Please return this form with complete payment in FULL to: Design Room, Salamander Lodge, 80 Sandford Raod, Dublin 6 Tel: 01 497022 info@designroom.ie N O T LATER T H A N FRIDAY, AUGUST 6. IT WILL N O T BE POSSIBLE T O PROVIDE THIS SERVICE AFTER THAT DATE.

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THE ROLE OF THE PRIVATE RESIDENTIAL TENANCIES BOARD PRTB CHIEF EXECUTIVE BRIAN O’ NEILL OUTLINED THE ROLE OF THE NEW BOARD TO IPAV’S ANNUAL CONVENTION.

Brian O’ Neill The private rented sector in Ireland plays a vital role in the overall housing market and has a positive role to play in the development of mixed tenure communities. The sector provides homes for people across the economic and social spectrum and meets housing needs and demand for a wide range of households with a variety of income levels, ranging from highly paid professionals to some of the most vulnerable members of society. Therefore, in many ways, the private rented sector can be considered more diverse and complex than the social or owner occupied sectors.

In fairness, that was to be expected, as the various interests have differing views about the relative rights and responsibilities of those who provide rented accommodation and those who live in it.

Before we begin to consider the new legislative framework, I think it would be useful to put it in context. The private rented sector is of vital importance in the overall housing market. It is a tenure of choice for an increasing number of people. It facilitates mobility – a growing feature of the labour market and it assists in addressing social housing needs. Recognising this, but aware of the fact that there were also problems in the sector, including the fact that the sector was not reaching its full potential, a Commission on the Private Rented Sector was established to look at the landlord and tenant relationship and make recommendations in relation to the sector.

Like the Commission’s Report, the Bill does not contain everything that both accommodation providers and renters might like.But it does strike a fair and reasonable balance between those demands and it provides a framework for a stable, effective and efficient private rented sector. This, I have no doubt, will, in turn, encourage further development and growth in the sector.

The Commission was a widely representative group of relevant interests, the 18 members of which signed up to the Commission’s recommendations. Naturally, the Commission’s recommendations did not fully meet the demands of all the competing interests in the sector. For example, the Irish Property Owners Association objected to the security of tenure provisions and to registration in particular. Threshold, the Union of Students in Ireland and the Society of St Vincent de Paul all wanted greater security of tenure and the introduction of some form of rent regulation.

RESIDENTIAL TENANCIES BILL I think it is worthwhile noting one key outcome of the Commission’s report and recommendations – it was accepted in full by the State and resulted in the Residential Tenancies Bill.

When Minister Noel Ahern introduced the Bill in the Dáil a year ago, he referred to it as ‘flagship’ legislation. It is, by any standards a major piece of legislation that sets out to deal with the difficulties that have surrounded the rented sector for the last 50 years.To paraphrase Tom Dunne, Chairman of the PRTB, agricultural rent was addressed in the 19th Century, commercial rent in the 20th century and at last, in the 21st century, the private rented residential sector is being addressed. The new legislation sets out to provide a user-friendly and fair regime where both landlords and tenants will have better and more accessible protection than currently available. It will also result in a fundamental change in the relationship between landlords and tenants - for the better. In addition, it should also result in giving the wider

community more confidence in the sector and its management.

LANDLORDS I often suspect that the historical view of landlords continues to today. All landlords are bad. Tenants by definition must be good! The reality of course is considerably different. I have no doubt that 90% of both landlords and tenants treat each other fairly. Of course, it is a given fact that you do not get a bad tenant with a bad landlord. So I suspect that roughly 10% of tenancies will give rise to some level of difficulty and dispute. More importantly, 90% of tenancies will run smoothly with no significant difficulties arising between the landlord and tenant who behave responsibly and professionally. The situation, on the ground, will not be all that different for these landlords and tenants once the new legislation is enacted. Hopefully, however, it will have a significant impact on the bad landlords and tenants. Tenants will be able to rent on flexible terms for periods that suit them, much as they do now. They will, however, have the added advantage of a greater degree of security of tenure if they want it, but only if they want it. If they are periodic tenants, they will be free to leave at any time, having given reasonable notice, as is now the case. I know some people have difficulty with the security of tenure provisions in the legislation. I think this is down to a misunderstanding of what is proposed. The PRTB has received numerous phone calls from both landlords and tenants about this provision. Usually, these calls revolve around tenants saying they do not want to be stuck with four year tenancies or landlords saying they

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do not necessarily want to have a particular tenant for four years if that tenant is causing problems.

weeks notice. That limited notice period has caused immense difficulties for some tenants e.g. single mothers.

These are misinformed queries. As I have already stated, tenants can rent on flexible terms, as suits them – one year lease, two year lease, periodic tenancy. They can end it once they give the appropriate notice and they fulfil the terms of any tenancy agreement in place.

Specific safeguards have been provided to ensure that landlords do not abuse the right to reclaim possession. If a landlord terminates a tenancy on grounds that subsequently turn out to be false, the tenant can refer the matter to the PRTB and compensation of up to €20,000 may be awarded.

SIX MONTHS In terms of landlords, a qualifying period of six months applies to the security of tenure provisions. During the initial six months a landlord can terminate the tenancy without reason. It is considered that six months is a sufficient amount of time to allow the landlord to be satisfied with the way a tenant is working out, while not being long enough to make tenants vulnerable to the automatic termination of their tenancies before the security of tenure provisions kick in. If this judgement is proved wrong, the PRTB will seek its amendment. In any event, the tenant only has a qualified right to security of tenure because the owner will have a right to reclaim the property for justifiable reasons such as own or family occupation, sale, change of use or major refurbishment. These grounds are essential to basic property rights and to encourage participation in the sector by accommodation providers. Naturally, the tenancy can also be terminated in the event of the tenant’s failure to comply with the tenancy obligations. The new system represents a major improvement on the present position of a virtually absolute right of a landlord to terminate a tenancy, subject to only four

Under the new legislation, tenants will have a means of ensuring that their landlord meets his obligations. It is worth stating that most professional landlords do this as a matter of good practice, but tenants will now have the confidence that all landlords who do not can be asked to do so without fearing eviction. For their part, landlords will have greater certainty of what to do to be good landlords and provided there are no problems with their tenants, life will be much as it was in the past. If they need to change rents, there will be a fair and user-friendly system for doing this. If they have problems with tenants, they will now have a means of dealing with them.

DISPUTE RESOLUTION SERVICE Landlords and tenants will have access to a

timely and confidential dispute resolution service. This service will have an emphasis on putting things right between the parties and maintaining good relationships rather than being adversarial. Given that, in time, the PRTB will become best known for its dispute resolution functions, it may be worthwhile to look at the structures being put in place, and why

Pictured at the Annual Convention were (l - r): Brian O'Neill CEO of the Private Residential Tenancies Board; Una O'Neill and Desmond Daly of Property Options.

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we are putting them in place. Up to now, if a landlord or tenant found themselves in dispute they had three options – either resolve it themselves, terminate the relationship or go to court. I would hope that in most cases disputes were resolved amicably between the parties. However, we know that in numerous cases tenancies have been terminated on foot of disputes, often because the tenant cannot get the landlord to meet his obligations and, for example, repair the shower, or because the landlord cannot get the tenant to meet his obligations, which can often be as simple as paying the rent on time! The final option for landlords and tenants in dispute is to take the matter to court. However, this is a slow, adversarial and very expensive procedure. In many cases, tenants and often landlords cannot afford to take a dispute to court. Where cases have been taken, there have, on occasions, been complaints about the consistency of judgements handed down. From the very start we felt that what was needed was a cheap, speedy, user-friendly and fair system. We looked at the systems used in other countries around the world, particularly Canada, New Zealand and Australia. We looked at the quasi-judicial dispute resolution systems currently operating in Ireland such as the LRC, EAT, various mediation and arbitration schemes. We thought long and hard about what system would deliver for landlords and tenants alike, what system would instil confidence in the process.

TWO-TIER SYSTEM The end result is the PRTB Dispute Resolution Service. It is a two-tier system. The parties in dispute will, in the first instance, be offered the services of a PRTB mediator. The reason we chose mediation as an option is because we believe that an agreement freely entered into by the parties is preferable to a decision imposed by a third party. It also has the advantage that an agreed solution is more likely to be implemented by the parties. It facilitates the continuation of the relationship if required. Finally, the mediation process itself forces the parties to think about the landlord – tenant relationship and their respective roles, responsibilities and actions. By going through the mediation process they can learn how to avoid future difficulties or deal with them as they arise. Unfortunately, not everybody is prepared to sit down with the other side and try to broker a solution. Perhaps the relationship has finished badly. Perhaps the parties just want a third party to decide for them. Perhaps the dispute itself is not amenable to mediation, which is likely to be the case in many tenancy termination cases. In such cases, an Adjudicator will be appointed. The


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PRTB Adjudicator will hear the evidence from both sides and any witnesses involved and will determine the matter, having regard to the law and in many cases, common sense.

think that says an awful lot about these people and I want to express my gratitude to them. The PRTB will be all the better for their professionalism and expertise.

professional valuation. Then after considering everything, the Adjudicator will determine whether the rent sought exceeds the market rent.

Where the mediation fails to produce an agreement or where one of the parties is unhappy with the Adjudicator’s determination, the matter can be appealed to a Tribunal to be established by the PRTB. It is usual to allow an appeal procedure in judicial and quasi-judicial processes. The Tribunal’s decision will be binding on the parties.

RENT VALUATION

I want to make this really clear. In dealing with rent, the PRTB dispute resolution process WILL NOT set rent levels. New lettings will be a freely entered agreement between the landlord and tenant. Rents will be determined by the market, albeit indirectly, as is the case in the commercial market, not the PRTB.

LOCAL LEVEL Our intent is to deliver the PRTB Dispute Resolution Service on a local level. Every county will have a Mediator and Adjudicator or a team of them to deal with disputes, as they arise. Since our establishment on an ad-hoc basis we have put in place a network of 120 Mediators, spread throughout the country. To-date, despite a reasonably large number of enquiries about the service, only seven mediations have been held. Unfortunately, and I regret having to say this, the reason we have had so few mediations is primarily because landlords have declined our invitation. In the bulk of cases these disputes involved retention of deposit and the attitude of many landlords was ‘I have the money, let them sue me’. I have absolutely no doubt that that attitude will change once we are established on a statutory basis. At the moment we are building our Adjudication service. We are running a series of workshops with the adjudicators and by the end of July we will have some 72 Adjudicators in place and ready to deal with cases. The PRTB Adjudicators and Mediators come from a range of professional disciplines and all bring to the process a wealth of experience. We have property professionals, legal professionals, senior business people, members of the Mediators Institute of Ireland and the Chartered Institute of Arbitrators. I am delighted to say that the Institute of Professional Auctioneers and Valuers has been of particular assistance to us in that regard, I would like to take the opportunity to publicly thank your Chief Executive Officer, Mr. Liam O’Donnell, not only for his work on the PRTB but for his support for the building and development of the PRTB Dispute Resolution Service. A considerable number of IPAV members have committed themselves to work with the PRTB. Without these people, we cannot deliver a service to landlords and tenants. I know, from having spoken to those individuals, that they have a deep sense that what we are engaged in is the right way forward. I also know that many of them also have a sense of ‘wanting to make things better’ and a sense of ‘public service’. I

I will now comment on rent valuation. During the Commission’s deliberations, some argued that tenants would need some form of rent certainty. In effect, they sought a system whereby the market rent agreed at the start of the tenancy would go up by a specified index. Of course this immediately causes a problem. What index do we use – CPI, rate of inflation, a construction index? If we do manage to agree an appropriate index, what would happen in a market where rents are rising. Chances are that many landlords would increase the initial rent in order to capture future rent increases. The net result of that is that a tenant wishing to rent for only one or two years would, in effect, be paying for security of tenure they do not want. What would happen if, as we have to-day, market rents dropping. In the normal course of events, the chances are that the index will lag behind market reality or may in fact be increasing as the market decreases. In such circumstances, tenants would end up paying higher than the market rent. Given that type of scenario, I think it is understandable that the Commission recommended that rents should be reviewed to market rent and that this should be done once per year. So let’s consider how this rent review will take place. I expect that most rent reviews will be negotiated amicably between the landlord and tenant. Hopefully, that process will be helped by the published rental data from the PRTB. We will have that data from the registration process which I will come to shortly. However, if there is a dispute between the parties about the level of the rent on review the matter can be referred to the PRTB. At the discretion of the parties we will appoint a Mediator or an Adjudicator. In such a dispute the person appointed will usually be a practising valuer. I say usually because in some circumstances, such as mediation, it may not always be necessary. Having said that, I would expect that most rent valuation cases will be dealt with through adjudication. The Adjudicator will consider all the aspects of the case and any evidence the parties submit. Evidence as to what the market rent is will be drawn from all sources and comparables will be taken into account. The published data from the PRTB will be one source. Landlords and tenants will offer comparisons of other property rents in the area. Where necessary the Adjudicator, who in most cases will have a local knowledge, can seek an independent

REGISTRATION I mentioned registration earlier and promised to deal with it. For some reason this appears to be a highly contentious issue among landlords. Since 1996, landlords have been obliged to register rented dwellings with the local authority. The system has not worked well and compliance has been low. This is in part due to legal challenges by landlords and also to some extent to a lack of enforcement activity by some local authorities. In future, landlords will be required to register details of all tenancies with the PRTB. The Irish Property Owners have said that imposing registration requirements on landlords would be ‘bureaucratic and unduly onerous’. They pointed out that landlords of houses in multiple occupancy would be constantly filling out registration forms. The registration procedure takes the shape of a short form that will take a couple of minutes to fill out and post to the PRTB. I do not think a professional businesslike landlord will have any problems with this. The PRTB has been instructed by the Minister to ensure compliance with the law and to identify non-compliant landlords and pursue them through court. I hope I will not have to do that and instead that landlords realise the practical benefits of registration and comply freely. Those practical benefits include the fact that landlords will not have access to the PRTB Dispute Resolution Service unless the tenancy is registered. The data collected will assist the PRTB in its dispute resolution functions, e.g. in relation to disputes over rents. Therefore, it is very much in the interest of landlords that this data be supplied to the PRTB. The legislation provides that the tenancy commencement date – which may be highly relevant about the validity of a termination notice – is the date in the registration, unless the contrary is proved. The registration data will also underpin the PRTB’s research and information functions. The Commission in its deliberations noted the dearth of information on the sector. We need this information to monitor developments and trends in the sector and to provide a sound basis for future policy formation.

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DOUGLAS NEWMAN GOOD GO NATIONWIDE DOUGLAS NEWMAN GOOD RECENTLY LAUNCHED THEIR FRANCHISE OPERATION UNDER THE GUISE DNG NATIONWIDE, WITH A CLEAR STRATEGY TO BECOME THE MOST SUCCESSFUL FRANCHISE OPERATION IN THE COUNTRY. DNG Nationwide, Douglas Newman Good’s franchise operation can immediately benefit from a proven record as being one of the country’s most powerful and well established property brands with vast experience in all areas of the market. They have already commenced talks with a large number of high profile estate agencies in virtually every city and town in Ireland

Keith Lowe MIPAV, FIAVI - Managing Partner (left) Michael Glynn - Franchise Partner (middle) Tony Forte MIAVI - Franchise Director (right)

With 16 branches in the greater Dublin area and a total of €1 billion in residential sales in 2003 (making them the largest seller of second hand property in the Greater Dublin area), DNG are well known and well respected.Their New Homes Division is also one of the strongest in Dublin. They believe that agents around the country will now be able to market their new housing schemes and resale properties directly to the lucrative Dublin market and with decentralisation now on the cards, they will be able to deal with many of the Douglas Newman Good clients who will ultimately be seeking to relocate to other areas around Ireland. DNG Nationwide franchisee Agents will be able to enjoy the added benefits of a number of centralised group services. Their businesses will also be given access to IT Support, a research department and the support of a leading property economist. As well as many other marketing tools including a dedicated website and a full colour property magazine with a proposed national circulation of 40,000. Potential franchisees will become part of a dynamic national property network. Cost effective and centrally negotiated advertising group rates mean that properties on the books will get maximum exposure for less, through high profile media. Agents will also be able to benefit from exposure on television, radio, and national newspapers. GMC mortgages, DNG’s sister company (Ireland’s second largest mortgage broker with loans of €300 million), also offers franchisees the help and support they might need in order to develop a highly profitable mortgage side of their business. Commenting on the plans, Keith Lowe FIAVI MIPAV, Managing Partner of Douglas Newman Good said “Our strategy is to become the largest property franchise operator in the country and we are fully committed to this expansion process. We feel that our dominent position in property sales in the capital will be of tremendous benefit to franchisees. We truly believe that there is a great opportunity for independent agents to benefit from the tremendous opportunities our network has to offer and we look forward to welcoming members of the IPAV to our network.” For further enquiries contact, Michael Glynn, Franchise Partner on (01) 491 2672/(086) 810 8358 Tony Forte, Franchise Director on (01) 491 2621/ (087) 752 8893.

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IN THE DÁIL… THE FOLLOWING ARE SOME RECENT WRITTEN DÁIL REPLIES FROM MINISTERS TO DEPUTIES ON ISSUES OF INTEREST BUILDING REGULATIONS Mr. R. Bruton (FG) asked the Minister for the Environment, Heritage and Local Government the level of checking of compliance with building regulations which is undertaken by local authorities and the extent to which a local authority can retrospectively inspect the level of compliance with the regulations where faults are detected by householders in the years after occupation. Minister for the Environment, Heritage and Local Government (Mr. Cullen): With the objective of improving monitoring by local authorities of compliance with building regulations, my Department and the City and County Managers’ Association have adopted a target of inspecting a representative sample of buildings. This is currently equivalent to at least 12% to 15% of buildings covered by valid commencement notices served on each building control authority. In the second half of 2003, the latest period for which statistics are available, all 37 building control authorities were carrying out inspections and 84% of authorities met the agreed target. I hope all authorities will achieve this target by the end of this year. Under section 8(2) of the Building Control Act 1990, an enforcement notice for noncompliance with the building regulations must be served by the building control authority within five years from the date of completion of the relevant building or works. Mr. R. Bruton asked the Minister for the Environment, Heritage and Local Government if he has satisfied himself that the system for identifying the source of structural faults by homeowners in houses is satisfactory; if he has further satisfied himself that there is an adequate documentary record retained of the building and structural aspects of construction which are not open to

inspection by the naked eye, so that persons can quickly and effectively identify the standard to which the house was built and if he will make a statement on the matter. Minister for the Environment, Heritage and Local Government (Mr. Cullen): It is primarily a matter for the designers and builders to decide on the level of detail to be required in drawings and specifications for the construction or reconstruction of dwellings. Owners or prospective purchasers of new or existing dwellings should assess the adequacy of building documentation available, in consultation with their legal and professional advisers. It is advisable for dwellings to be surveyed by a competent building professional prior to purchase or in the event of defects being suspected after purchase. I understand that new houses covered by structural guarantees issued by Home Bond or Premier Guarantee are subject to independent inspections by the relevant guarantee companies who would retain records of such inspections for a minimum period of ten years.

HOUSE PRICES Mr. P. McGrath (FG) asked the Minister for the Environment, Heritage and Local Government if his attention has been drawn to the recent 70% price increase in the cost of steel for the building industry; if his attention has further been drawn to the scarcity of this product; if he will assess this situation and the impact on the building industry, particularly the cost of new houses and major infrastructural projects and if he will make a statement on the matter. Minister for the Environment, Heritage and Local Government (Mr. Cullen): Construction inflation, which had reached 12% in the

period 1998 to 2000, had fallen to 4% in 2003. Notwithstanding this, recent reports from the construction industry suggest that construction tender prices had bottomed out by the end of 2003. It is too early to determine what effect, if any, an increase in steel prices could have on tender prices in the construction industry. My concern is with any overall rise in total construction costs and industry sources suggest that the recent price increases for steel will have relatively little impact on total costs. However, it is possible that such an increase could trigger price variation clause increases in a limited number of public and private sector contracts. I intend to keep this matter under review. Ms K. Lynch (Lab) asked the Minister for the Environment, Heritage and Local Government what assessment his Department has undertaken of the potential impact on house prices as a result of the development levy; and if he will make a statement on the matter. Minister for the Environment, Heritage and Local Government (Mr. Cullen): It is not anticipated that development contributions adopted under section 48 of the Planning and Development Act 2000, which are levied to fund the provision of local authority infrastructure that benefits development, will unduly affect the price of houses. While the development contribution system was reformed in the 2000 Act, it is continuous with the levying of contributions by local authorities which has operated since the commencement of the 1963 Act. In addition, a circular letter issued on 27 June 2003 advised planning authorities that while it is envisaged that developers should make an appropriate contribution towards the costs of public infrastructure and facilities, the local authority should take care to avoid development contributions that are excessively high.

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INVESTMENT POTENTIAL IN THE NEW EU MEMBER STATES CÁIT NÍ HÉALAÍ TAKES A LOOK AT THE NEW EU MEMBER STATES AND PONDERS THE PROS. AND CONS. OF PURCHASING IN SOME OF THE NEW CAPITALS THAT WILL SOON BECOME HOUSEHOLD NAMES IN IRELAND May 1st, 2004, will always be one of the most significant days in the history of Europe. It will be as significant as the fall of the Berlin Wall in many respects. It was the day when Europe was re-united. Among the many speeches and ceremonies, there was one word which came up again and again – opportunities. The debate surrounding enlargement generally focuses on the opportunities before the citizens of the new EU Member States and how membership of the EU will improve their lives. They will benefit from trading in the Single European Market. The barriers to working and studying in the rest of the European Union have been lifted and they will see money flowing into their economies in the form of EU Structural Funds as Irish people did. Some of these countries are trying to emulate Ireland’s economic model as a way to develop their countries, a way of reducing their high unemployment rates and increasing the amount of money in their pockets.

On the other side of the coin, the opportunities that the enlargement of the EU presents to citizens of the 15 more established EU member states has long been promoted by our own Government. As the economies of these new Member States develop, the wealth of the citizens will grow, along with their purchasing power. They will be the new consumers of Irish products and services. Tearing down the trade barriers with Eastern and Central Europe offers huge opportunities for Irish business and, given that only 1% of Irish exports go to the 10 new Member States, there is plenty of room for improvement, to the benefit of Irish producers.

INVESTING IN PROPERTY It is not just through trade that Irish people can benefit from the new Member States. Many Irish people are investing their money in property in these countries. In fact, according to one estate agent, Irish investors have accounted for up to 25 per cent of all commercial property transactions in Central and Eastern Europe so far this year. Joining the European Union, an entity founded on stability, democracy and prosperity, makes these countries instantly more attractive locations for property investors. Before the other Member States would even consider letting the 10 new countries into the EU, these countries had to fulfil certain economic and political criteria to prove that they were economically and politically stable, something which is a crucial factor when choosing a country to invest in. After all, it is risky to put your money into a country which experiences wild currency fluctuations. Ed Hughes, an Irishborn partner in one of the Czech Republic’s biggest real estate agents Lexxus, explained that “entry to the EU offers investors a guarantee that their property cannot be played around with by domestic politicians.” Another reason why Irish investors are looking to the 10 new EU Member States Cyprus, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia

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and Slovakia - is that there are signs that the residential prices on the Irish market are beginning to slow. There is little doubt that joining the EU will benefit the economy of these countries and good economic performance is closely followed by good property performance – both in terms of capital appreciation and rental market. The feeling is that right now there is more value to be found in these countries than in the more commercially mature Irish market.

However, the 10 countries are incredibly diverse. According to a recent report from the European Commission on economic cohesion in the EU, it could take up to 50 years of rapid growth for some of the new countries to catch up economically with the more established Member States. The countries that have joined are at very different stages of economic development. The largest country of the 10, Poland, has a population of nearly 40 million, an unemployment rate close to 20 per cent and almost one fifth of the population work in agriculture. Malta, on the other hand, with a population of 390,000, is largely dependent on tourism. It has an unemployment rate of nine per cent and its GDP is close to the EU average, making it wealthier per head of population than Ireland was when we joined in 1973. Up until recently, the Czech Republic and Poland were the most popular of these countries with Irish investors. Many Irish people picked up ‘bargains’ in Prague and Warsaw. Now Hungary has taken first place on the shopping list of Irish investors. It has an excellent business climate and a young, highly skilled and well-educated workforce which is driving the country forward and attracting foreign investment. Its low unemployment rate, at six per cent, and an increasingly well-off workforce are both positive factors to consider when purchasing residential property as they encourage a good rental market. High unemployment in a country has the added risk of emigration, which could bring about a surplus of residential property on the market with people selling up and moving out.

THE IRISH IN HUNGARY However, in Hungary, American and Israeli investors are buying up property, along with the Irish and driving up the prices. According to Brian Costello of Hungarinvest, there is an increase of about 15-18 per cent per annum. In Budapest, the city in Hungary which is the focus of Irish property investors, yields of between 6 - 8% are normal for apartments and it is possible to gain a yield of up to 11% for commercial property.

Pat Davitt Former IPAV President Pat Davitt of Sherry FitzGerald Davitt & Davitt, has sold hundreds of properties in Budapest over the past 5 years.

APPLICANT STATES

“One block in Area Six which we are now selling was fetching €1,500 per sq metre just one year ago,” says Pat. “The price has now risen to €2,250. Hungary has the second fastest growth in property prices in the EU after Ireland. With membership of the EU since May 1, that growth will rise even faster.”

Bulgaria and Romania are due to join in 2007. Turkey is also a candidate for EU membership. Croatia has recently applied and the European Commission has given a favourable opinion on its case for membership. Already the advertisements in newspapers are appearing, offering to find Irish people great deals on property there. Maybe the best returns could be found in these countries which are waiting to join. There is no doubt about the fact that joining the European Union has a positive effect on the property market of that country. But for the property buyer, the importance of thorough research cannot be underestimated. The question is how long must you wait to see the return.

COMMERCIAL IN POLAND A country like Poland has an unemployment rate of almost 20 per cent, with 25 per cent of its population living on the land and one fifth of its population working in agriculture. As this country develops economically, it is likely that more and more of its people will be moving to the cities and there will be a demand for residential property there, driving prices of residential property up. But the question is over what time span is this likely to happen. After all, Ireland was nearly 30 years in the European Union before the property boom happened here in the early nineties. According to Irishman Padraic Coll, founder of Key Invest, a Polish-based property investment company, whereas the property market was depressed in Poland for the past couple of years, it took an upturn towards the end of 2003. It is, however, an economy in transition and the higher yields available in Poland, compared to the Dublin market reflects the higher risk. The Embassy of Poland in Ireland says Irish people tend to buy residential property, whereas there is a better return from commercial property in Poland at the moment. Analysts are now saying that the countries to watch are the Baltic States - Latvia, Lithuania and Estonia. While Hungary is the most popular country now among Irish property investors what is currently happening in Hungary is likely to happen soon in the Baltics. Many believe that the Baltic States are likely to gain massive foreign investment as a result of joining the

And what about the countries waiting at the door of the EU?

BUDAPEST, DISTRICT XIII €1PRIC 05 E FR ,0 OM 00

HUGE DIVERSITY

EU and may offer Irish investors the best potential among the new Member States. Paul Coughlan, chief executive of the Prestige Group, who is responsible for placing over €170m of Irish investors money in UK and Eastern European property in 2003, said that Talinn, the capital of Estonia, is expected to follow Prague in its status as the ‘place to be’ in the new Europe. Property buyers in Prague have seen good returns in recent years. However, somebody entering the market now is unlikely to see impressive results.

EXCLUSIVE PROPERTIES ON THE DANUBE DISTRICT XIII BUDAPEST. PHASE 1 NOW SELLING FROM PLAN. CONTACT: BOBBY O’REILLY: 087 2950458 Dominick Street Mullingar Co Westmeath Ireland Tel (044) 40000 Fax (044) 43726 Email pdavitt@ddw.ie Web www.davittanddavitt.ie

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FINE ART PRESENTATIONS! Recipients of this year’s Certificate and Diplomas in Fine & Decorative Arts courses, organised by the Institute of Professional Auctioneers & Valuers, were presented with their parchments by IPAV Chief Executive Liam O’Donnell and the President of the Irish Antique Dealers’ Association, George Stacpoole at a function in the Stephen’s Green Club on the evening of Friday, 28 May last. “The full or part-time courses are ideal for people who are pursuing a new interest or who are seeking out a fresh

career in the wonderful and exciting world of the Fine and Decorative arts,” says course organiser Roxane Moorhead. “Many previous students have gone on to enjoy very successful careers later.” The award for best thesis was jointly shared by Mr David Farrelly of Dalkey, Co. Dublin and Ms Ann O’Dea, Shillelagh, Co. Wicklow. Full details on the courses are available from IPAV Head Office at 01 – 6785685 or by e-mailing info@ipav.ie

Recipients of this year’s Dipolma in the Fine and Decorative Arts with lecturers Roxane Moorhead (centre) and Christopher Moore (kneeling)

Award-winner David Farrelly and Desmond FitzGerald, the Knight of Glin

Award-winner Ann O’Dea is congratulated by Course Presenter Liam O’Donnell

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At the Presentation function were (l-r): George Stacpoole, Roxane Moorhead, Liam O’Donnell and Brian Coyle, James Adam & Sons the property professional

Property magazine 2004 summer