IRELAND 25 November 2017
VFM Report 50: Property Sale by Shannon Development
Summary of Findings
Arising out of concerns expressed to my Office, I examined the sale by Shannon Development, of a parcel of land measuring 3.5 acres at Ennis Road, Limerick. After Shannon Development took over responsibility for foreign direct investment in 1988, the land had been transferred to it by the IDA but was not registered in the Land Registry, although an adjoining factory site was.
The failure of the State agencies to protect the title to the property resulted in encroachment and a building company began dumping spoil on the land.
In October 1997, the executors of a previous owner purported to enter into a contract to dispose of the property until searches in the Land Registry and the Registry of Deeds revealed that the site had been sold to the IDA in 1979. In the meantime, the executors had obtained an injunction against encroachment by the building company. Shannon Development was registered as owner in March 1998.
The building company commenced proceedings to establish title by way of adverse possession in 1997, but withdrew from the case prior to a High Court hearing in 2000.
Shannon Development sold the site in May 1998 to the owner of the adjoining factory site for ?254,000. The amount coincided with a valuation given by an auctioneer.
The amount of the sale price and the informality of the valuation procedure gave rise to initial concerns on my part as to whether value for money had been achieved. However, taking account of an independent valuation commissioned as part of my review and the fact that the purchaser had agreed to indemnify Shannon Development against any future claims, the proceeds were probably broadly in line with what was obtainable in the circumstances.
Nevertheless, if title had been protected it is likely that Shannon Development would have achieved a better price.
In the context of an industrial development agency, good practice would dictate that in order to achieve the best price reasonably obtainable, surplus property should be sold through an open market process and property for industrial development sold with a covenant restricting its use to that purpose.
Using this yardstick, the disposal procedures adopted by Shannon Development in two cases were inappropriate
- In the case of the Ennis Road property, which was a sale of surplus property, other adjoining property owners, or possible interested parties, were not invited to tender.
- In another case ? Shannon Development took preliminary steps to sell a factory on 116 acres at Gilloge, County Clare without a covenant restricting its use to industrial purposes. However, the sale did not, ultimately, proceed.
In addition, where large properties like that at Gilloge are being disposed of, it would be appropriate to segregate property earmarked for industrial promotion from surplus property, in order to ensure that the relevant disposal mechanism is being used.
Shannon Development has assured me that it has taken steps to strengthen its procedures and all proposed disposal transactions are now reviewed by its internal audit.