bought with a friend and now have big problems

ktm_hansi · 1 May 2006 at 12:56PM

Just over a year ago, I bought a house in Dorset with a friend. The house we chose was a DIY disaster and we got some money off to do the work ourselves. I put £32k deposit and the rest has been split through a £200k mortgage with the monthly bills halved. We set up a trust deed, so if we were to sell, my deposit would come out first and the rest is split 50/50.

I use the house as a part-time home as my partner and I live in London during the week and every other weekend we come to the house with my son (who I have joint custody and lives in Dorset with his mum). So we are there 4 days out of a month.

The intention of buying the property was to do it up (as cheaply as possible) over five years and sell it with a profit, so we opted for a 5 year mortgage with penalties should it be paid back early. Problems have escalated over the year with the flatmate, who is now unhappy about the arrangement and wants to move out. Communication between us is now non-existant. I've looked at taking on the whole mortgage but the lenders have refused. They have offered me two thirds of the mortgage which is not enough to pay for the house, but we could buy a flat. This would mean selling the house and paying a redemption fee. As my flatmate has no money the fee would come out of my pocket.

Over the year my partner and I have completely decorated my son's room and we are soon to start our room. My flatmate on the other hand has a nasty habit of starting jobs but not finishing them, so we have a half built shed, a lounge with no wallpaper on as he ripped it off and a half finished door. While this wasn't a problem initially, he has now moved to the utility room that only needed a coat of paint and has completely stripped it out. The walls and ceiling will need replastering (which he wants to try out himself), a cupboard will need to be built to hide the pipes and shelves need to be put up. We are now deeply concerned as not only is the house not in a sellable state, but it is likely that the flatmate who has no experience of plastering will mess it up, or get bored and move to the next room. Again this will come out of my pocket as he is seriously in debt and is struggling to pay the mortgage. At any stage he can leave the house and stop paying the mortgage. To further my worries, my partner is about to give birth in 6 weeks.

I would really welcome any suggestions...

Wickedkitten · 1 May 2006 at 1:37PM

You live there 4 days a month. Is the other bloke there the whole time?

F_T_Buyer · 1 May 2006 at 2:05PM

Bite the bullet and sell.

And never ever buy with a friend. At uni I lived in two different houses and in each house there was always a good friend who was a nightmare to live with.

Oh, and all those sites advocating/encouraging buying with a friend make me feel sick!

Check out Halifax's new site: http://www.buyingyourfirsthome.co.uk/

ktm_hansi · 1 May 2006 at 3:55PM

yes our flatmate lives there the whole time, which is one of the main reasons why we have no control over what he does with the house. In terms of selling, we would love to but due to the demolition site our flatmate has left the place it, he has now devalued it by so much that we will end up losing around £17k - £7k penalty fee for repaying the mortgage and upto £10k to sell it! This is also going to come out of my money as my flatmate has no equity in the house!

lynzpower · 1 May 2006 at 4:01PM

God ktm, what a nightmare.

silvercar · 1 May 2006 at 4:11PM

You seem to be accepting that you will shoulder the burden of the redemption fees etc.

I would suggest seeing a mortgage broker to see if you could find enough of a mortgage to buy your friend out. Would you consider buying with your partner to increase the mortgage available to you.

meanmachine_2 · 1 May 2006 at 4:32PM

The lesser of two evils is to take a hit on the repayment charge and remortgage with a lender who is prepared to offer you a mortgage based on you and your partner's joint incomes.

Outline your incomes and outgoings and a broker on here might be able to offer advice.

The lesson is: never buy a house with a friend or stranger.

irnbru_2 · 1 May 2006 at 5:05PM

meanmachine wrote:

The lesson is: never buy a house with a friend or stranger.

The lesson is to draw up a contract that covers a breakdown in the relationship i.e. an independent third party to resolve disputes.

ktm_hansi wrote:

Again this will come out of my pocket as he is seriously in debt and is struggling to pay the mortgage.

What happens if he defaults?

ktm_hansi · 1 May 2006 at 5:07PM

Thanks for all your advice - unfortunately we still have to pay the £7k redemption fee and my partner has her own mortgage on the place in London. The only option we have is to wait until her fixed mortgage is up in December and remortgage her place to raise the capital to buy pay the difference between the mortgage and what the mortgage company is offering. The flatmate will walk away with nothing! This based on if the house is still standing by then and that he hasn't walk off!

BobProperty · 1 May 2006 at 6:53PM

I've read this through a few times and, in the words of the song, there are more questions than answers. What was the agreement as far as the work to be done to the property? If the flatmate is bought out and "walks away with nothing" are they in agreement about this? (I can make a good argument that they shouldn't be.) Why isn't the flatmate liable for half the mortgage penalty fee? If this is a 50/50 deal and you have lost money, the flatmate should be coughing up half the loss. Then again, what does it say in the agreement? Have you each got mortgages on this property, or are you both paying half of one mortgage? Could you get their agreement to leave but you still pay the mortgage(s)? (dodgy I know)

Check with your partners mortgage company if they will do a re-mortgage without any, or too big, a penalty. A lot of lenders look favourably on existing borrowers extending mortgages.

sophistica · 1 May 2006 at 9:40PM

Interesting. I have probably had far too much port, wine and brandy to make any sense of this but my question to you is why do anything other than the fact that you don't liek the other chap and you are not speaking. If you carry on paying and he carries on paying at the end of the term you will own the house outright and you can do what you like? Or if he defaults you can ask him to leave, draw up a legal severance, renovate the property (in your free time) and rent it out at a commercial rent to cover the mortgage????
Ok finally got it...he wants to move out. Well he can't very easily can he? He is jointly and severally liable for the mortgage. Why don't you agree to do your original plan which is to do the place up, rent it out until the end of the mortgage term when you will either sell it or buy him out. Or you could do it up now and sell it an pay off the mortgage. Face it - if you can't stand the guy you can pay contractors and stay in a B&B at weekends.

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bought with a friend and now have big problems

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