Legal Charges- can they be for all the equity in a property?

silvercar

Had the mother remained as a tenant, the council would have paid for all maintenance and possibly the rent (through housing benefit). The mother would have no gain in property value from living there.

The son puts the money up for buying the property, gets it at a discount due to mother's tenancy. In return for son effectively getting the property cheap (and maintaining it), mother lives there rent free. Son gains, mother's benefit is neutral.

Two different arguements.

care fees etc

Come care home time, there is the risk that the mother will be assessed as having the discount. Presumeably if it was bought years ago the discount in plain money terms would have been low. Nevertheless there is the possibility that the care assessment will result in the mother being assessed as having some capital with which to contribute to care fees. Logically, the son will need to use some of his gain to pay this, either from selling the property or taking a mortgage.

Sibling shares

The son did a business deal, he bought the property in his mother's name and in return he maintained it and she lived there rent free. She hasn't lost by this arrangement, he has potentially gained, by the increase in value being greater than the costs he has spent over the years.

What is the siblings problem? They wanted to be part of the deal? Or that they want a share of the profit without having taken a share of the risk? Or that they weren't consulted?

Skidoobee

Thanks to everyone whose taken the time to reply I'll address any specific points directly but I thought a general post will cover a lot of them.

The house was bought at full discount- 40%?- approx 25k purchase price in 1999. Now there's a nice twist to this which I didn't outline in the first post in order not to baffle everyone with science on the first off, but here we go!:

The situation is this: mother lives in council house for 20 years [call it House A]. Son lives down the street in his own smaller, mortgaged house [House B]. He says to mother, I'll buy your larger house [A] by extending the mortgage on my house , then we [son, wife and children] will move into there [house A] and you can move into our house . Effectively a house swap, but informally done i.e. no paperwork etc.

Although with misgivings mother agrees to this and she moves into house B, agreeing to pay her son monthly 'rent' to cover his extra mortgage costs. Of course as in all things family this was in cash and there is no rent/payment book to record this although she dutifully did so for over nine years and spent 20k on the house on maintenance, windows, heating, garden etc.

Son continued to live in Mum's original house [A] and he too paid for its general maintenance over the years, but not much more in terms of structural improvements. Remember in terms of title deeds, house A is still in mother's sole name, house B in son's.

Hang in there because it gets even more interesting. Come 2007 son decides to sell house B. Without any consultation beyond getting her to sign on the dotted line, son sells house [his original one] to a property company. For the first time she becomes a proper 'tenant.' Son pockets the whole profit from the sale of house B and now lives in his mother's house [A] mortgage free.

Then last year property company goes bust. the recievers decide to sell the house to release its assets and mother, now a frail 87 year old, is faced with eviction and having to find somewhere else to live [she continues to live in the house although she is looked after on a day-to-day basis by one of her daughters].

To be fair I do not believe the siblings are being 'moneygrabbing' in trying to rectify this situation. in fact from what I can see they have been reasonable all along agreeing to the process believing at least their Mum was secure in a home of her own.

Nor do they quibble over their brother having a charge on the house [A] to cover his inital investment, that is entirely sensible. But now with her home sold from under her feet by her son [who now has very little to do with her] and seemingly having no interest left in her original home [A] due to this charge after she'd invested in her son's house and paid him 'rent' to cover his extra mortgage commitments [on house B]?

Well they see it as a rather iniquitous situation and I don't blame them for trying to find some redress.

Skidoobee

Suzy M:Has the mother ever repaid any of this money?
Who paid for any maintenance or repairs?
Did any of her other children make a financial contribution?

Did the son put up all the money for the initial purchase and pay for maintenance and repairs
and
did the mother repay any of this money or pay for any maintenance or repairs.

If the mother did not pay anything to her son she has in effect been living in the property 'rent-free' for 10 years.

Skidoobee: Hi there's a lengthy post of mine here now somewhere that explains some of the above which is a bit complex when it comes to maintenance costs etc but basically:

1] son put up all of the money for the full discounted purchase by extending his own mortgage which mother then 'informally' paid him monthly to cover his extra costs so he was effectively operating like a building society I think, to all intents and purposes;

2] mother never lived in the house after purchase; complicated, see other marathon post lol

3] non of the other children made any contribution to the purchase as they were never asked to- it was presented pretty much by the son as a fait accompli- but the siblings accepted it at the time [although mother had misgivings] as it seemed a reasonable thing and they didn't know about the charge for the whole value of the house at the time to prevent the council putting a charge for care costs etc in the future.

Skidoobee

Robert_Sterling wrote: »

Did your mother get a discounted price from the council?
If so what %?

Hi it was a full discount- is that 40% I think?

Skidoobee

kunekune wrote: »

Legally, this is quite tricky.

What the legal title says is not necessarily what the courts will say, there is a distinction between "legal" and "equitable" ownership, and the son here is arguing that despite his mother's name being on the title (legal ownership) he has an enforceable right to all or part of the house.

There is a presumption that someone who has paid for the house gets an interest in the house, even if their name isn't on the title. But in certain special relationships there is a presumption that money given is a gift. Based on current legal precedents, I think the son would have a good case - transfers from children to parents aren't presumed to be gifts, and his mother would have to prove that it was meant to be a gift rather than the son having to prove that it wasn't. It might be different if she has been paying the mortgage all these years, but even then the son might still get a share of the house.

I do think that legal advice will be needed here: the whole question of undue influence is probably a bit of a red herring, the burden is going to be on mum to negative the presumption that the person who paid for the house gets the house. I suspect this isn't what you want to hear, sorry.

Thank's for that, very useful. It's a bit more complicated than that though, see my other monster post lol

The other siblings don't have a quibble with their brother having a charge on the house to cover his initial investment [even if their mother has actually paid that off over the years in 'rent' but there's no official record so that's by the by] and even for any reasonable expenses he's had since in running the house, but he does seem to have had his cake and eaten it, particularly as he's living in the house now and sold his other one, giving no financial benefit back to his mother through the process.

Skidoobee

hethmar wrote: »

It does sound dodgey to me too. I cant see how he could have got the solicitor to make a legal charge in the first place. Secondly, a lot of rules have changed in the last ten years and it may be that he is on a hiding to nothing re the care charges etc.

See a legal rep at the Citizens Advice Bureau.

Yes this is what struck me funny at the outset- the same solicitor that did the conveyancing for my mother-in-law was instructed by her son and that same solicitor drew up the Legal Charge to his benefit. Clearly she signed on the line but isn't there a conflict of interest/ lack of independent advice issue there?

Skidoobee

Richard_Webster wrote: »

I'm not an expert on all this but I think that if she did go into a home the state might try to argue that the discount belonged to the mother and was beneficially hers and the existence of that could reduce or remove her entitlement to any benefits.

This is what I suspect also and looking back over the old paperwork, something the original solicitor was hinting at too at the time.

silvercar

Lots of people bought their parents council houses. Generally the family thought it was a good idea to get hold of the discount given; the elder generation were quite happy to go along with it as they still lived rent free in the place and it gave their children some potential to money in the future.

The whole care home costs issue unravelled the straight forward capital gain plan, but generally speaking it was a common thing to do.

The swapping homes makes it more complex. (Although I know of people who swap council homes within extended families on a regular basis; don't know whether the council registered tenancies also get swapped.)

On first look swapping house A for house B is not so big an issue as the son actually paid for both of them.

When the son sold house B in 2007, where did the mother think she was going to live? She must have known the house was being sold and she would need to move. (Answered my own question, she became a tenat of the new company.)

Selling to a property company where the mother remains a tenant sounds like a rent back scheme ie a quick sale where the price paid is much below market value. Otherwise the mother wouldn't have been able to remain a tenant.

Then last year property company goes bust. the recievers decide to sell the house to release its assets and mother, now a frail 87 year old, is faced with eviction and having to find somewhere else to live [she continues to live in the house although she is looked after on a day-to-day basis by one of her daughters].

This is where it gets interesting. The mother's position should have been protected ie she was a tenant with rights, why was she evicted? It really isn't the son's fault that he sold the house to a company that went bust, unless he was connected to the company in some way. Really the mother was made homeless and the council should have rehoused her. Where is she living?

Nor do they quibble over their brother having a charge on the house [A] to cover his inital investment, that is entirely sensible.

He put up all the money for the house. So he gets all the money from the sale. He would say.

particularly as he's living in the house now and sold his other one, giving no financial benefit back to his mother through the process.

But sold it to a company that agreed to keep the mother as a tenant. He would argue.

Just trying to put another view. The son was the only one that made a financial investment and he is the only one to have taken a risk and to have seen a gain. Now it seems the girls are looking after the mother and the son is doing nothing, so the girls are naturally aggrieved. I'm not sure of any financial rights they may have.

Skidoobee

silvercar: [extract]

Sibling shares

The son did a business deal, he bought the property in his mother's name and in return he maintained it and she lived there rent free. She hasn't lost by this arrangement, he has potentially gained, by the increase in value being greater than the costs he has spent over the years.

What is the siblings problem? They wanted to be part of the deal? Or that they want a share of the profit without having taken a share of the risk? Or that they weren't consulted?

Thanks silvercar very useful, other big post of mine describes the further complexities in all this that should answer the earlier points in your post but with regard to the above:

1] although it has turned out otherwise, the son wasn't claiming to be ostensibly doing a 'business deal' at the time; he was in effect operating like a building society, enabling the purchase of the house for his mother by extending his own mortgage which mother then paid off by an informal 'rent' agreement. He quite sensibly put a charge on the property to cover his investment- as any lender would do- he just managed to extend that charge to cover all equity in the house on the pretext of preventing the council clawing back any money if a care situation arose. That has never happened nor is now likely too, so the contemporary situation is now different.

2] the siblings were never initially consulted about the deal so had no opportunity of an input into it; however when finding out about it they accepted it, in the knowledge their mother had a secure home of her own. This turned out not to be the case [see other monster post].

They don't see their brother as particularly taking a risk in the whole process; of course property prices go down but buying a relatively new 3 bed house in a relatively good area at 40% discount? Besides he never claimed to be doing it for 'business' purposes although of course in the end he clearly was.

The bottom line is that their mother is now left penniless after forking out a lot of money in 'rent' and maintenance costs whislt her son lives in her house now, mortgage free. The siblings have no issue with the 'risk' [minimal as it's been] their brother has taken and fully accept a charge on the house for his investment and any recompense for any further investment he's made in the property since, but he has seemed to have fleeced his mother [and let's be honest her estate when she dies] quite comprehensively, and they're a bit peed off about it lol

Suzy_M

Skidoobee,

Re: Your various replies.

My comments queries were in response to your original postings which led me (and possibly others) to think this may simply have been a touch of "green-eye".

However, now you've given a lot more background it seems the mother may have been subjected to undue influence by the son.

Can I suggest you take a look at the financial abuse section at www.elderabuse.org.uk . There's all sorts of useful signposts on the site and they operate a helpline and have a link to a national associaiton of solicitors who specialise in law for the elderly.