Can I sell half of my property to my friend?

eatton

I am looking to sell my flat (worth £180k) and my friend wants to buy it, but he can't raise the full amount needed. In fact he can raise half. So could I 'sell' him half of my property for £90k and have us as joint owners? He would then live in it and I would move in with my girlfriend.

Is such a scheme possible? It would be an ideal solution because a) I would like to hang on to the property but I do need a lump sum fairly quickly, and b) he wants to get on the property ladder but can't afford to on his own.

Any advice would be much appreciated.

Thanks.

Jowo_2

Are you proposing to pay half the mortgage while you don't live there, in order to retain half the equity when it is sold in future? And are you happy to be responsible for mortgage arrears if he defaults on it? What happens if in a few years time, he wants to sell up and you don't or vice versa?

Why don't you put it on the open market and sell it to someone who can actually afford it (thus getting a larger lumpsum upfront), and which doesn't have the potential to harm a friendship which would quickly sour in a tenancy/ownership dispute?

eatton

He has offered to cover my share of the mortgage while he lives in the property and we would then split any profit when we sell.

I realise the risk of falling out, but I should point out he's actually the brother of my girlfriend and will most likely be my brother-in-law at some point, so we're practically family! Also, whenever he wanted to sell is fine by me, my main aim is helping him get on the ladder, hence why I'd rather do this than put it on the open market.

My worry is whether my mortgage lender will agree to it. I know plenty of people buy properties with their friends, my question is can it be done this way round?

Jowo_2

Entering a financial relationship with a friend or relative, as a joint owner or landlord, is fraught with great difficulties, namely that minor disputes relating to the business side of the transaction has very bad ramifications on the relationship.

so why can't he afford it with the income of his fiancee, your sister? and what's wrong with him getting onto the ladder in the conventional way (saving hard until he can afford it)?

and what happens when you want to marry your girlfriend and have kids with her and want to buy your own place? if he doesn't consent to the sale in order to fund your next nest, then you have to take him to court.

my main advice is not to entertain it but if you do proceed, make sure you seek the advice of a solicitor regarding the exit strategy and his rather generous commitment to paying the mortgage in full and letting you waltz off with half the equity. we see lots of threads on here about informal arrangements about equity and sale of jointly owned property which backfire spectacularly.

also, look into Capital Gains Tax which could see you lose 28% of the gain of your share after 3 years, if it is applicable to your situation, as it's not your primary residence but I don't know where you stand on this, perhaps others know. I;m not sure that it applies because you aren't a landlord, you just don't live there.

shaven-monkey

Whether the arrangement is possible isn't relevant.
This kind of arrangement will lead to trouble in the future.

If you're going to do it anyway have cast iron contracts drawn up where he can't wiggle free if he decides he wants to move on and leave his debts behind and remember that your relationship with his sister will be threatened by any conflict down the line.

eatton

Thanks for the advice Jowo and shaven monkey.

My relationship with him is excellent, as demonstrated by his offer to cover my share of the mortgage. So putting that to one side, my concern is that my mortgage lender won't entertain such an idea.

I suppose I could ring them and find out, but I was just wondering if anyone had heard of similar things being done in the past. If it's a non-starter I won't pursue it.

bigbigmamamoo

I'm sure couples must do this all the time. One owns a house, the other moves in and they become joint owners