selling/transferring property to my brother

zed7

After our father passed away, I took over his assets including the family home. We all lived in it and shared the cost even though the property was legally mine and the mortgage in my name. My brother still lives in it and would like to take full ownership. As he does not have the money to buy out my sister and I he will be financing giving us our inheritance from the mortgage he can get to buy the house from me. The property currently has a mortgage of 80k he qualifies for a mortgage of £212,000 which his bank has told him is the maximum 85% of a purchase price set at £250.000. This is to avoid stamp duty. We will then be able to use the remaining balance to give to myself and my sister as our inheritance. How does this work. I am confused. He will be "buying" the property under market value and will be using the amount he can get from the mortgage lender to enable him to give me and my sister our share of the inheritance, although technically the money will be coming to me from the proceeds of the sale. Is there another way around this? Are there other costs I am not aware of. What is Capital Gain Tax?? If he is living there then he cant be charged for that right? Anyone know of any solicitors specialising in this type of situation. It feels complicated...any help really welcome!!

tyllwyd

I think you need to get everything clear to start with.

First - you own the house. There is a mortgage on the house in your name, but you say you inherited it from your father. That's confusing - did your father ever own the house? You can't have inherited the mortgage - I think you need to explain the situation a bit more clearly.

You say that you want to give yourself and your sister their inheritance - but you seem to own the house, so what have you/they inherited? Why was this not sorted out when your dad passed away?

zed7

OK, this is what happened.

My father passed away. There are 3 of us (his children). I took ownership of the property as a formality, as in the house is in my name and so is the mortgage. We all 3 continued to live there and my brother still does.
At the time, we were quite inexperienced and we thought it easier that as I was the highest earner at the time, I take the mortgage in my name.

The house therefore still stands as all 3 of ours inheritance except no one has received there share - it hasn't been divided up yet. Now, my brother has chosen to take it over and live there. Great. I have to 'technically' sell him the property. The property has a mortgage of 80k and he can get £212,000. We have between us agreed of an amount of £70k each for me and my sister as the amount he pays to buy us out.
After this he owns the property and my sister and I have been paid our share. I should add that the amount has been calculated on a combination of what he can afford and my sister and I are happy with that.

TonyMMM

Did your father leave a will .... if so, what did it say about shares, who is the executor and has probate been applied for ?

If not, has application been made for Letters of Administration ?

zed7

no, we applied for probate. This was way back in 2002. So all that was sorted then. My brother and sister gave letter of relinquishing their right at the point. It was not my intention to keep it...we have a good understanding but it seemed the tidiest way to do everything.

RAS

Actually it is getting very messy.

When did you last live in the house?

zed7

i moved out last August when I got married. Why is it messy?

Jenniefour

You're right - you need to get a bit of legal advice on this prior to doing anything. The three of you inherited the property - the proceeds of which would have been shared between you if you had sold it following your fathers death 9 years ago. This is what you still want to do, and, at the same time, your brother wants to buy the entire property. In the meantime you decided to put the property in your name and for you to take out a mortgage for the amount outstanding on your fathers death. The three of you continued to live in the house and shared the costs between you. Sounds fine, and you're perfectly entitled to agree between yourselves that your brother, in effect, gets a slightly larger share of the estate.

The bit I think needs some legal input is whether or not waiting 9 nine years, during which time the property has been in your name and you're the sole mortgage holder, would affect anything about the disposal of your fathers estate i.e. the inheritance to you and your siblings. Would there be any capital gains tax to pay. I suspect not but it needs checking because it's important.

One of the solicitors on here might see your thread and give you the information you need - otherwise an hour spent with a decent solicitor - have your questions ready - would be money well spent. I believe that would be a probate solicitor.

zed7

thanks...I really appreciate the time and advice. I just want to sort everything out as tidily and clearly as possible. I will get in touch with a probate solicitor.

00ec25

The current circumstances are that 2 of the siblings have lived in the property as their main residence but are not legally its owners. They are legally not liable for CGT because they are not owners

the brother moving out in Aug 2010 is also CGT exempt because he owned and lived in it as his main residence 2003 - 2010. Furthermore he has 36 months from moving out in Aug 2010 to complete the sale under the "36 month rule" and would still be exempt

Even if the will had been followed correctly and the property registered in equal shares then it would still have been CGT exempt because each of them lived there as their main residence during the last 9 years. CGT would only have been relevant if one (or more) of them had NOT lived in it full time since inheriting their share, ie they would have been a part owner of what was, for them, a second home and thus in that case only it would be CGT liable

BTW your stamp duty plan appears correct because SDLT is based on the consideration given for the sale, as this is all in cash (£212) then it wil be at 1% rate - the £250k maximum he can borrow is irrelevant for SDLT purposes, the calculation is based only on the actual "consideration" given which is clearly all in cash in this case.

tyllwyd

So are you saying that the three of you would have inherited the property jointly, but instead they gave their shares to you, and you took out a new mortgage to pay off the mortgage outstanding at your dad's death?

I think the inheritance issue is confusing things - it seems to me from what you said that your brother and sister have given up their inheritance, although you have a gentleman's agreement between the three of you to split the value of the house.

As far as I can see, your brother needs to buy the house from you so that you can pay off the mortgage, and then the three of you can agree how much of that money you give back to your brother & sister. But for the mortgage company, where is your brother's 25% deposit coming from? It seems to me it is an imaginary amount, and I'm not sure they will be impressed by vague talk about inheritance.