Jointly owned property ,but wanting to part company

struggling_but_positive

Hi All, I am brand new to the forum, so please be gentle with me:p

I was hoping that you could provide some advice or direction on the following.

I bought a house with my sister 6 years ago. My mother kindly provided the deposit. Initially, we rented the property and covered any shortfall. In year 3 I decided to move into the property as we were having a little difficulty renting it out. She chose to continue to rent.
At that point, my sister stated that she did not believe that she should cover any of the running costs as I was living there. From that point on, I was responsible and paid the full mortgage plus associated bills.
It is now year 6 and she has approached me stating that she would like me to sell the property so that she can get "her share."

This has caused me concern as I have alot of debt which I am trying to clear and there is no way that I could afford to buy another place to live.

In addition, I am confused as to what "share" she is entitled to as she has not contributed to any of the bills or mortgage.
I dont want things to become unpleasant, but I feel she is being unreasonable.

Does anyone have any advice as to what I should do next?

Thanks

pleasedelete

Wouldn't her share be 50 per cent of the difference between the sale price and the mortgage ( after you have repaid your mother if required- was the agreement to repay the same amount borrowed or a percentage of the final value?)

HAve you had it valued?

Really you being in there is no different from a tenant. You made no money from having a tenant presumably looking at it on increasing in value over time and making both of you money not through the renting but through the increase in value?

McKneff

Whilst you were living there alone, how much was the mortgage.

How much would the rental value be. (half of any rental would have been hers really so her half as well as yours has come off the m/gage

If they were more or less the same I would think a 50/50 split would be fair to be honest.

No reason why she should share any of the bills, you lived there so you pay the bills.

Does mother want her 'deposit' back

struggling_but_positive

Thank you both for your responses. The answers are as follows:

Mother does not want the deposit back. Luckily it was a gift.

The property is currently valued at 195000. The mortgage is 187000. The value has taken a bit of a dip.

My moving into the property has saved her money as we had a few months where the property was empty and had to cover the mortgage.

Even if we had rented it, there would have been a slight deficit of approx 250/ month that would have needed to be covered by both of us.
She hasnt made any contributions since I moved in.

The mortgage was £1000.00/ month. the rental value was £750/ month when we were able to source a tenant leaving a £250 deficit.
When I moved in, she no longer contributed to that deficit.

Thanks

pleasedelete

In reality after fees if you sold for £195 there would be only £5000 between you.

Could you get the full mortgage transferred to you? (loan to value may be an issue). Could you afford to pay her £2,500 to buy her out?

With the property worth so little more than the mortgage ot seems silly to sell.

Whatever you decide you need to get it recorded in writing and clearly agreed.

I would get valued for both sale and rent as a starting point. What would the current rental be?

struggling_but_positive

I have spoken to my mortgage provider and they are happy to transfer the full mortgage into my name. However, they wont let me borrow anymore against the property so I would not be able to pay her the £2500 as I am in quite a bit of debt.

The maximum that the property could be put on the market for would be £200k and the rental value is £750/ month.

pleasedelete

Is that a current rental? Lots of rentals have increased recently as it is harder to buy?

Is tne 195,000 what others have sold for recently? Houseprices.co.uk is easy to use with the postcode .

struggling_but_positive

Hi,

The valuation was done about a month ago and the rental value assessment was done last Saturday.

I followed your suggestion and just looked on the website you suggested and a property nearby sold for £180k last year.

pinkshoes

If the mortgage is £1000/month, then you both should have been paying £500/month towards it.

Then, as you rent the property (for £750/month), then you would receive half this each (as you would from a private tenant), so £375/month. Thus meaning that each of you then only have to top the mortgage up with £125 each.

So in reality, your sister should have been paying £125/month towards the mortgage.

This means that over the 3 years you have rented it, to make the property 50/50, then she needs to pay you:

3 years x 12 months x £125 = £4500

So, if she gives you £4500, and you put the house on the market, she can then have half any profit (minus any selling costs).

As you only have £8k equity, then she'll in theory be giving you £4500 to get £4k back, so it would make more sense for her to sign any remaining equity in the house over to you, and let you keep the house and take over the mortgage.

ps - you pay the bills, as you live there.
pps - you REALLY should sort out scenarios like this before buying
ppps - the above scenario is actually GOOD for her, as it's worked out with you paying the market rent value. In practice, it would have been fair to get you to pay a lower rent due to 100% occupancy!

Egg_custard_2

If the house was valued by an EA at £195k this is what they recommend it is marketed for, but few houses achieve their asking price at the moment. Even a 5% reduction from asking price would mean an offer of £185k... so to be honest it's unlikely that there's much equity in the property above the mortgage balance of £187k at the moment.

Half of nothing is, well, nothing.

Paul_the_Painter

I would look at this way.

First of all you will need accurate dates, and amount of monies put in, but let us assume everything was even at the point you moved in yourself.

Let's assume you have been in the house 36 months

The fairest way in my opinion is to treat it as if you were a "normal" tenant

Let's also assume that it would have rented for £750/month for 33 months (allowing for 1 month a year void)

To keep things civil I would suggest ignoring repairs etc done to the property, as if it was rented out on a "normal" contract the landlord would have had to pay for the repairs, but the tenant would have had to either returned the property in the same condition (allowing for wear and tear), or forfeited some of their deposit. It's just too much of a minefield, and there could be big disagreements over relatively small amounts of money. I would treat other costs the same way, for example, as occupier insurance is cheaper then landlord insurance, there is probably not much difference between a 50/50 split of landlord insurance costs, and 100% of occupier insurance costs.

If it had been let, you would have paid out

£1000 x 36

= £36,000

You would have recieved

£750 x 33

= £24,750

There would have been a shortfall you would have split of £11,250

so £5,635 each

your half has been paid each month, as you paid the mortgage, hers has not.

So in reality there is nothing in the property for her as the value of the property has decreased.

There are a few options.

1. You leave things as they are, but obtain a rental valuation every year so that you can re-run the figures every year or so using up to date rental valuations. Rents have been increasing so the £750 figure may not be very accurate.

2. Have your sister surrender her interest in the house for nothing, as there is in reality no equity for her. (NOT reccommended, and don't suggest it except in a dismissive way if you ever want to speak to your sister again!)

3. Offer your sister an amount of money to buy out her interest - this should be somewhere between £0 and £5000. £0 is what the figures above show, £5000 is 50% of the difference between value and mortgage.

The problem is that she probably thinks she is entitled to 50% of what your mother put in, which sounds like it could be about £20,000.

She is not

House prices have changed

Something to consider if the house had been rented out for all 36 months is that the figures change to a shortfall of £4500 each, so she would be entitled to about £500.

Spent so long typing pinkshoes beat me to it!

Also I second the valuation vs sale price.
If the EA values it at £197, it's not going to sell for that!