Two family properties in my name, need to buy own home - tax/mortgage implications?!

Star99_2

Re the rent, I only found out about it 2 days ago when brother 1 rang me and said he needs me to sign an eviction notice as the tenants are refusing to leave. He was due to come yesterday, but I was avoiding his calls as wanted to get some advice first.

I'm worried that if I sign this, it would indicate I knew about the tenants and have been receiving rent, when the truth is it was brother1 that dealt with all this. I don't want to get myself into a bigger mess by signing this.

I should imagine he would call me today to come round. I need all the info I can get so he cannot continue using me for his own selfish gains, as he seems to think I'm ridiculously naive (which I guess I am, and too trusting)

As I didn't have anything to do with the tenants and didn't sign any rental agreement, do I still need to declare the rental income for tax purposes or would my brother1 have to do that?

PurplePow

I would see a solicitor!

AlexMac

Not sure if I've followed all the detail, but everything in life tends to be fixable apart from death or disability- so let's wind down at least some of the catatstrophe.

The flat bought by 'you', paid for (in part- via mortgage from your account) by you has only been owned for 2 years- so unless it's in a really upmarket part of Central London or your brother got it amazinglt cheap for cash, it cannot have appreciated much. In fact it may even have lost value given the state of the market in most of the UK since 2009. I suspect the capital gain will not exceed your CGT personal annual allowance of £10.6k, especially after you factor in the lettings relief as it's been rented out.

An accountant could probably help advise how to untangle all this, (a solicitor will be bound to insist on absolute naive honesty- not that I mean to imply accountants can be creative!) but even if you or Bro.1 do end up paying tax on the rental income (which again- is probably only £10k - £20k unless you're in Mayfair?), that will be offset by mortgage interest, insurance/service-charges, repairs, agent fees, and other allowable expenses so, at 20% on the net income after deductions is unlikely to be more than a few hundred quid (I rarely pay as much as £2k pa on my 2 little rented flats). You have til next January 2014 to complete a tax return on income between April 2012-March 2013, even if you do decide to come clean.

And looked at one way- you've been involuntarily 'saving' money by paying 'your' mortgage, unless, when you do sell- you decide to gift all the ill-gotten to Bro 1 without a tithe for the innocent (you!). Good luck

AlexMac

Sorry- I walked away from this to chop some onions mid-post (above) so I missed your updates; I don't know enough to comment on CGT liability for partial property transfers between family members (although an accountant would.

I'd also be concerned at signing 'an eviction notice'. A landlord can give a tenant 2 months' 'notice' if they are off the end of their initial 'assured shorthold tenancy' (AST) - which usually covers the 1st 6 months, and when it may become a 'statutory tenancy' tenancy (subject to 2 months LL notice or 1 month from the tenant). But if a tenant refuses to leave after being given notice, only the court can 'evict'. This is a simple process but takes a bit of time and the court will want to see the original AST or tenancy agreement - so let's hope your Bro set it up correctly

RAS

Star99 wrote: »

Re the rent, I only found out about it 2 days ago when brother 1 rang me and said he needs me to sign an eviction notice as the tenants are refusing to leave. He was due to come yesterday, but I was avoiding his calls as wanted to get some advice first.

I'm worried that if I sign this, it would indicate I knew about the tenants and have been receiving rent, when the truth is it was brother1 that dealt with all this. I don't want to get myself into a bigger mess by signing this.

Hi

If he needs you to sign the eviction documents, then you are lsited as the landlord on the rental agreement.

Do not sign anything at all. Try and get the document and take it to a lawyer. Even better demand that he sends you a copy of the rental agreement before you sign anything.

I think dear brother 1 has been using your name in all his activities and quite possibly rendered you liable for the HMRC debt for the tax due on the rent.

Since you will not have spent the money on the tax-deductable allowances, this is a mega mess.

Star99_2

AlexMac wrote: »

The flat bought by 'you', paid for (in part- via mortgage from your account) by you has only been owned for 2 years- so unless it's in a really upmarket part of Central London or your brother got it amazinglt cheap for cash, it cannot have appreciated much. In fact it may even have lost value given the state of the market in most of the UK since 2009. I suspect the capital gain will not exceed your CGT personal annual allowance of £10.6k, especially after you factor in the lettings relief as it's been rented out.

An accountant could probably help advise how to untangle all this,

The flat was purchased for £30k 100% outright 2 years ago. It’sa 3 bed flat, so I think it’s value now is about 50k.
I think he did by it cheap as he was rushing to close the deal. (I had to ring in work one morningn and tell them I would be late as I had to go to the bank, then as I was rushing to get to work later that morning, I must have been speeding as a few weeks later, I got a letter in the post saying I had been caught speeding that morning and was given a SP30. My first ever motoring conviction. I've learnt my lesson now. Never do any favours for anyone.)

So would I be liable to pay 20% on 20K? And also 20% onrental income minus expenses that my brother received?
Also, I used to live at my mothers address up until I gotmarried which is just over a year ago.
Does that mean CGT would be exempt from that house as I residedin it within the last years?

Star99_2

AlexMac wrote: »

Sorry- I walked away from this to chop some onions mid-post (above) so I missed your updates;

I'd also be concerned at signing 'an eviction notice'. But if a tenant refuses to leave after being given notice, only the court can 'evict'. This is a simple process but takes a bit of time and the court will want to see the original AST or tenancy agreement - so let's hope your Bro set it up correctly

Chopping onions? What are we having for dinner tonight then?

My brother mentioned the tenants are refusing to leave; I should imagine he has given them the required notice.
And I'm not sure exactly what he wants me to sign as I was tending to my baby when he called, so was going to find out when he came to my home. But he definitely wanted me to sign something. So am I best not signing it? He did say he wants them out so he can sell the flat.

Mojisola

PurplePow wrote: »

I would see a solicitor!

I second this - and then I would never, ever sign anything that brother puts in front of me!

Start practising saying "NO!" now. Make sure your OH is going to back you up on this.

Your brother has put you in a very nasty situation. Does he care at all that he is causing you trouble?

Star99_2

RAS wrote: »

Hi

If he needs you to sign the eviction documents, then you are lsited as the landlord on the rental agreement.

Do not sign anything at all. Try and get the document and take it to a lawyer. Even better demand that he sends you a copy of the rental agreement before you sign anything.

I think dear brother 1 has been using your name in all his activities and quite possibly rendered you liable for the HMRC debt for the tax due on the rent.

Since you will not have spent the money on the tax-deductable allowances, this is a mega mess.

Thanks. It's a good idea to request a copy of the rental agreement. Would be interesting to see who's signature is on there (one is required from the landlord, right?) as I definitely didn't sign anything.
And I agree, looks like he has been using my name to make money. And I don't know what he has been doing with the rental income from the flat. Pocketing it presumably.

Star99_2

Mojisola wrote: »

I second this - and then I would never, ever sign anything that brother puts in front of me!

Start practising saying "NO!" now. Make sure your OH is going to back you up on this.

Your brother has put you in a very nasty situation. Does he care at all that he is causing you trouble?

Hi
Sadly I am coming to the realisation that no, he probably doesn't give a crap.
I only did this cos I thought I was helping out a brother, nothing else. Speak of the devil, he's calling me now.