Inherited House Blockage

sneekymum

OH's mother died almost a year ago. He and his two siblings (A and were beneficiaries and executors. So that's OH + A + B now own a house.

The house is 100 miles away and so we hadn't noticed that one of siblings (A) has moved in. They didn't ask if anyone agreed.

They are now offering a low amount of £ to the other siblings for their share. OH and B do not want to accept this offer. Partly because it is so low, but also because A doesn't actually have the money and would need to sell their own house to raise it, and even then it's optimistic that they might sell their much smaller house for enough.

A said they'd had the inherited house valued and it was worth £135,000. This turned out not to be true and OH +B got an estate agent out who confirmed they'd just sold next door for £159,000, but it was in a better condition. The inherited house would easily fetch £150,000 in its current condition.

When they asked A why they thought it reasonable to make such a low offer the reply was that they needed to buy it cheaply to make as much profit as possible when they sell it, which they intend to do very soon so that with the sale of their current house too they'll be able to buy a really big house.

Obviously the maths here is nonsense.
Also A has no money to make any offer.

To move things along OH has offered A £50K cash for their share. This is money we are able to raise on a secured loan just to move the situation forward.

A does not want to accept this. They prefer to stay in the house rent free.

OH + B have been to see a solicitor to ask if a sale can be forced. It cost £160 to be told it was going to be very expensive and they should consider cutting their losses and accepting a low offer. Except that the money for the low offer does not exist. A's house is not worth very much and we do not know if they have a mortgage, and they haven't tried to sell it.

How do we move this forward?

Crabapple

Start with a stern letter (personal not one you have to pay a solicitor to write). Say that market rent in the area is x so they already owe y amount (1/3 rent to date) to each other sibling. They are not entitled to stay there rent free whilst the others own an interest.

If they intend to sell the property anyway then suggest it be marketed asap and the proceeds split. They are not entitled to make a profit on it while the others take a small share now and get nothing later.

Threaten an order for sale. It may cost, but is that cost going to be less than what will be lost if this brother offers some silly low amount that he doesn't even have to buy the others out?

Savvy_Sue

Another possible way forward which may help move the blockage, but probably damage family relationships (which sound a bit doomed already) ... what does the will say? And have they got probate yet?

If the will says the executors are to sell the house and split the proceeds, then it may be that OH and B have grounds to remove A as executor, apply for probate and proceed to sale.

But one would hope the solicitor would have suggested this if it was an easy / obvious option. I don't think you'd need a solicitor to do that.

sneekymum

The will does not stipulate that the house be sold. They already have probate.

I'm wondering if this is a common situation in divorce cases too.... Maybe it is straightforward to get some sort of court order requiring a sale? Is it something that can be done without a solicitor?

Is it realistic to demand rent?

They were a close family before this happened. Is this just the effect of greed?
TBH we (me+OH+B) are bewildered that this has happened.

Savvy_Sue

sneekymum wrote: »

The will does not stipulate that the house be sold. They already have probate.

I guess that explains why the solicitor didn't suggest it.

sneekymum wrote: »

I'm wondering if this is a common situation in divorce cases too.... Maybe it is straightforward to get some sort of court order requiring a sale? Is it something that can be done without a solicitor?

I don't know how common, but it happens. I don't know if it can be done without a solicitor, but scouting around the wikivorce forums would give you some idea. Likewise the house buying, renting, selling board.

sneekymum wrote: »

Is it realistic to demand rent?

You give the impression that you can demand all you like, but sibling A doesn't have the money to pay it.

sneekymum wrote: »

They were a close family before this happened. Is this just the effect of greed?
TBH we (me+OH+B) are bewildered that this has happened.

It's impossible to say why this has happened. Being charitable, there may be something going on in A's life you don't know about and as a result their thinking has become clouded. It may even be 'just' grief which means they can't see past the end of their nose. A may see this as their one chance to escape the present and move into a rosier future.

You say they were close, but have they become less close since Mum died? I know we'll see (even) less of my siblings now because we won't be able to use the 'Mum would like to see you at her birthday lunch' line any more.

How long ago do you think A moved in? Who's paying the utility bills? What's happening to their own house? Would a visit from B and OH to A to sit down and suggest reasonable ways forward be helpful? Would an offer of £50k now, plus a further payment IF the house sells for more than £150k, help at all? (It may not be 'fair', but if it keeps people on speaking terms how much is that worth?)

Are there other assets, eg bank accounts, and have these been distributed? We (me and my co-executor) are definitely planning NOT to distribute all mum's cash before her house is sold, because we know there will be expenses incurred until it does sell.

BTW, bear in mind that a valuation for probate will almost certainly be lower than a valuation for marketing. If that's what A obtained, then the value for probate may be correct.

Crabapple

Savvy_Sue wrote: »

BTW, bear in mind that a valuation for probate will almost certainly be lower than a valuation for marketing. If that's what A obtained, then the value for probate may be correct.

Sensible advice from Sue as always, but this bit is wrong. A valuation for Probate cannot be less than an open market value. If any Estate Agent prepared one on that basis they are very wrong and seriously out of date on the rules and regulations.

Historically you could value things like houses and jewellery lower for Probate. HMRC will not allow it now, and haven't for quite a while.

It seems more likely that the brother is trying it on. Perhaps ask to see this valuation. I can't quite get my head around the idea that he would offer a low value to his brothers and actually say it's so that he can do a quick sale and make himself a profit!

Money does strange things to people...

sneekymum

Crabapple wrote: »

I can't quite get my head around the idea that he would offer a low value to his brothers and actually say it's so that he can do a quick sale and make himself a profit!

Yes. We're really struggling with this too. We expected an answer along the lines of "it's really important to me to stay in this place I grew up, with all my memories.." or some such.

I read on another thread about "tenants in common" and realised we hadn't done anything about sorting out the entry at Land Registry. Half the house had been left to the three siblings by their father some years before and so the property is probably already "tenants in common" as 50% in their late mother's name and 50% in the siblings.

It just occurred to me that once the property is held in separate parts (tenants in common) then what's to stop OH and B from selling their shares on the open market? Would that be possible? Would their shares come with the option to demand rent?

rogueylawyer

Hi Sneeky

A couple of things to clarify, has a grant been obtained? We'll need to clarify the position in relation to ownership of the property but it seems to me that A is clearly in breach of his fiduciary duty as executor to the two other beneficiaries.

When you act as an executor you are not able, without the consent of the beneficiaries, to obtain an undue benefit. The example you've offered - I'll give you far less than it's worth so I can get a nice profit later - is in complete opposition to A's position as executor.

Arguably this means that OH could make an application to remove A as a executor.

With regards to an application you are heading toward the right lines. It is possible to make an application to force a sale of the property under the Trusts of Land and Appointment of Trustees Act 1996. It's not the easiest thing in the world, and it can become a bit tricky in probate cases, as everyone appears on a somewhat equal footing, unlike a divorce case.

Regardless of whether the property is owned as tenants in common or joint tenants, A should be paying a market rent for occupying the property.

Savvy_Sue

Crabapple wrote: »

Sensible advice from Sue as always, but this bit is wrong. A valuation for Probate cannot be less than an open market value. If any Estate Agent prepared one on that basis they are very wrong and seriously out of date on the rules and regulations.

Well, on another thread it was suggested that 10% below market value was probably the figure to put on the forms for HMRC, and one agent actually gave us a formal valuation for probate, AND a separate letter with a marketing strategy recommending putting it on at a higher price.

Presumably this is at least partly because the valuation for probate has to be the value at the date of death, when the house is (generally) full of clutter and not seen to best advantage.

Crabapple

sneekymum wrote: »

It just occurred to me that once the property is held in separate parts (tenants in common) then what's to stop OH and B from selling their shares on the open market? Would that be possible? Would their shares come with the option to demand rent?

Theoretically you can sell a tenants in common share separately. Practically, nobody would buy it. It's not like buying a house with a sitting tenant as a rental property, a buyer would be co-owning property with someone they didn't know and that person would have a load of rights to the house in excess of any a tenant would be able to claim.

Savvy_Sue wrote: »

Well, on another thread it was suggested that 10% below market value was probably the figure to put on the forms for HMRC, and one agent actually gave us a formal valuation for probate, AND a separate letter with a marketing strategy recommending putting it on at a higher price.

Presumably this is at least partly because the valuation for probate has to be the value at the date of death, when the house is (generally) full of clutter and not seen to best advantage.

I didn't see the 10% (yet at least) but HMRC want open market value, discounting is a bad idea. Property values in a taxable Estate will be referred to the District Valuer for checking.

An open market valuation is going to be different from a marketing strategy anyway - Agents will normally suggest marketing higher with the expectation that offers will come in lower than that.

https://www.gov.uk/valuing-estate-of-someone-who-died/assets

Also, if you did undervalue the house on the Probate forms and later sell higher then CGT may become an issue.

Savvy_Sue

Crabapple wrote: »

I didn't see the 10% (yet at least) but HMRC want open market value, discounting is a bad idea. Property values in a taxable Estate will be referred to the District Valuer for checking.

An open market valuation is going to be different from a marketing strategy anyway - Agents will normally suggest marketing higher with the expectation that offers will come in lower than that.

https://www.gov.uk/valuing-estate-of-someone-who-died/assets

Also, if you did undervalue the house on the Probate forms and later sell higher then CGT may become an issue.

The 10% below market value suggestion was in this thread.

My feeling is that CGT may become an issue whether you under- or over-value on the probate forms. If you over-value on probate the District Valuer may still challenge the probate value and argue it should have been £X000 rather than £Y000, and as it's now sold for £Y000 there was a capital gain.

But going back to the blockage question:

The siblings have probate.

The will says everything to be divided equally.

A does not appear to wish to do that.

Can A therefore be removed as an executor? Is that what the solicitor told OH and B would be very expensive? Is that more or less expensive than forcing a sale through the court?

Sitting down with A and working through the possible scenarios, with the costs which will reduce EVERYONE's share of the estate, may bring a reality check.