Buying ex partner's share of property

Windsorcastle

My partner and I have split up extremely acrimoniously and need to find an urgent resolution as it is intolerable for us to continue sharing the property but neither of us can afford to move.

We bought the property as Tenants in Common, with her owning a 65% share and me owning a 35% share. She put in a much bigger deposit than me and we then took out a joint mortgage for the remainder.

A family member has very kindly offered to lend me all of the money to buy out my ex and pay off the mortgage, so is effectively giving me a mortgage for the whole amount, at a low rate of interest.

In order to agree a market value, I have been advised to get a surveyor valuation, which is apparently more reliable than an estate agent valuation. Is this the best thing to do? The potential investor also suggested we put the property on the market anyway to test it and see if we do get any offers. I'm not that keen to do this, as it means wasting other people's time, if we're not actually intending to sell.

Will stamp duty need to be paid in this scenario?

One other factor is that I made an overpayment of £20,000 last year, which I want to make sure my ex doesn't benefit from. However, in this scenario, am I right in thinking that I would just be paying my ex back her original deposit plus 65% share of the equity?

As I would then be paying off the remainder of the mortgage, the fact that I made an overpayment is irrelevant, am I right?

I hope I have explained this clearly! Any advice on potential pitfalls will be most helpful.

DumbMuscle

For a valuation, the surveyor is likely to give you a more reliable opinion (since they get paid up front, and aren't relying on the house selling to get their commission).

As for the amount of money you will be paying your ex - that's up for negotiation. She might look at the valuation, decide she wants more than 65% of that, and refuse to sell her share at that price. You'd be paying back a price which she agrees to, and since we don't know her, we can't say what that will be. She could insist that you put it on the market, in case anyone is willing to offer more than you are (and at that point, you probably have the choice to match/exceed their offer or sell the house). On the other hand, if she wants out of there quickly, then you seem to have a reasonable solution which can be done very fast - provided you can get a reasonable price out of her.

gettingtheresometime

Windsorcastle wrote: »

One other factor is that I made an overpayment of £20,000 last year, which I want to make sure my ex doesn't benefit from. However, in this scenario, am I right in thinking that I would just be paying my ex back her original deposit plus 65% share of the equity?

As I would then be paying off the remainder of the mortgage, the fact that I made an overpayment is irrelevant, am I right?

Did you agree anything in writing about the overpayment? I'm sure that you didn't see the split coming but imo it was a daft thing to make that overpayment without a written acknowledgement.


If you didn't (and it sounds as if you didn't) then depending on how morally correct your ex wants to be then I think you might be stuffed without an expensive legal fight.


Does your ex know about the offer? Be prepared for her not to accept the survey valuation so I'd suggest you go for one & then she goes for her own and then you agree (if that's possible!) to meet in the middle.

G_M

As above, the starting point is to get the valuation and then see if
a) ex is willing to sell
b) ex accepts the valuation

If a) is no, you have a problem, but then both have to keep living there I guess

If b) is no, suggest ex also pays for a separate valuation, and you compare the two.

As for the share-out, this may well require negotiation, but I'd start by suggesting

* you knock the £20K off the agreed valuation
* then you knock off the mortgage redemption amount
* then you knock off any legal costs
* then you split the remainder 65/35

getmore4less

as you don't seem to have an agreement in writing that describes what happens for a buyout you need to construct one through action & intent

how did you come to agree 65% 35%?
did you think you were doing proper equity shares
did you think this was a get your deposits back situation.

The overpayment can be worked into those as well with more details on the timings and payments

The numbers will be different for each method but that will give you a range to be working with.

You can get as many valuations as you like what is needed is mutual agreement.

Windsorcastle

Thanks for all of these responses, which are really helpful.


The original percentage shares were calculated on the deposits we put in respectively, plus half of the mortgage each, and those were the percentage shares recorded on the land registry documents.


In terms of the overpayment, we only acknowledged that I had made the overpayment by email, but obviously I have proof that I made those payments. The idea at the time was that she was also going to make an overpayment of the same amount but then she had second thoughts, and never did so.


You are all right, of course, that this all depends on us coming to an agreement as to the valuation (which is tricky as there is no verbal communication whatsoever, despite us living in the same property!).


However, she does want her money urgently as she wants to use it as a deposit on another place.


I think GM's suggestion as to how to organise the share-out sounds the fairest, so thank you for that.


This has all helped me get my head around it all a bit better, thank you all!

Windsorcastle

Ooh, just one more thing? Will stamp duty be payable on this transaction/transfer? Does it matter that I am already one of the owners and already paid stamp duty at the time of the original sale?

G_M

SDLT will be due on the amount you pay, assuming it is in excess of the zero rate.

00ec25

Windsorcastle wrote: »

Ooh, just one more thing? Will stamp duty be payable on this transaction/transfer? Does it matter that I am already one of the owners and already paid stamp duty at the time of the original sale?

SDLT is due if the amount of money you actually pay her for this "buy out" is more than the threshold

getmore4less

Windsorcastle wrote: »

I think GM's suggestion as to how to organise the share-out sounds the fairest, so thank you for that.

Problem is that is not the fairest way if you want to do proper equity shares.

saajan_12

Windsorcastle wrote: »

One other factor is that I made an overpayment of £20,000 last year, which I want to make sure my ex doesn't benefit from. However, in this scenario, am I right in thinking that I would just be paying my ex back her original deposit plus 65% share of the equity?

As I would then be paying off the remainder of the mortgage, the fact that I made an overpayment is irrelevant, am I right?

What do you mean by equity? Equity is usually value - mortgage balance, so this would already cover her deposit.

Sounds like you overpaid the £20k based on an agreement ex would do the same, so now to account for that you get £20k before splitting the equity 65/35. So partner gets 65% of (Property value – mortgage balance – 20k). Note this isn’t completely fair as your partner’s deposit has ‘grown’ / ‘shrunk’ by the change in property value whereas your 20k doesn’t. However its hard to figure out (and agree on!) the property value at the time of your overpayment and unless it has increased much since then, it will make little difference.