Selling share to other owners

HeadingSouth

Hi - I've looked down the threads and couldn't see anything that matched my exact query so hopefully it's ok to post this as a new one. Please forgive the length - it's a little complex.

I own a house with two friends - we bought it nearly 12 years ago. 57% of the house was purchased outright by one housemate and the three of us entered a 25 year mortgage agreement for the remaining amount, which is paid back by myself and the other housemate. We have a Deed of Trust that said we can't sell up for two years and if one of us wants to leave after that point, we have to give other housemates first dibs to buy us out, we can sell our share to another party if all co-owners agree on the new buyer, otherwise the house is sold.

So I have a 9% share of a house which at the time of purchase was approximately £32,000 and is now probably around £50,000. I now want to sell my share of the property to one of the housemates (probably the one who pays the mortgage with me). Btw this housemate will not need to get a mortgage to buy my share and I will be moving to rented accommodation.

Both housemates are happy with the concept and at this point it is entirely amicable (these housemates are my best friends but I now want to live in another part of the country with my long term partner). Obviously I want to ensure everything is as fair as possible so that our friendship remains.

We are going to get a number of valuations done to work out the value of the property so we can come to an agreed price.

Now I'm at a complete loss as what we do next. Because I won't obviously get my full share of the property as it's not fully paid off. So I think that I need to work out how much of my share of the original value of the house I've paid off. Let's say I've paid 25% of £32,000, does that then mean that my housemates enter a new mortgage agreement for the remaining debt which I'm not part of and my housemate pays me 25% of what my share of the new value of the house is (e.g. £12,500)?. Am I right in that assumption?

Am I liable for any taxes? I'm not liable for Capital Gains Tax as far as I can see.

What other expenditures do I need to consider in relation to the sale? So far I have:
- Cost of remortgage
- Cost of solicitor
And are these costs split between myself and the party who wants to buy the house or am I solely liable for them?

Alternatively does someone know where to go looking for the information I need. Do I need to hire a financial advisor to discuss my options? I'd really rather not do that if I can gather the information myself.

Finally, thank you for reading this and thank you even more if you are able to give any advice or point me in the right direction. I am enormously overwhelmed by this and would be so grateful for a helpful steer.

xylophone

https://www.theguardian.com/money/2006/sep/06/expertsproperty.property

a 'declaration of trust' which is a separate deed which people who own property as tenants in common are strongly advised to draw up when the property is purchased. If you do have this legal document, it should state what you have to do when one of you wants to buy the other out and - if you have unequal shares in the property - how the proceeds of a sale will be divided, or, as in your case, how much you'll have to pay to buy your co-owner out.

Have you checked the deed on this point?

G_M

9%? ??

A owns 57%.

Although all 3 of you are named on the mortgage agreement(presumably a requirement by the lender?), only B & C are paying it off.

So it could be argued B & C own the remaining 43% ie 21.5% each.

But this should be specified in the deed.......

What is the outstanding mortgage? Let's say £XK. And the house value is £50K So the equity is 50 - XK. You are therefore due 21.5% of this.

Subjet to what the Deed says of course.

Have you been living in the house? If yes, ther's no CGT to pay. If no, there may be CGT unless the calculation above is less than £11,300 (assuming you've not used your annual allowance elsewhere).

Costs of re-mortgage and solicitor should be atributed as per the Deed. If the Deed is silent I'd suggest you pay, as you ae the one wishing to make the change which results in the cost.

getmore4less

As above unless you are only paying a tiny part of the mortgage you may have been poorly advised on the deed..

The real calculation would be (( house value * 0.43) - mortgage) split by the share of the mortgage being paid.

HeadingSouth

Thank you for the quick responses so far.

Sorry I wasn't clear - I don't pay half the mortgage - I pay a part of the mortgage based on ultimately owning a 9% share of the house once all paid off.

I am living in the house with the other two owners and we don't rent to anyone and I don't think it's large enough to warrant Capital Gains Tax.

Barejester

Your numbers still aren't really that clear - but does this sound right;


A = 57%
B = 34%
You = 9%


B and you took out a mortgage for your share, so what % of the mortgage are you paying? Must be about 20% or so - if you want to exit, then you owe 20% of the remaining balance of the mortgage and you'll get 9% of the house value.


If the mortgage you and B took out was for £150K and you've paid nothing off, but the house has increased in value so the 9% is now worth £50k, then you owe £30K to the house (your 20% of the mortgage) and so would have equity of £20K.


These numbers are very rough and have been rounded for simplicity, but essentially - you owe your full share of the mortgage from your 9% share, whatever is left over is your equity.

Brighty

So are you saying the whole house is worth £50k or is that a rough guess of what your 9% is worth?

So A owns 57% off the house outright
The remaining 43% is 'owned' by B and you
If you own 9% of the whole house, then you must own 21% of the mortgaged 43%, therefore you should be paying 21% of the monthly mortgage, that correct?

So by my reckoning, if B wants to buy you out, A&B need to remortgage the house for what the current mortgage is plus your pay off (£50k-21% of remaining mortgage). Then B takes on the whole mortgage payment and now owns 43% of the house

AdrianC

So if your 9% is ~£50k, the property is worth approx £550k now?
When you bought in, your 9% was ~£32k, so the property was worth £350k?

Person A owns 57% - £200k at purchase, £313k now.

The three of you shared a mortgage in equal proportions - £150k, or 43% LTV at the time of purchase. How much is the outstanding balance?

Your share of the mortgage is 9% of the total value of the property.
You "owe" around 9/43 of the mortgage.
You "owe" 9/43 of the remaining equity after that mortgage is deducted from 43% of the value.

43% of £550,000 is £236,500.
9/43 of £236,500 is £49,500
Let's say the remaining mortgage is now £75,000.
9/43 of the remaining mortgage is £15,700.

So you have about £33,800 due to you for your share.

gabriellemarny

May I add a similar problem/post to this interesting question? I and partner own a property with a mortgage on a 50-50% basis. He wants to buy me out but I do not want to part with my share, can he force me to sell? Also, what costs would be involved and who pays in this case.

xylophone

Do you have a deed of trust? See 2 above.

Re Court Order for Sale.

http://www.howellslegal.co.uk/news/post/Applying-to-Court-for-an-Order-for-Sale.aspx