Buying out shares of a property

Gadge2011

For context I am the son of one of the property owners. There are four owners and between them they would not be able to agree that grass is green, and the sky is blue. The property is paid for.

My aunt has lived in the property long term for 50years and wishes to remain there, other siblisepngs are pushing for a sale / buy out.I’m exploring options of buying out the shares of the property but I want to ensure that its done fairly for all parties involved and that my investment is secured. Yes, I know the sensible thing would be to not get involved.

• House has been valued at 120k
• 4x shares at 25% each
• Aunt will give me her share + Gift me 10k(ish) - she wishes to remain in the property long term
• My mum’s share I can manage but I think I would also be better off buying her out
• 2x shares need to be purchased at the same time

Obtaining the property:

• 20k would be put down on a mortgage (10k gifted from the aunt + me)
• Presumably, this would need to be a buy to let mortgage 0 rent would be paid at least for an agreed amount of time before going ahead with the purchase
• Believe my aunt would legally become my tenant and everything that comes along with it (Tenancy agreement, Filling out tax returns etc...)
• I would not live in the property
  

Am I missing anything that is likely to bite me? Other than the family politics. I will be seeking legal advice but I like to be prepeared.

[Deleted User]

Gadge2011 said:

For context I am the son of one of the property owners. There are four owners and between them they would not be able to agree that grass is green, and the sky is blue. The property is paid for.

My aunt has lived in the property long term for 50years and wishes to remain there, other siblisepngs are pushing for a sale / buy out.I’m exploring options of buying out the shares of the property but I want to ensure that its done fairly for all parties involved and that my investment is secured. Yes, I know the sensible thing would be to not get involved.

• House has been valued at 120k
• 4x shares at 25% each
• Aunt will give me her share + Gift me 10k(ish) - she wishes to remain in the property long term
• My mum’s share I can manage but I think I would also be better off buying her out
• 2x shares need to be purchased at the same time

Obtaining the property:

• 20k would be put down on a mortgage (10k gifted from the aunt + me)
• Presumably, this would need to be a buy to let mortgage 0 rent would be paid at least for an agreed amount of time before going ahead with the purchase
• Believe my aunt would legally become my tenant and everything that comes along with it (Tenancy agreement, Filling out tax returns etc...)
• I would not live in the property
  

Am I missing anything that is likely to bite me? Other than the family politics. I will be seeking legal advice but I like to be prepeared.

I don't understand the part about managing your mum's share.  If you need a mortgage then if your mum remains an owner you'd need a joint mortgage with her so yes you'd be better off buying her out too.

I think your biggest stumbling block is finding a lender willing to give you a regulated BTL mortgage when the tenant is providing half the deposit.  It's also difficult to find lenders willing to grant mortgages as low as £20k, some have a minimum of £25k. There's also the higher rate of SDLT to pay assuming you're already a home owner so have you accounted for that?

getmore4less

What is the CGT situation for each of the current owners?

If the Aunt wants any security she would be mad to give away her share. 

AdrianC

Gadge2011 said:

For context I am the son of one of the property owners. There are four owners and between them they would not be able to agree that grass is green, and the sky is blue. The property is paid for.

So what makes you think they'll agree to this plan?

My aunt has lived in the property long term for 50years and wishes to remain there

So a regulated tenant with far stronger protections than modern ASTs, as well as being a close family member...?
That rules any BtL mortgage straight out. Nobody's going to lend against that.

House has been valued at 120k
4x shares at 25% each
Aunt will give me her share + Gift me 10k(ish) - she wishes to remain in the property long term

She's lived there 50yrs - she's what age, 80ish+?
What other assets does she have apart from the £40k-worth (£30k property + £10k cash) that she's giving away...?
MAJOR league alarm bells there for deprivation of assets, especially given the likelihood of her needing means-tested benefits, let alone residential care in the future.

My mum’s share I can manage but I think I would also be better off buying her out
2x shares need to be purchased at the same time

So you're going to need to raise £60k, minimum, possibly £90k. You say you have £10k cash of your own, so £50-80k.
Your mother could gift you her share - if she retains ownership, the property will still be in joint ownership, which will even further complicate any mortgage...

GDB2222

I gather your aunt pays nothing for living in the property at the moment? And that would continue? How old is she and what’s her state of health?  Who pays for maintenance, insurance, etc?

BTL mortgages are linked to the rent. If there is no rent, forget that possibility. In any case, you’re going to have to pay the mortgage interest out of your own pocket, which might be a great deal for you if your aunt passes away in five years but a terrible deal if she’s still there in 30 years.

getmore4less

50years living in a property you own how does that make you a tenant.

Missing info how/when the property was obtained by the current owners. 
If that was 50years ago. 
Was it an inheritance or a purchase? 
What is the current base for CGT. 
If an inheritance did the aunt get any rights to live in the property. 

diggingdude

Aunt pays no rent......you can see why the others are annoyed 

Gadge2011

Thank you for the replies they are very helpful.

My aunt has lived in the house nearly her whole life, she’s 55 and on a very low income. She doesn’t pay rent, she pays insurance, bills etc... pretty much the other siblings want their piece of the pie so I’m trying to help her out if I can, If it doesn’t work financially from my perspective I at least want to make sure she gets her portion.

in terms of who owned the house prior, it’s an odd one but apparently her and her brother owned 50% each at the time of my grandad passing away (they didn’t actually know) this was then changed to a 25% split between the four of them about 9 years ago. 

Would capital gains be payable on this?

SDLT is some aI need to look into further.

thanks

Gadge2011

GDB2222 said:

I gather your aunt pays nothing for living in the property at the moment? And that would continue? How old is she and what’s her state of health?  Who pays for maintenance, insurance, etc?

BTL mortgages are linked to the rent. If there is no rent, forget that possibility. In any case, you’re going to have to pay the mortgage interest out of your own pocket, which might be a great deal for you if your aunt passes away in five years but a terrible deal if she’s still there in 30 years.

Yes I would be looking to exchange her share for rent pretty much ad provide myself with a long term investment. 

GDB2222

You are effectively buying a property with a tenant aged 55 who will pay no rent for the rest of her life. That’s called a reversionary interest that you are buying. For a life tenant as young as 55**,the price paid by an investor for that would usually be around 40-50% of the house value.  But you are effectively paying 75%. 

The figures don’t stack up, and that’s before you start getting into the problem of trying to finance this, although it partly explains why you are going to Have trouble doing so. 

The other owners will have to think about whether they are willing to sell their shares at a discount, in order to avoid your aunt being made homeless. 


** Home reversion are not usually bought when the life tenant is as young as this, as investors don’t like being locked in for upwards of 30 years 

getmore4less

Someone needs to resurrect the details of how the ownership happened and why it was changed to the four of them 9 years ago?

Any change of beneficial interest  would be a disposal and CGT calculations done.

Did their parents have wills that would be the starting point of the trail
anything further is speculation and the sort of things that do happen(but not exhaustive) .
Could be on the death of both parent the 4 siblings inherited(beneficial interest) 25% each at that point.
The change of legal owners 9 years ago was just a tidy up.

If they(aunt and one brother) already owned 50% was that from the previous grandmothers death? 
That tends to be with life interest for surviving parent but not always

I find these things much easier, and I suspect you will, if there is a time line of who lived there when, when changes like legal owners and beneficial ownership  happened, that highlight what gaps need filling.

(It is important to get your head round legal and beneficial ownership)