CGT questions (when gifting a property)

letsgetdowntobusiness

Hi there

I am looking for some advice on what has turned into a rather complicated situation.  I think I have covered most things but of course, ask any questions if you need further clarification.  Apologies if this should be in a different section, happy for forum guides to move it if they think more relevant elsewhere.

Sibling A owns a property with sibling B (B couldn’t get a mortgage at the time, SAHM 15+ years) but had lump sum from divorce which they put towards the property so A offered to get a joint mortgage (as guarantor really, as they were mortgage free with a higher salary), with a view to gifting the property to B as and when B was able to take it all on their own.  It was always A’s intention that this be a B’s property and a roof over her and her children’s heads and security forever that no one could take away from her (hindsight is a wonderful thing). 

Property Co-owned, joint tenants, joint mortgage.

A paid 50% of monthly mortgage for first 5 years with B (as B on low income), B has not repaid this money to A.

B has always lived in the property (initially with adult children who paid rent) now with 1 adult child and B’s partner (who all pay rent/towards bills), partner moved in around 4 years ago and A stopped paying towards mortgage at that time.

A has never paid any of the bills (other than mortgage), has never lived in the property and has never received any rental income either.

B is remarrying and wants A to “sign property over as a gift” so that B’s (HTB) can go on the mortgage and deeds (which A thinks is a bad financial decision FWIW as, if the marriage were to end in divorce, B would not have the funds to buy him out as she still doesn’t earn enough to take the mortgage on her own as it is). 

Both have taken some legal/financial advice recently and all say that if A does this then they will be liable for CGT, which A is unwilling to pay and has said that if this is really what B wants, then B will have to find/borrow the money to pay the tax bill (bearing in mind the property would be hers, and it has gone up in value approx. 40% since we bought it).  And then reimburse A the money they paid towards the mortgage.   HTB owns his own property that he rents out, there is no intention to add B to his mortgage or deeds.

B does not wish to sell the property and buy a new one with her HTB, which would free up capital to pay the CGT costs of A.

Do A and B legally own 50% share each of the property regardless of who has paid what (deposit and mortgage), just curious?

How does A achieve what B wants without it costing £000’s and guarantee that B will not have to pay a large CGT bill at any point.

A is seriously regretting the decision to help B and is getting nothing but stress and complaints from B (I shan’t bore you with the details, there are always 2 sides).

If you've got this far, thank you for reading!

pphillips

When more than one person buys a property as tenants in common they are given an opportunity to make an express declaration that states the shares each of them will hold. If a declaration has been made then, in the absence of fraud or undue influence, that declaration is conclusive. Failure to make a declaration is not advisable as it can result in expensive litigation later on.

In my opinion, B is being unreasonable about refusing to sell or buy out A because B's HTB already owns a property.

[Deleted User]

What is the acronym HTB, please?
Presumably not Help To Buy?

p00hsticks

Poster_586329 said:

What is the acronym HTB, please?
Presumably not Help To Buy?

Husband to Be , I think

Annisele

letsgetdowntobusiness said:

Property Co-owned, joint tenants, joint mortgage.

If you're certain that A and B own as joint tenants (and not as tenants in common), then that means A and B jointly own all of the property. Right now there's no "A's half" or "B's half"; legally A and B jointly own all of it.

If the property was sold, then from a tax perspective the assumption will be that A and B would take the proceeds in equal shares. And yes, if the property has gone up in value that's likely to mean a CGT bill for A (assuming the gain is more than what's left of A's annual CGT allowance).

Given that there's a mortgage that B can't afford on her own, it sounds as though there's no prospect of A just gifting the property to B and walking away - the lender won't have that.

Is it possible for B and HTB to get a joint mortgage to pay off the original lender plus (however much A wants of) A's half of the equity? If not, it doesn't sound as though B can afford what she wants.

From A's perspective, how much is "the money A paid towards the mortgage" compared with half of the 40% gain in the value of the property? And was the mortgage interest only or repayment? I don't see that A has any entitlement to a refund of the interest payments (unless that was previously agreed with , because A was always jointly liable for the mortgage. But I can see why A would feel aggrieved at losing out on any capital repayments A made.

As things stand, assuming this really is a joint tenancy then if either A or B were to die, the whole of the property would pass to the other under survivorship rules (regardless of what they've put in their wills). That doesn't sound as though it's what anybody wants, so they might want to take legal advice as to whether they should sever their joint tenancy. But it's probably a bad idea to do that without advice!