Co-ownership and remuneration of rent problems

Gr3g5ta

Hi there,
Thank goodness this forum exists, I look forward to learning from your advice and in turn helping others in areas I know about.

I have a tricky situation which I would like some advice on.  For the past 13 years me and three relations have all been locked together on a mortgage for a house.

The house has been rented out more or less the whole time it has been ours.  My sister decided to take care of the renting out of it and noone asked any questions.

The immediate question I have is how to take control of this situation.  Any messages or emails are ignored by her.  

She has a tenant in the place at 1450 GBP, the interest only mortgage is 300 GBP, service charge is 200 GBP per month.

That leaves 750 GBP unaccounted for.  My understanding is that that should be split between four owners.  She has a contract in place from herself to the tenant.

In my mind the best thing to do would be to go to the small claims court for the back pay, and somehow force the tenant to sign a new agreement that is managed by an external rental management company.

Like I said she is not willing to speak about any of it, so please discount that as an option.

If you have any other ideas, please do help me with other ways this can be done.

Regards

Greg

tacpot12

It would probably be best if the three other owers clubbed together to get some professional legal advice. I think that suing her for the rent you should have received is going to be necessary. You might also need advice from an accountant/tax adviser as to whether your costs of recovering the money can be used to offset the tax that will be due on this extra income you will hopefully be receiving. 

Suing your sister might persuade her to talk to you all about it. Don't forget that the problem will go away to some extendt once the interest-free mortgage ends and the house is sold to clear the mortgage. 

She will also be able to deduct other expenses that were reasonably incured in operating the property for rental.  The legal advice might say that you can't claim for some of rent due in the early years because civil claims have to be made within 6 years. 

Before suing her, you should consider the effect on your relationship, which sounds to be non-existant, but suing her will make it much worse. 

I am sure others will be curious as to why you didn't pay attention to this income stream then and why you are paying attention to it now. Really, the  mortgage shoudl have been converted to a Repyament mortgage so that the house would not have to be sold at the end of the interest-free mortgage.  

AFF8879

What was the agreement when you first took ownership of the property (I assume an inheritance)? Was it written down anywhere? And what has suddenly changed to make this now an issue after 13 years? This will impact any steps you need to take…

sourpuss2021

I can just write from a tenant's perspective, as I'm renting a property that's owned by two siblings who inherited it.   One of the siblings is my landlord, and I have had no contact with the other.

I know they split the rent, but the landlord sibling sets the amount and also, so far as I know, takes the decisions about repairs and renovations. So the property has one landlord and two freeholders, but one freeholder is sleeping.

If, following some family row, the other sibling contacted me and said, "I'm your landlord now", I would tell them to take a hike!  Because I have a perfectly valid contract with my landlord, which without my agreement could only be ended by the courts.  If however they chose to exercise some authority as freeholder (e.g., commissioning external repairs), that would be a surprise to me but welcome.

So... That's a long way of saying I don't think you have any way to get the tenant to recognise you as their landlord, as you cannot easily obtain that status.

But also, don't forget the likely maintenance costs of the property that have to be met out of the rent.   These can be very considerable!   Whether it's new boiler, oven, washing machine, decoration, external repairs, plumbers and electricians, etc, etc.

You also need to consider the tax on the rental income profits that your sibling will have had to pay each year.

thegreenone

Are you saying you and the two others have not received a penny in rental income in 13 years?  As there were four of you, it sounds as though you should('ve) formed a company.

I think you need to call a meeting of all four, invite sister and provide proof that you did, preferably with a solicitor.

As sourpuss says, there will need to be an emergency/sinking fund for maintenance but even if that is £200 pm there still should be a fair amount left and you need to know where she's put it.  

I hope this is not going to turn out how I'm thinking it's going to turn out.

Pixie5740

Gr3g5ta said:

Hi there,
Thank goodness this forum exists, I look forward to learning from your advice and in turn helping others in areas I know about.

I have a tricky situation which I would like some advice on.  For the past 13 years me and three relations have all been locked together on a mortgage for a house.

The house has been rented out more or less the whole time it has been ours.  My sister decided to take care of the renting out of it and noone asked any questions.

The immediate question I have is how to take control of this situation.  Any messages or emails are ignored by her.  

She has a tenant in the place at 1450 GBP, the interest only mortgage is 300 GBP, service charge is 200 GBP per month.

That leaves 750 GBP unaccounted for.  My understanding is that that should be split between four owners.  She has a contract in place from herself to the tenant.

In my mind the best thing to do would be to go to the small claims court for the back pay, and somehow force the tenant to sign a new agreement that is managed by an external rental management company.

Like I said she is not willing to speak about any of it, so please discount that as an option.

If you have any other ideas, please do help me with other ways this can be done.

Regards

Greg

How is the property owned?  Joint tenants or tenants in common?  Do you all own equal shares of the property?  Was anything ever written down about how this rental business was going to work?

You can't force a tenant to sign a new tenancy agreement, so please discount that as an option.  You can force the sale of a property though and that exactly what I would be doing along with suing the sister for the rent you never received.  I would not want to continue with this partnership. 

TripleH

Check through all correspondence you have and emails since you inherited the property.

Bear in mind if this becomes a legal argument, you have the risk that HMRC come chasing for unpaid taxes, penalties and interest.

They will assess based on what they believe is the tax due and will expect all of you to pay your shares (as per the assumed legal position concerning ownership) regardless of if you have had the funds or not.

sourpuss2021

OP hasn't actually said that this property was inherited - and perhaps that wouldn't fit with it being on an interest-only mortgage.  Perhaps instead the purchase was made when the siblings chose to invest some money together.

canaldumidi

More information is needed, in particular

* how the arrangement started and was set up

* current ownership status

But clearly your aim should be three-fold:

* start receiving shares of ongoing rent

* receive shares of back rent

* sell the property and end the business/financial link between you

As others have said, tax is an issue.

You don't say whether the other 2 relations are concerned/involved - this needs resolving by all.

As explained, this is not the tenant's fault, and there is no way to involve them. So far as they are concerned they have a perfectly valid tenancy which they are (presumably) abiding by.

Ultimately, a court could order the sale of the property, and could order payment of rent owed. But it will be time-consuming, stressful, and expensive to get to that point. Possibky the serious threat of that might make the landlord/relation start communicating. If so, I'd recommend compromising eg agree to write off the rent if he/she agrees to either buy iut your share of the property, or sell it and split the proceeds.