What is fair during mortgage buyout?

BeenHereAWhileNewID

Hi there

My divorce has been dragging on since 2020... 
I moved out of the family home as ex refused to, yet made my life unliveable by giving me silent treatment and not giving me time to have guests visit without her being there.  For transparency she was the one that cheated and then decided she didn't want to be married any more.

Because the only rental flat that was suitable for me to move into - area so that I could maintain contact with our son, standard, and price - was already furnished I did not take any furntiure as such with me.  I also did not want to rip apart my son's home just to take what was half mine.  Since that home, I have now had to move again (the joys of renting!) and this time it is an unfurnished property that I had to take a loan out to buy a 2 bedroom flat's worth of furniture!  Our joint saving were used up long ago on the solicitor fees!

Anyway, things are now progressing a little and ex is working out figures to buy me out.  Aside from the disagreement in the value of our flat (leasehold with 82-83 years remaining so due to be extended) there is approximately £100k equity.  With this equity figure she and her solicitor (and my solicitor!) also seem to be factoring in what costs would be to sell eg estate agent fees, even though it isn't being sold... my point is that nobody seems to be factoring in the costs I had to set up a new home... and also the stamp duty I will face when I finally get my share of the equity and might be in a position to buy another home.  My ex has offered to buy me out for £40k.

I will also point out the our pensions are still at this point undecided (disagreement over the valuation of hers as it is a local authority DB pension that seems to have been grossly undervalued). We are treating the 2 main assets separately.  The flat needs to be sorted as a matter of urgency as the fixed term is due to end and the interest rate hike will mean I may have to sugn up to a new product to keep a roof over my son's head... and therefore drag this out even longer.

I was just wondering what the norm is regarding making up theoretical costs for selling etc to reduce the equity during a buyout?

Thanks

RAS

The starting point is to take the pressure of yourself.

The fixed term on your rental is coming to an end? It will immediately roll over to a periodic tenancy whether the landlord r EA like it or not. Unless you have given notice? Have you?

The EA won't like it because they don't get a renewal fee from you or the LL. If the LL doesn't like it, they can send you an S21 notice, which will give 2 months notice, beyond which they might take you to court to repossess, likely sometime in 2022.

So there is nothing to stop you sorting out the house and pensions simultaneously, which may be to your benefit.

Now go and read your tenancy agreement to ensure understand whether it's going to be a contractual or statutory periodic tenancy.

BeenHereAWhileNewID

RAS said:

The starting point is to take the pressure of yourself.

The fixed term on your rental is coming to an end? It will immediately roll over to a periodic tenancy whether the landlord r EA like it or not. Unless you have given notice? Have you?

The EA won't like it because they don't get a renewal fee from you or the LL. If the LL doesn't like it, they can send you an S21 notice, which will give 2 months notice, beyond which they might take you to court to repossess, likely sometime in 2022.

So there is nothing to stop you sorting out the house and pensions simultaneously, which may be to your benefit.

Now go and read your tenancy agreement to ensure understand whether it's going to be a contractual or statutory periodic tenancy.

I'm sorry maybe I wasn't clear.  It is the fixed term on the mortgage on the flat I own with my ex that houses her and my son that is coming to an end.  If we do not sort out a buyout then we will have to sign up to a new fixed term product that will protract matters further or incur early redemption fees at the point of buyout.

BeenHereAWhileNewID

BeenHereAWhileNewID said:

Hi there

My divorce has been dragging on since 2020... 
I moved out of the family home as ex refused to, yet made my life unliveable by giving me silent treatment and not giving me time to have guests visit without her being there.  For transparency she was the one that cheated and then decided she didn't want to be married any more.

Because the only rental flat that was suitable for me to move into - area so that I could maintain contact with our son, standard, and price - was already furnished I did not take any furntiure as such with me.  I also did not want to rip apart my son's home just to take what was half mine.  Since that home, I have now had to move again (the joys of renting!) and this time it is an unfurnished property that I had to take a loan out to buy a 2 bedroom flat's worth of furniture!  Our joint saving were used up long ago on the solicitor fees!

Anyway, things are now progressing a little and ex is working out figures to buy me out.  Aside from the disagreement in the value of our flat (leasehold with 82-83 years remaining so due to be extended) there is approximately £100k equity.  With this equity figure she and her solicitor (and my solicitor!) also seem to be factoring in what costs would be to sell eg estate agent fees, even though it isn't being sold... my point is that nobody seems to be factoring in the costs I had to set up a new home... and also the stamp duty I will face when I finally get my share of the equity and might be in a position to buy another home.  My ex has offered to buy me out for £40k.

I will also point out the our pensions are still at this point undecided (disagreement over the valuation of hers as it is a local authority DB pension that seems to have been grossly undervalued). We are treating the 2 main assets separately.  The flat needs to be sorted as a matter of urgency as the fixed term is due to end and the interest rate hike will mean I may have to sugn up to a new product to keep a roof over my son's head... and therefore drag this out even longer.

I was just wondering what the norm is regarding making up theoretical costs for selling etc to reduce the equity during a buyout?

Thanks

I'll also add that the ex is also negotiating points that would crop up on an imaginary survey if we were actually selling the flat such as the boiler might need replacing and the fusebox will be flagged etc... she has apportioned costs to these issues too with regards to justifying the lowball figure for my half of our flat.

tightauldgit

BeenHereAWhileNewID said:

Hi there

My divorce has been dragging on since 2020... 
I moved out of the family home as ex refused to, yet made my life unliveable by giving me silent treatment and not giving me time to have guests visit without her being there.  For transparency she was the one that cheated and then decided she didn't want to be married any more.

Because the only rental flat that was suitable for me to move into - area so that I could maintain contact with our son, standard, and price - was already furnished I did not take any furntiure as such with me.  I also did not want to rip apart my son's home just to take what was half mine.  Since that home, I have now had to move again (the joys of renting!) and this time it is an unfurnished property that I had to take a loan out to buy a 2 bedroom flat's worth of furniture!  Our joint saving were used up long ago on the solicitor fees!

Anyway, things are now progressing a little and ex is working out figures to buy me out.  Aside from the disagreement in the value of our flat (leasehold with 82-83 years remaining so due to be extended) there is approximately £100k equity.  With this equity figure she and her solicitor (and my solicitor!) also seem to be factoring in what costs would be to sell eg estate agent fees, even though it isn't being sold... my point is that nobody seems to be factoring in the costs I had to set up a new home... and also the stamp duty I will face when I finally get my share of the equity and might be in a position to buy another home.  My ex has offered to buy me out for £40k.

I will also point out the our pensions are still at this point undecided (disagreement over the valuation of hers as it is a local authority DB pension that seems to have been grossly undervalued). We are treating the 2 main assets separately.  The flat needs to be sorted as a matter of urgency as the fixed term is due to end and the interest rate hike will mean I may have to sugn up to a new product to keep a roof over my son's head... and therefore drag this out even longer.

I was just wondering what the norm is regarding making up theoretical costs for selling etc to reduce the equity during a buyout?

Thanks

There's two parts to the calculation really that a court would look at.

1. The value of the equity - which will probably be reasonably straightforward, get an estate agent valuation on the property in it's current condition, less outstanding mortgage, less expected costs of sale (and yes that's legitimate to include). If either party wants to deviate significantly from that then it would be up to them to make that case to a court. Your costs of setting up a new home are irrelevant to this part. In theory the contents of the house are also an asset to be split but do you really want to be arguing over the value of second-hand furniture unless its really significant?

2. The equity split - which would start at an assumed 50/50 but could be altered by a court. Both sides would have to make their case for their needs here and certainly you could argue that you feel you are entitled to a bit more to cover your costs in setting up a new home and the value of the contents you left in the old house but whether that would be seen by a court as reason to justify a bigger share of the equity I'm not really convinced. The question would be whether those needs can be met from your 50% share  

So you have a few things to consider.

1. If you are unhappy with a valuation of £100k on the equity on what basis are you challenging that? Are you going to be able to get an estate agent or two to say it's worth more than they are saying? 

2. If you are unhappy with a 50/50 split on what basis are you challenging that? Are your ongoing needs to rehouse yourself significantly more than hers?

3. Is she in a position to be able to take on the mortgage in her sole name and still get access to discounted products etc. If an interest rate hike would mean you can't keep a roof over your son's head then is it borderline on affordability? Where is she getting the 40k from to buy you out?  Is the property actually going to have to be sold anyway?

4. What's the number you are happy with to walk away now and avoid time, stress and costs of it going to court? You're well within your rights to negotiate her offer. If she says £40k and you say £60k is it a case of meeting in the middle at £50k? When the numbers are relatively small like that in my experience courts are pretty pragmatic and not too keen to dive into the weeds - a 50/50 split would seem like the most likely outcome.

5. Bear in mind if you go to court they are going to want to look at all assets as a whole including pensions etc and that's going to take a while to resolve. You won't have an outcome this year. 

tightauldgit

BeenHereAWhileNewID said:

BeenHereAWhileNewID said:

Hi there

My divorce has been dragging on since 2020... 
I moved out of the family home as ex refused to, yet made my life unliveable by giving me silent treatment and not giving me time to have guests visit without her being there.  For transparency she was the one that cheated and then decided she didn't want to be married any more.

Because the only rental flat that was suitable for me to move into - area so that I could maintain contact with our son, standard, and price - was already furnished I did not take any furntiure as such with me.  I also did not want to rip apart my son's home just to take what was half mine.  Since that home, I have now had to move again (the joys of renting!) and this time it is an unfurnished property that I had to take a loan out to buy a 2 bedroom flat's worth of furniture!  Our joint saving were used up long ago on the solicitor fees!

Anyway, things are now progressing a little and ex is working out figures to buy me out.  Aside from the disagreement in the value of our flat (leasehold with 82-83 years remaining so due to be extended) there is approximately £100k equity.  With this equity figure she and her solicitor (and my solicitor!) also seem to be factoring in what costs would be to sell eg estate agent fees, even though it isn't being sold... my point is that nobody seems to be factoring in the costs I had to set up a new home... and also the stamp duty I will face when I finally get my share of the equity and might be in a position to buy another home.  My ex has offered to buy me out for £40k.

I will also point out the our pensions are still at this point undecided (disagreement over the valuation of hers as it is a local authority DB pension that seems to have been grossly undervalued). We are treating the 2 main assets separately.  The flat needs to be sorted as a matter of urgency as the fixed term is due to end and the interest rate hike will mean I may have to sugn up to a new product to keep a roof over my son's head... and therefore drag this out even longer.

I was just wondering what the norm is regarding making up theoretical costs for selling etc to reduce the equity during a buyout?

Thanks

I'll also add that the ex is also negotiating points that would crop up on an imaginary survey if we were actually selling the flat such as the boiler might need replacing and the fusebox will be flagged etc... she has apportioned costs to these issues too with regards to justifying the lowball figure for my half of our flat.

Unless she has written evidence from an expert (estate agent, surveyor, electrician, etc) that these things NEED done in order to sell then I don't think they would be seen as legitimate expenses to reduce the equity. But it's not unusual for these things to be inflated initially - that's all part of the negotiation. And to be honest you are doing the same in reverse by including hypothetical future stamp duty etc. 

In the event of a disagreement on the value of a property then the way out of that is to get an independent survey done with both sides agreeing to be bound by the outcome. That's what a court would instruct if you can't agree. If you get 2 or 3 estate agent valuations and they are all in general agreement then that's the value of the property in its current condition to be honest. 

Thrugelmir

BeenHereAWhileNewID said:

We are treating the 2 main assets separately. 

Need to be viewed as a whole not seperately. 

TBagpuss

It's absolutely standard to take into account he tional costs of sale.

Wwhat you are looking at it what you would each get if you sold up and split the proceeds, so you would take into account the likely sale costs, (e.g. estate agents and legal costs, ay ERC etc). it would be ususal for these to be 2 - 2.5% of the hosue value.

The fact that you will have to pay stamp duty is relvant to your finacial needs andhow they compare to heres, which would also include looking at the diffrences (if any) in the rest of the finacial pcture, e.g. your reslectvie incomes and earning capacities, ages, child's needs etc.

It would be usual to look at all assets together - it may, for instnace,, that you ended up looking for a slightly higher proportion of the pensions if the reality is that you have les from the hosue, for instace. 

For home contents these are only valued at their second hand resale value so you wont get any extra cash - you can however ask for a reasonable share of the furniture from the house so you and she both have to buy some new things. (Also, while I am sure that, like most of us, you'd prefer to be able to buy new and furnish to your tate, the realisty is that you can buy second hanf furniture pretty cheap;ly and then replace gradaully with new as and when you can afford it, so you may have to focus on the mosst importnat things such a a bed (or at least a new mattress) initially, and go from there