joint project, flip my own home

snickpan

I own a couple of houses, sold one recently, buyer did it up an absolute treat, he said we should do a joint venture.  I have a house that could do with renovating before selling, would like his golden touch, but unsure of 'etiquette'.  I thought I would value the house as it is, give him the keys, and let him keep any surplus money once it's renovated and sold.  I would cover the mortgage in the interim, and agree that I get the asking price (of the pre-renovation valuation), as part of the deal.  House is probably £650K as it is, I suppose it's up to him to decide if it's worth his while, and to what standard he works to.  The advantage to him is that he doesn't have to by the property before starting work.
BUT:  who covers the energy bills?  Who would be responsible for solicitors fees, estate agent fees?  Probably me.  I've assumed he has a certain amount of capital, as he wanted to do a project.  Should we go halves on all the work done, or would that be his look out?  Would it be better to simply agree a fee for him, or would that not be such an incentive? 
I know it's all vague, I'm hoping someone has done this before, and knows of pitfalls to lookout for.  

silvercar

His big saving is on stamp duty on purchase and funding the project. By the sound of it he has all the gain between current valuation and new. You have the costs of the property until sale. The big risk is that he can hold out for whatever price he wants and you provide the funding while he waits to get the right buyer.

user1977

Doesn't sound like much of a joint venture if the house is solely in your name, and he's keeping all of the increase in value? Why not just arrange the work yourself in the usual way?

diystarter7

Hi Op

The "pitfalls" there are many and a big current one around se England/London is prices are weka and could go down. The other chap may jump ship half way through or could go off sick, break a leg etc - a common problem is what price to sell at.

Many pit-falls IMHO.  Possibly a better way you give him a contact to do the house up for a fixed price and you will have a better idea of what yout may get at the end of it. Draw up a contract and important to have sensible completion dates for works as it could drag on for a lot longer than you hope for.

Personally, I'd never do that but I have seen stuff like that done well for both sides and other times not so weel on tv show/HUTH

SDLT_Geek

snickpan said:

I own a couple of houses, sold one recently, buyer did it up an absolute treat, he said we should do a joint venture.  I have a house that could do with renovating before selling, would like his golden touch, but unsure of 'etiquette'.  I thought I would value the house as it is, give him the keys, and let him keep any surplus money once it's renovated and sold.  I would cover the mortgage in the interim, and agree that I get the asking price (of the pre-renovation valuation), as part of the deal.  House is probably £650K as it is, I suppose it's up to him to decide if it's worth his while, and to what standard he works to.  The advantage to him is that he doesn't have to by the property before starting work.
BUT:  who covers the energy bills?  Who would be responsible for solicitors fees, estate agent fees?  Probably me.  I've assumed he has a certain amount of capital, as he wanted to do a project.  Should we go halves on all the work done, or would that be his look out?  Would it be better to simply agree a fee for him, or would that not be such an incentive? 
I know it's all vague, I'm hoping someone has done this before, and knows of pitfalls to lookout for.  

There are bigger issues here, but I will put my oar in, on stamp duty land tax, as is my wont.

If the "developer" party has a right to select the buyer of the property, then it is likely that the "developer" will have to pay SDLT under some anti-avoidance rules for building licences: Finance Act 2003 section 44A "Contract providing for conveyance to third party".

SDLT_Geek

Outside of my area of experience, but is there possibly something much worse here? 

By turning this into a development project is the gain, instead of being taxed to CGT and sheltered by PPR (the heading says this is your home), now entirely taxed to income tax??  Horror!!

donutandbeer

I don’t understand why you would want to do this. You will only get the amount of money that it is worth now without any improvement when you eventually sell the place (and that’s providing that he really finishes the work in a reasonable time)… So why don’t you just sell now without doing it up? 

Boat_to_Bolivia

As others have said, I don't see how you will benefit at all from doing this?

Either sell now or pay a developer to do the work, then sell and you will benefit from any increase in the value of the property.

snickpan

the only benefit to me really, would be that I'd get the asking price, and not have to drop £30k when someone views it and makes an offer.
The other main issue from replies is stamp duty...!

snickpan

probably best idea is just to sell it now.  I'd never be motivated to get the work done myself, just don't have the contacts, and I'd probably keep trying to spend less, and end up with a half arsed job!  The other bloke did such a good job, I would have liked to see him in action on my place.  I suppose if he jumped ship half way through, I could pick up where he left off, I'd still have my house.

user1977

snickpan said:

the only benefit to me really, would be that I'd get the asking price, and not have to drop £30k when someone views it and makes an offer.

No, the current valuation is what you'd actually sell it for, it isn't an asking price which you don't expect to achieve.