Inheriting unmortgageable property

user1977

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

Keep_pedalling

lisyloo said:

Keep_pedalling said:

lisyloo said:

Keep_pedalling said:

lisyloo said:

My trustess shall hold my interest (50% tenant in common) in the freehold property ........................... upon trust to sell the same ...........the same shall be held by my trustees upon trust for such of my children as shall be living at my death and if more than one in equal shares absolutely.

Who owns the other half

The other half belonged to his wife (tenant in common) who pre-deceased him.
It was a mirror will so same wording. Held upon trust for her daughter and grandson to sell the same (but only with his written consent during his lifetime).

The title was not changed when she died. 

So am I right in thinking if the property was sold by the trustees/executors then the estate pays 28% CGT with 2 executors CGT allowances.
Whereas if property is split among the 6 beneficiaries, they can then gift their half to their spouses, so there will be 11 CGT allowances and mostly 18% CGT?

I just had a look at your previous thread so it is a little bit clearer now. There is unlikely to be CGT on your share of the sale as there should be no taxable gain between date of death and sale of the property. If there is a gain (perhaps because the house was undervalued for probate) your father’s estate will have a single allowance (not one per executor) Your step mother’s beneficiaries however may have a CGT liability on any gain from the value declared on her IHT return as it does not look like your father was given a life interest in her will, which would have avoided that.

Thanks, the reason why I think there will be a taxable gain is that I currently think the property was unmortgageable at date of death and therefore of low value. This low value is the one that should be used for probate isn't it?

Yes, it’s current value is what is used for probate, although that value is going to be higher for a property that has previously been repaired but no certificate is available and one where no remedial work has been done. If their is no brick cladding on the property you know it is the latter, but even with the former you will need to establish that it was done properly and their are no defects.

Unless you know that no work has been carried out, then A RICS survey shroud be sought for a proper valuation and it should be a specific defect report which will probably involve a structural engineer. 

If the property is inherited at that low value and then it's just a shared property and the owners decide to pay for a building certificate and any remedial works and make the property mortgageable then it vastly increases in value.
As this will be a second property for everyone and not their residence then the gain in value is subject to CGT is is not?

All the beneficiaries of both estates would have to agree to to do this, and you could be talking about a 6 figure sum for the repair and there is no guarantee that you would get your money back let alone make a profit. 

What's the difference between a life interest and the clause that says the property can only be sold with his consent during his lifetime?

A life interest puts 50% into a trust in which the life tenant is treated as the owner for tax purposes with the eventual beneficiaries not becoming the beneficial owner until the life tenant dies or decides to move out.

It might be worth asking about your options on the housing board where you are likely to find people with better knowledge of these sort of properties.

lisyloo

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

The numbers may be wrong. The idea of putting numbers on it is to expose the thinking (and the flaws within it).

Until we have a PRC we don't know whether there's nothing to do, or whether there's a 6 figure bill.
So I am factoring in for that uncertainty not just that they need cash.

Yes it's been valued by 2 estate agents at £250k-£260k for probate purposes, I think they would be assuming it's mortgageable.

I'll also put up a very pertinent letter found but can't confirm it's the latest situation which obviously we need to confirm.

Keep_pedalling

lisyloo said:

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

The numbers may be wrong. The idea of putting numbers on it is to expose the thinking (and the flaws within it).

Until we have a PRC we don't know whether there's nothing to do, or whether there's a 6 figure bill.
So I am factoring in for that uncertainty not just that they need cash.

Yes it's been valued by 2 estate agents at £250k-£260k for probate purposes, I think they would be assuming it's mortgageable.

I'll also put up a letter found but can't confirm it's the latest situation.

As that value is well under his NRB then there is no problem with using those numbers for probate. Where there is no risk of IHT over valuing a property for probate is quite a good move to avoid accidentally obtaining a CGT liability.

user1977

lisyloo said:

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

Yes it's been valued by 2 estate agents at £250k-£260k for probate purposes, I think they would be assuming it's mortgageable.

But you seem to be suggesting it isn't mortgageable? In which case you ought to get a corrected valuation, rather than one based on assumptions which you know are incorrect.

RAS

If the estate is not in IHT territory, a higher probate value would be wise. Otherwise the estate would end up paying a huge amount of CGT. As any gain would be way over £12.6k.

poppystar

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

Exactly this ^   The last four properties I’ve known that were sold after a death went either to developers or cash buyers and probably at the most 20% below top market value for the areas. Not mortgageable does not mean not saleable particularly if there is reasonable land too. 

Keep_pedalling

What was the valuation given on his wife’s probate application and how long ago was this?

lisyloo

Pertinent solicitors letter dated Dec 1997 - the bracketed parts are my additions.

I understand you will be buying the property with cash and we have already discussed the implications of you purchase i.e. that the property is considered unmortgageable (1997) and therefore you would not be able to sell the property to anyone who is buying with the benefit of a mortgage. You are also fully aware that the alterations which were done ("bricked up") to the property (by Local authority) were not done to a fully licensed scheme, and this again could cause problems on a resale.

From your personal knowledge of the property (lifetime in engineering) and the surveys and inspections you have had carried out. I know that you are happy to proceed with your purchase of the property in any event.

lisyloo

user1977 said:

lisyloo said:

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

Yes it's been valued by 2 estate agents at £250k-£260k for probate purposes, I think they would be assuming it's mortgageable.

But you seem to be suggesting it isn't mortgageable? In which case you ought to get a corrected valuation, rather than one based on assumptions which you know are incorrect.

Well we don't know for sure yet (although increasingly indications are going that way).
I agree with you.
The valuations were done yesterday and the letter was found afterwards, so it's an unfolding situation.
We've been quoted £1473 by a firm we know is familiar locally, but first I think it makes sense to exhaust household paperwork and conveyancing paperwork.