Buy out of sibling's share of property - is this fair?

BoGoF

ArbitraryRandom said:

BoGoF said:

There's a difference between what 'should' happen which is as above and what you have to do in this scenario. Your sibling kind of holds all the cards here and ultimately doesn't have to sell his/her half share. A bit of negotiation may be required and you may need to 'suck it up' in terms of some of their demands if you really want to proceed.

At the same time, the OP doesn't actually have to buy their sibling out and can go on living their with their partner... 

True, but the sibling is then free to pop round anytime, stay over etc etc.

If the OP wants this to be their home with no distractions then they may need to concede on something.

All in all, another example of why buying with family is not always a good idea.

stuhse

I can see how your sibling may feel that you are getting the better of what set out as a 50/50 deal.  Presumably you have enjoyed an attractive rental arrangement  ? and now because it was you who has lived there will score on CGT(if indeed the tax rules allow this) simply because it happened to be you who ended up living in it and not your sibling.  How are you valuing it if its not going on the open market ?    On the flip side your sibling has enjoyed a safe trouble free tennant.   As others have said contributors need to know more about the actual numbers involved to comment objectively. Might be easier to buy another property with your new husband and rent your current one out  (or at least suggest that as an option during negotiations)  it would continue something that presumably you saw initially as a long term investment opportunity.

theartfullodger

Buying/selling price is whatever BOTH AGREE   Transaction won't happen unless they agree.

Fairness is an entirely different matter 

Basic capitalism: sadly.

Best regards to all.

MeteredOut

I'd put this to the sibling:

"Imagine it wasn't the OP that was buying the house, but another person. How would the transaction proceed and how would the mortgage be settled, funds be split etc".

In my view, it should be no different just because the person buying already owns 50% of the property (and is also responsible for an as yet unknown percentage of the outstanding mortgage)

ie. remove the personal relationship from the transaction.

Schwarzwald

As others said, you will need to provide and confirm some more points:

• In which name is the mortgage at the moment?
• Who has serviced the mortgage in recent years, especially you started living in the property?
• Have you been paying rent to your sibling since you started living there?

 Assuming answers as follows:

• Both
• Only you
• No

 I would say:

• You have to refinance the mortgage solely in your name
• Property value minus existing mortgage, divided by 2 seems fair
• CGT: it’s you who want to buy their share now triggering the CGT liability on their end, plus you got the benefit of moving into the house …. so this is a pure negotiation point, but I have some sympathy for their Ask and would aim at agreeing to pay 50% of their CGT liability

 

redjuice55

Thank you everyone for your comments thus far and for your patience.

When property was rented, the rent went directly into a joint account to pay mortgage, and build up some cash for additional costs and also make overpayments where possible. I have not been paying rent to my sibling, however we have both been paying the mortgage since I moved in. I guess this is a loss to my sibling in theory.

I have been paying the bills (gas, elec, water, council tax etc), home insurance, and general maintenance costs, and where I wanted to modernise parts of the house e.g. bathroom fittings, tiles, fitted wardrobes or buy my own white/electrical goods I have not asked for a contribution.

Property was bought at 385k originally, and valued by estate agents at around 700k, we have 110k left on the mortgage. The plan is to remortgage with my partner after we are married (we will settle the outstanding mortgage with the new lender), and this will be our home for good. Hence why I also want to remove the complexity of half being owned by my sibling.

My sibling's CGT after appropriate deductions is around 24k, whilst mine is 7k.

I'm seeing the buyout like others have said as if it was a sale to a third party, the seller still needs to settle the remaining mortgage with the lender, and you wouldn't make the buyer pay your CGT on top.

housebuyer143

redjuice55 said:

Thank you everyone for your comments thus far and for your patience.

When property was rented, the rent went directly into a joint account to pay mortgage, and build up some cash for additional costs and also make overpayments where possible. I have not been paying rent to my sibling, however we have both been paying the mortgage since I moved in. I guess this is a loss to my sibling in theory.

I have been paying the bills (gas, elec, water, council tax etc), home insurance, and general maintenance costs, and where I wanted to modernise parts of the house e.g. bathroom fittings, tiles, fitted wardrobes or buy my own white/electrical goods I have not asked for a contribution.

Property was bought at 385k originally, and valued by estate agents at around 700k, we have 110k left on the mortgage. The plan is to remortgage with my partner after we are married (we will settle the outstanding mortgage with the new lender), and this will be our home for good. Hence why I also want to remove the complexity of half being owned by my sibling.

My sibling's CGT after appropriate deductions is around 24k, whilst mine is 7k.

I'm seeing the buyout like others have said as if it was a sale to a third party, the seller still needs to settle the remaining mortgage with the lender, and you wouldn't make the buyer pay your CGT on top.

I would probably make some concession for half the "rent" that you didn't pay during the time you were there because that's a loss to your sibling. Improvement works you have done because you are living there, so accept these as your spend. 

They should pay half the mortgage off with their equity though, it's not for you to take on their debt. 

Bluebell1000

redjuice55 said:

Thank you everyone for your comments thus far and for your patience.

When property was rented, the rent went directly into a joint account to pay mortgage, and build up some cash for additional costs and also make overpayments where possible. I have not been paying rent to my sibling, however we have both been paying the mortgage since I moved in. I guess this is a loss to my sibling in theory.

I have been paying the bills (gas, elec, water, council tax etc), home insurance, and general maintenance costs, and where I wanted to modernise parts of the house e.g. bathroom fittings, tiles, fitted wardrobes or buy my own white/electrical goods I have not asked for a contribution.

Property was bought at 385k originally, and valued by estate agents at around 700k, we have 110k left on the mortgage. The plan is to remortgage with my partner after we are married (we will settle the outstanding mortgage with the new lender), and this will be our home for good. Hence why I also want to remove the complexity of half being owned by my sibling.

My sibling's CGT after appropriate deductions is around 24k, whilst mine is 7k.

I'm seeing the buyout like others have said as if it was a sale to a third party, the seller still needs to settle the remaining mortgage with the lender, and you wouldn't make the buyer pay your CGT on top.

I'm not a tax expert but I thought you don't pay any CGT if you are living there? 

silvercar

Bluebell1000 said:

redjuice55 said:

Thank you everyone for your comments thus far and for your patience.

When property was rented, the rent went directly into a joint account to pay mortgage, and build up some cash for additional costs and also make overpayments where possible. I have not been paying rent to my sibling, however we have both been paying the mortgage since I moved in. I guess this is a loss to my sibling in theory.

I have been paying the bills (gas, elec, water, council tax etc), home insurance, and general maintenance costs, and where I wanted to modernise parts of the house e.g. bathroom fittings, tiles, fitted wardrobes or buy my own white/electrical goods I have not asked for a contribution.

Property was bought at 385k originally, and valued by estate agents at around 700k, we have 110k left on the mortgage. The plan is to remortgage with my partner after we are married (we will settle the outstanding mortgage with the new lender), and this will be our home for good. Hence why I also want to remove the complexity of half being owned by my sibling.

My sibling's CGT after appropriate deductions is around 24k, whilst mine is 7k.

I'm seeing the buyout like others have said as if it was a sale to a third party, the seller still needs to settle the remaining mortgage with the lender, and you wouldn't make the buyer pay your CGT on top.

I'm not a tax expert but I thought you don't pay any CGT if you are living there? 

There maybe some CGT liability for the time it was rented.

_Penny_Dreadful

Bluebell1000 said:

redjuice55 said:

Thank you everyone for your comments thus far and for your patience.

When property was rented, the rent went directly into a joint account to pay mortgage, and build up some cash for additional costs and also make overpayments where possible. I have not been paying rent to my sibling, however we have both been paying the mortgage since I moved in. I guess this is a loss to my sibling in theory.

I have been paying the bills (gas, elec, water, council tax etc), home insurance, and general maintenance costs, and where I wanted to modernise parts of the house e.g. bathroom fittings, tiles, fitted wardrobes or buy my own white/electrical goods I have not asked for a contribution.

Property was bought at 385k originally, and valued by estate agents at around 700k, we have 110k left on the mortgage. The plan is to remortgage with my partner after we are married (we will settle the outstanding mortgage with the new lender), and this will be our home for good. Hence why I also want to remove the complexity of half being owned by my sibling.

My sibling's CGT after appropriate deductions is around 24k, whilst mine is 7k.

I'm seeing the buyout like others have said as if it was a sale to a third party, the seller still needs to settle the remaining mortgage with the lender, and you wouldn't make the buyer pay your CGT on top.

I'm not a tax expert but I thought you don't pay any CGT if you are living there? 

You only get Principle Residence Relief for the time the property was your only or main home plus the final 9 months of ownership. A CGT liability is triggered when you dispose of the asset and as the OP isn’t disposing of the asset I don’t know why they think they’re facing a £7k CGT bill. SDLT will be payable though.