Inherited property

[bmwmike]

Good morning

In a scenario whereby two siblings inherit a property, one was considering buying the other out but affordability may be an issue. Its in a good school catchment.

Would it be right the thing to do to let the sibling live in the property rent free, and in which case, what would be fair in terms of things like repairs and maintenance? The property is newly refurbished, but may not be at the end of an extended (2-5yr) occupancy.

Also, is this a risky proposition all things considered whereby there would be no tenancy agreement as such, and the sibling is not married but has a partner and child. Does any ownership of the property get inferred somehow onto the unmarried partner if they live there for a certain time?

Also, in the event of a death, am I correct in saying full ownership passes to the other joint owner and not the estate of the deceased?

Thanks
Mike

[eliot]

Feels like a rapid path to acrimony between siblings - especially if you need to liquidate the asset and your bro/sis are still living there and you have to go through the emotional blackmail of evicting them.

[blindspot]

Define 'right'.

Ownership could be as joint tenants or tenants in common. As tenants in common, each party has a specified ownership proportion, and can pass that ownership on in their will.

You'd definitely want an AST, to specify the rent (divided, less costs to each party in the ownership proportion) and landlords' obligations.

On maintenance and repairs, keep it to the legal requirements. Landlords repairing obligations under S11. Basically structure of the building, heating & hot water.

Set the rent at market levels - ask a couple of local letting agents what they think market rate is. Both owners receive share of rent, less costs.

Both owners benefit from any capital growth. The one who wants to keep it can at some later date buy out the other, who in the mean time receives an income. Might argue that it would be fairer for them to also receive something for the opportunity cost for the capital they are leaving locked up in the property.

[Sheets Tabuer]

Would the tax man also want tax on the rent? I know the occupier won't be paying rent but would the tax man not say hang on a minute we want based on market value and not give two hoots if you are charging them or not.

At least your half anyway... you can probably tell I'm not an accountant

[bmwmike]

Thanks all, good points.

Any rent even on half would be taxable.

I can't help be feel a clean break is probably best though, and as said in first reply, renting may cause problems further down the road, even with a rental agreement in place.

Edited by bmwmike on Monday 13th September 14:53

[Mr Whippy]

Ummm.

So it's been inherited already? Or about to be? Or in probate?

Do everything by the book.

This can and will get messy, so no help/favours. It's a business deal.

[dmahon]

Messy as hell. Don’t do it!

[Burwood]

Sheets Tabuer said:

Would the tax man also want tax on the rent? I know the occupier won't be paying rent but would the tax man not say hang on a minute we want based on market value and not give two hoots if you are charging them or not.

At least your half anyway... you can probably tell I'm not an accountant

No, you can gift anything you rant as long as you live 7 years(less/tapered).

[Burwood]

bmwmike said:

Good morning

In a scenario whereby two siblings inherit a property, one was considering buying the other out but affordability may be an issue. Its in a good school catchment.

Would it be right the thing to do to let the sibling live in the property rent free, and in which case, what would be fair in terms of things like repairs and maintenance? The property is newly refurbished, but may not be at the end of an extended (2-5yr) occupancy.

Also, is this a risky proposition all things considered whereby there would be no tenancy agreement as such, and the sibling is not married but has a partner and child. Does any ownership of the property get inferred somehow onto the unmarried partner if they live there for a certain time?

Also, in the event of a death, am I correct in saying full ownership passes to the other joint owner and not the estate of the deceased?

Thanks
Mike

Mike, Joint ownership is you both own all of it. And yes, if one party dies, the entire ownership passes automatically to the other party. It's the same with any thing owned in joint name such as investments and bank accounts. You might want to look at Tenants in Common where you each own a defined percentage.

[bmwmike]

Burwood said:

Mike, Joint ownership is you both own all of it. And yes, if one party dies, the entire ownership passes automatically to the other party. It's the same with any thing owned in joint name such as investments and bank accounts. You might want to look at Tenants in Common where you each own a defined percentage.

Thank you, good info. Am hopeful of a buy out in the first instance and cant help but feel some level of responsibility to sibling but that said its a good property and potentially a good investment. Can always sell later.

[Burwood]

bmwmike said:

Burwood said:

Mike, Joint ownership is you both own all of it. And yes, if one party dies, the entire ownership passes automatically to the other party. It's the same with any thing owned in joint name such as investments and bank accounts. You might want to look at Tenants in Common where you each own a defined percentage.

Thank you, good info. Am hopeful of a buy out in the first instance and cant help but feel some level of responsibility to sibling but that said its a good property and potentially a good investment. Can always sell later.

If you have dependants you need to consider the above. Nice to hear sibling loyalty is alive and well.