I have recently inherited a property, alongside my sibling of which we now own 50 per cent each. The house is a smidge under £1million and is mortgage-free.
I am living in rented accommodation with my partner and we are now looking to get out of that situation and buy our first property.
However, we have a problem – my sibling does not want to sell the property as he would rather stay there.
Inherited property: What happens if one heir wants to sell and the other refuses? (Stock image)
They are unable to ‘buy my half share’ but happy for me to look into getting a mortgage raised against the house.
Is this my only option and is it wise for me to pursue this?
Ideally, my partner and I are looking to buy a £650,000 property (something I think is doable assuming I can get my fair share out of the house). Any words of wisdom strongly appreciated.
Tanya Jefferies, of This is Money, replies: It’s far from uncommon for people who inherit a property jointly to have different ideas about what to do with it.
We asked a lawyer and a mortgage broker to give their takes on your situation.
Christian Butler, solicitor at Silk Family Law, replies: No, raising a mortgage on the property is not your only option, but you need to be prepared for some difficult decisions and potential family fallout if your brother is not prepared to be considerate of your position and you are determined to sell.
I am often asked to advise clients in your position regarding an inheritance, or when they have purchased a property jointly with a partner and subsequently separated.
It is not unusual for one owner to wish to sell and another to refuse.
Can you force your brother to sell the house?
You and your brother hold the property under a trust of land. You are therefore both trustees of that trust.
The Trusts of Land and Appointment of Trustees Act 1996 (ToLATA) confers general powers on trustees. These include powers to sell, mortgage and grant leases.
In order for the property to be sold you and your brother, as joint legal owners, must join together in any disposition of the property. Therein lies the problem if your brother is not prepared to sell.
Christian Butler: Often the threat of an application for an Order of Sale encourages the other party to agree to the sale, owing to the legal costs involved
It is possible, however, for you to apply to the County Court or in certain circumstances the High Court for an Order for Sale under ToLATA, which would force your brother to sell the property.
When considering whether to make an Order, the court has to have regard to the following matters.
1) The intentions of you both when the trust was created, which means when the property was inherited by you.
2) The purpose(s) for which the property subject to the trust is held. It may well be in your case that you and your brother are at cross purposes in this respect.
From your point of view, it’s an inherited asset you want to sell, while your brother could if applicable argue it’s a family home being passed on to the next generation.
It will be relevant and could be in your favour that the property has been recently inherited as opposed to being purchased by you both from joint resources.
3) The welfare of any minor who occupies or might reasonably be expected to occupy the property as his or her home.
4) The interests of any secured creditor of any of the beneficiaries, although in your own case at the moment this is not applicable.
An Order for Sale will be made at the discretion of the court and further consideration of your specific circumstances would be needed to confirm the merits of any such application.
Often the threat of such an application encourages the other party to agree to the sale, owing to the legal costs involved.
If an Order was made and your brother sought to frustrate matters and refused to sign the transfer documents to complete the sale of the property, the court could sign the papers to enact the sale.
Can you handle this without trying to force your brother to sell?
While you state he is ‘unable to buy’ your share in the property, would your brother be able to purchase your interest in the property, by way of raising a mortgage himself?
In respect of the suggestion of you raising a mortgage against the property, I assume you would do so on the basis that you would still jointly continue to own the property.
The terms of any mortgage would be subject to agreement with the mortgage lender but, generally speaking, as joint owners of the property both you and brother would have to enter into the mortgage deed and it would be on the basis of joint and several liability.
Your brother would therefore have to be content with being liable under the terms of the mortgage for its repayment.
In such circumstances, he would be advised to ensure that you indemnify him, so that in the event that you default in making payments under the mortgage, you will be liable to repay him.
Expert advice from a mortgage broker and a solicitor who specialises in these issues is an absolute must.
Consideration would also have to be given to the fact that if you were to purchase a further property prior to the sale of your inherited property, there would be an increase in the amount of stamp duty payable by you.
Given the proposal of purchasing a second property in the region of £650,000, such an amount may be sizeable.
This extra cost might factor into your decision over whether you try to force your brother to sell the inherited property before you buy somewhere else, or raise a joint mortgage with him so that he can carry on living there.
Where will your partner stand in this?
Serious consideration as to how a property will be held is necessary when buying a home with another person.
Deciding on what terms you will hold the property is particularly important if you are going to be liable for the mortgage and not your partner, and will potentially pay 100 per cent of the deposit yourself.
You do not say whether your partner will be contributing to the new property you hope to buy, and/or taking out a mortgage with you to do so.
However, from your partner’s point of view, they might want to consider whether they wish to take out a joint mortgage with you when you are already liable for the other one with your brother.
Regarding how the new property is held, there are two distinct ways in which it is possible to own property jointly with another person or people.
1) Beneficial joint tenants: If you and your co-owner own the property in this way, you would each own the whole of the property regardless of your respective contributions to the cost of purchase.
In this regard, you do not own the property in two separate and distinct shares, although notionally you would be deemed to hold the property equally.
On the death of either of you, the deceased’s interest in the property would automatically pass to the survivor, regardless of the terms of any will that each of you may have made. This is known as the ‘right of survivorship’.
2) Tenants in common: Unlike a beneficial joint tenancy, if the property was held in this manner, your respective shares in the property, which should be confirmed within a declaration of trust, would pass in accordance with your will or in accordance with the intestacy rules if the deceased did not have a will.
On that basis, the ‘right of survivorship’ does not apply.
You are therefore strongly advised to take legal advice from a solicitor who specialises in these matters so each party is aware of their respective positions and further ensure you have a valid will in place.
Shaun Church, director at independent mortgage broker Private Finance, replies regarding the inherited house: If two individuals are on the deed of a property, any subsequent finance taken out on the property will need to be taken out by both of the individuals that own the house.
Shaun Church: In order to mortgage the property, you’ll need to talk your sibling into taking out a joint mortgage
In short, you can’t have someone’s name on the deed, but not on the mortgage unless one of the parties is happy to sign the property over to the other.
As such, in order to mortgage the property, you’ll need to talk your sibling into taking out a joint mortgage.
If you do take out a joint mortgage as a means of raising equity, it’s also worth noting that this additional loan could impact your eligibility for a mortgage on the home you plan to buy with your partner in future.
The mortgage on the inherited property will show up in any affordability testing carried out by a lender and could impact lenders’ willingness to lend to you if you are servicing another loan already.
Even though this may be your partner’s first home, deciding to hold onto the inherited house means your new home will be classed as a second property.
As a result the stamp duty bill you face will be considerably higher, around £42,000 if you choose to purchase a £650,000 property which will of course eat into the size of deposit you can put down.
Nevertheless, with a deposit around £450,000, presuming you meet income criteria, I would expect you and your partner to be eligible for a joint mortgage.
Furthermore, given the size of your deposit you could also expect a mortgage at a low loan-to-value which should be very affordable from a repayment perspective.
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