Inheritance issue, house with tenants

[earlydoors42]

My FIL sadly is terminally ill. My SIL has been thinking about inheritance already. It's a bit complicated. FIL has a house in rural Wales which his friends live in as tenants, but little else of value. His will is to split anything he has 4 ways, between my DH, SIL and their 2 stepsisters who they don't see or have much contact with.

SIL says the tenants are concerned about losing their home. She wants us to keep letting them live there and split the rest 4 ways. This seems a major hassle to me. I would rather sell the house and have our share. We don't have much money. I don't even know if it's possible to do that, to own a quarter of a house? Would we pay a quarter of maintenance etc? My idea is SIL buys us out if she wants to keep the tenants there. Any suggestions what is best to do and what is legally possible? Thank you.
PS I do feel bad thinking about his property when he hasn't even died. I didn't even know about this house until SIL brought it up. It's probably worth under £100k.

@Sweetchocolatecandy I read it as the OP putting feelers out of the practicalities. If she's the one who handles all the admin then its going to be more of a headache for her than DH.

Theres another thread about landlords thats been derailed by arguments about 'accidental' landlords. There's a lot of work involved and if the house is split four ways (2 beneficiaries who are NC?) then something as simple as the boiler going will have to be agreed and the cost split four ways. Its a lot to take on, and there's nothing wrong with asking the questions.

Can’t they sell the house with sitting tenants to someone who is looking for a buy to let?

the law changed in the late 90s and if they were in situ before that I think they might have more security which remains protected.

Yes. If they moved in before 1997 it's very possible that they have an assured tenancy. If so, they have more rights and protections and can't be evicted on a No Fault eviction. Of course that doesn't mean you can't sell. You'd just have to sell to another landlord or have your SIL buy your DH out.

You'd need to consider inheritance tax. So you would be taxed on your portion of the house whether it is sold or kept. Could all of you you afford this without selling the house?

@IronTeeth, you've missed my point.
I wasn't implying that the OP was wishing death on her fil.

What has disappointed me is that the OP didn't even know about this house until recently, and rather than considering graciously accepting an unexpected gift that comes with some admin, she thinks the long standing occupiers, friends of the FIL should be shown the door.

I'd be willing to be that there is no formal tenancy agreement in place. I think the situation should be treated with sensitivity.

[quote Sweetchocolatecandy]@IronTeeth there’s admin and then there’s deciding for someone how their inheritance should be spent. If my FIL died and left my husband a share of his house there is no way I would be telling him how the money should be spent as it wouldn’t be my money. Similarly, if I was gifted an inheritance I wouldn’t expect my husband to be telling me how I should spend it either. It just seems very controlling and interfering on the OP’s part.[/quote]
just looking at what I read OP does all the life admin at home, and the last thing s/he wants is yet another thing to have to think about - rent & maintenance of the property.

Sure fine if DH looks after his own crap, but thats not likely - so OP even states s/he (and & DP) would have no problem with this

He can leave the house to his friends if he wants to, probably simpler all round! It's fine by me. DH not bothered either. I'm glad you can see through my "shocking greed" though :-D

Who would the "good property manager" be that is referred to?

Most U.K. estate agency will also do property management of rented properties for absent landlords. They usually charged a flat rate of 5-10% of the rent for their services.

I think there are implications with tax if he keeps a share of the house and would mean doing a tax return every year which is a pain - I would end up doing it like all the admin round here

It’s not that much of a pain. You can do it electronically in about half an hour. I had to do U.K. self assessment tax returns when i lived there because I had over £300 foreign income. They’re very easy especially compared to the tax forms I had to do in the US!

I think the tenants are of too little importance in your eyes. You just seen awfully eager to get your hands on money now, even if it means kicking people out of their home.

@Sparklfairy
There's a lot of work involved and if the house is split four ways (2 beneficiaries who are NC?) then something as simple as the boiler going will have to be agreed and the cost split four ways

Only if you manage it poorly. You set aside some of the rent each month into a maintenance account and that pays for any repairs. If it’s beyond your ability or capacity to manage as a landlord you hire a property manager via almost any U.K. estate agency to do this for you.

OP it's sensible to think about this before it potentially happens. It's always good to have a plan for all eventualities.

Firstly your SIL should ask DF what he would like to happen after he dies with his friends as tenants. Also in the meantime she should tell tenants that it isn’t her decision solely as to whether they can stay after he dies.

You can do 3 things. Give tenants notice to leave, for the house to be sold and money divided up and perhaps the tenants would be in a position to buy the house. Your SIL buys you and the other beneficiaries out, then she can do what she wants with the house. Lastly to keep the house and divide the rental money 4 ways. I would expect as they are friends of your DF that they probably don’t pay going rates, so this is something your SIL would have to find out before anyone can decide if this is of benefit to you all. It isn’t easy renting out a home these days, depending on the state of the house, you could be liable for expensive repairs, maintenance and insurance etc., and yes you have to declare income and pay tax on profits.

You need to look up Rent Smart Wales. You need to be a registered landlord to let property in Wales. Its a legal requirement. Is FIL currently registered? Welsh government are extremely strict. Is this casual arrangement even complying with the law? It's all changed within the last 6 years, so vital this is confirmed now or it's a big can of worms to be opened later.

"I agree it's not right to discuss before his death. It was SIL who brought it up and has basically messaged DH saying "the tenants have contacted me and want to stay there so that's ok with you isn't it". So that's why we are thinking about it."

SIL brought it up, putting OP's DH in the position of having to make a decision. If he doesn't respond, SIL will likely conclude that he's happy for the tenants to stay, and may hold him to that when the time comes. Regardless of your feelings re the morality of evicting the tenants, DH (if he does inherit a 25% share of the property) will (presumably) have the legal right to the choice. The question is how to phrase his answer in a way that doesn't commit him to SIL's predetermined path. One possible response would be, "I can't think about that right now, let's decide what to do when the time comes."

Can the tenants afford to buy out the property?