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Original poster

To think that DH has been treated unfairly financially by his parents?

304 replies

TravellingToad · 29/05/2014 06:37

I'm struggling to get my head around something but have a feeling that it's unfair.

13 years ago DH and his sister bought a flat together. It was £120,000 and they didn't have any money. Their parents paid the deposit. DH and SIL paid the mortgage equally for 2 years. After 2 years SIL wanted to move out. DH wanted to stay but couldn't afford to buy out SIL.

The parents have SIL £60,000 on DHs behalf as her share of the flat. So that was 11 years ago. Yesterday DH sold the flat (for exact same as he paid which was £120,000)

His parents thinks he owes them £60,000 as they bought out his sister for him all those years ago. This seems unfair to me but I can't quite put my finger on why. I think it's because SIL didn't put any money into the purchase (neither of them did) but was gifted £60k after living there 2 years. DH serviced the mortgage for all that time, 13 years and has come away having to pay his parents £60k whereas SIL has that amount in her pocket. DH obviously has £60k in his pocket too from the other half of the flat but he paid into it for all those years so it's not really a bonus it's just what he put in. Sils £60k is pure profit

Can someone see clearly for me is this fair? Happy to pay it if it's fair. Their parents are extremely keen for both children to have been treated equally.

OP posts:
TheSultanofPing · 29/05/2014 14:50

I know what you mean. He should at the very least asked how much they paid to Sil.

halfwildlingwoman · 29/05/2014 15:00

It's depressing me how people with such terrible financial acumen can have such large sums of money to hand around.
The only way SIL should have been given £60K is if the flat was owned outright as a place to live for the DH and SIL, so that they would have no rent/mortgage and then when it was sold, DH would get 60K and the PILs 60K.
The whole time it was mortgaged they should not have 'bought her out'. That's not what buying someone out is!

QueenStromba · 29/05/2014 20:47

I'm completely flabbergasted that not only did PIL hand over £60k to the sister when it should have been closer to £6k and now want the DH to pay it back but also that loads of people on this thread agree with them. Not only has the sister had an extra £50k or so but she's probably saved that much again in mortgage interest compared with if she'd had the same as her brother.

lornemalvo · 29/05/2014 20:55

What are you and your DP going to do OP? You really can't give them the money. It isn't theirs. Is your DP going to explain all this?

AnneTwacky · 29/05/2014 21:36

Been thinking about this. If your In laws paid the £60K to your Sil and not to the mortgage company, then they didn't buy her out they just gave her £60K.
Your DH did buy her out via his mortgage payments. So your DH owes nothing.
Hope they understand ok when he explains.

ChickenFajitasAndNachos · 29/05/2014 21:39

OP please do give us an update if there's one?

EddieStobbart · 29/05/2014 21:46

A skim through looks like this has been correctly worked out several times over but the kind of relates to what I do for a living so I may as well through my 2p in:

Initial purchase financed 90% mortgage, 10% equity

  • equity provided by M&D
  • property in B&S names

So, while the flat is in the kids names, in reality the bank owns 90% and unless money was gifted (which it wasn't) the parents "own" 10%.

OP DH pays off remaining 90% of mortgage. This is the share previously owned by the bank, not owned by the parents. The DH now owns 90% in his own right. If the parents had paid half this amount then half of it would be owned by them but they didn't, the DH did.

They completely muddied the water by basically converting a loan the sister had from the bank into an equity gift many years ago. What would they have expected if the OP's DH had only paid off half the mortgage over that time (as many would have, mortgages frequently being 25 years)? Would they have expected him to hand over £60k to them and for him to be left with nothing, despite having paid the money to the bank for the past 11 years?

The sister is the beneficiary here as nine years ago she was allowed to take out a mortgage a lot smaller than she would otherwise have had to. As the parents didn't ask for any equity from the original flat at the time (they didn't ask the DH to increase the bank loan by £6k, half the initial stake when the sister moved out) let's assume to make it even for the two kids, the parents give the sister £12k as that remained the equity stake they put into the DH's flat. However, they didn't, they gave the sister £60k so her mortgage is then £48k lower than it otherwise would have been - that's £48k less she has had to pay off her mortgage.

If the OP's DH gives his parent £60k then he has just massively subsidised his sister's own property purchase. He should give his parents £12,000 to repaid the initial stake (plus interest to cover that which they could have earned by investing elsewhere). His sister should give the parents £60,000 (plus interest) when she sells her flat.

EddieStobbart · 29/05/2014 21:47

Embarrassing spelling mistakes, sorry

ChickenFajitasAndNachos · 29/05/2014 21:56

Eddie what does gifting mean? The OP said the sister was gifted 60k.

EddieStobbart · 29/05/2014 22:00

Gifting would normally mean she was given it - unlike the OP's DH who appears not to have been given a penny and has subsidised his sister's mortgage to boot

EddieStobbart · 29/05/2014 22:03

I wonder if they will ask for the sister to give it back as well when she sell? That would interesting. Then they would have received £120,000 (2x£60,000) off the back of a £72,000 investment!

ChickenFajitasAndNachos · 29/05/2014 22:03

Thank you.

SanityClause · 29/05/2014 22:32

But Queen, from the information we had earlier, it seemed the DH had agreed to the payment of the £60k being made to the sister. That's why it seemed reasonable that the DH should pay back that sum to his parents now.

Yes, the figures were all wrong, and he should never have given her £60 k, but it is what happened, and unless the sister is prepared to unravel the whole thing from 12 years ago (and let's hope she is) then the DH owes his parents the money they paid.

The OP has since told us it was all done in the background, and he didn't know how much they were giving to the sister. Bit of a rum do, if you ask me.

Oldraver · 29/05/2014 22:33

I think the PIL's have been very stupid here....they gave SIL half the market value of the flat when in fact her share was the market value minus the outstanding mortgage divided by two (DH's and SIL's half)

How on earth did they make such a monumental mistake ? and now to trying to get your DH to cover it. They need it spelling out to them just what they have done. I'm assuming your DH trusted them to get it right when they 'sorted it out with Sarah'. Do you think they realise they have made a mistake or are pulling a fast one ?

EddieStobbart · 29/05/2014 22:38

How could the DH agree to a payment when he didn't even know how much it was for?

The parents appear to have attached all the payment obligations to the property rather than the people concerned. The appropriate liability should follow the relevant individual not be glued to one of the properties when the rationale for that doesn't stand up.

parentalunit · 29/05/2014 23:08

Yes he owes them 60k. Very generous of them to help him out and not expect any interest on the money. I would say thank you and repay them immediately.

nauticant · 29/05/2014 23:12

How could the DH agree to a payment when he didn't even know how much it was for?

Imagine this. Two people are in a restaurant. They get the bill. It's for £50. Person one says to person two "I'll pay this for the moment, you can pay me your share later" and person two says "Fine".

Later on person one says "Your share is £100". People two says "WTF?!" Person one says "Well, I decided to leave an extra £150 as a tip".

EddieStobbart · 29/05/2014 23:17

Parentalunit, what do you think the sister owes her parents?

EddieStobbart · 29/05/2014 23:21

Will leave this now - am drawn like a moth to a flame as at terrible middle made by parents.

Essentially the parents did an equity-release for this sister from the original flat but this involved releasing equity that had not yet been paid for and when it was, it was the DH that paid for it not the sister.

PetraArkanian · 29/05/2014 23:57

However I think there is an interesting legal question here. Presumably on day 1 the deeds showed that b+s each owned half the property (tenants in common if they had even a partially competent lawyer).
2 years later s moved out and stopped paying the mortgage. Did parents then go on the deeds instead of s, or did b become sole owner? Or (worst case) is s on the deeds at point of sale?

If b became sole owner then s effectively gave him her 50% of the equity at the time, and parents compensated her for having given him the equity by giving her 60k - an amount totally unrelated to the value of the equity gift s made to b.

I really hope that parents\sis weren't on the deeds at sale because in the absence of any written agreement to the contrary I suspect that if they own 50% of a property with no mortgage they are due 50% of the sale value - the fact that b paid the mortgage off would be irrelevant at that time and would end up being argued in court :-(

Although another good way to look at it would be to imagine b had saved 120k elsewhere and not paid off the mortgage. Then at sale time the bank would have got 108, leaving the 12 deposit to return to parents. B then has the 120 he saved, p get their deposit back, and the fact they gave s 60 in the interim is irrelevant. I think in fairness p owe b 60!! ( OK it's simplistic and hasn't allowed for interest payments on mortgage).

ScrambledeggLDCcakeBOAK · 30/05/2014 00:02

If they had both lived there together paying half the mortgage each until it was sold they would both now have 60k.... Yes

From what I can work out is your dh "borrowed" money for half the house (the part which wasn't his) so he could keep the whole house (instead of his original half)

Now he has sold it he owes for the half he borrowed for.

The plan was he would only ever own half of the house.

fifi669 · 30/05/2014 00:08

The 60k was given to the sister not paid off the mortgage. DH paid the mortgage in its entirety (minus deposit of 12k)

parentalunit · 30/05/2014 00:13

Eddie I agree it's a muddle! I think the parents have taken a very simplistic view of this. They lent each child 60k all those years ago for the deposit.

Some years later the son wanted to buy the daughter out but was unable to do so, so they paid her an additional 60k, effectively buying her out on behalf of the son (hence he owes them 60k to make them whole). The fact that the value of the house hasn't risen doesn't have anything to do with how much money he owes them, in my opinion.

It does seem that 1) the deposit was a gift not a loan (seems to be no expectation of return, and no interest) and 2) this was not communicated sufficiently.

Gifted means that the money is given with no expectation of return. It is a helpful and legitimate way to minimize inheritance tax, providing that the gift is made a number of years prior to the gifter's (parent's) death.

To summarise, I think the son owes the parents 60k, to repay them for buying out his sister. The sister doesn't owe them any money, unless they recall the 60k deposit. They both need to clarify with the parents whether the original 60k each was a loan or gift!

BakerStreetSaxRift · 30/05/2014 00:19

Op, i think you'll maybe find that they didn't give SIL 60k, maybe only 6?

Otherwise, it's SIL who owes them the money, not your DH.

fifi669 · 30/05/2014 00:26

PIL lent each 6k, together the siblings got a mortgage for the rest. The sister wanted out so the PIL gave her 60k to buy her out, not the equity in the house as it should have been. DH then paid the whole mortgage on his own. He owes nothing.