Really need some impartial advice on money row with sister!

[Cornberry]

I am in desperate need of an impartial opinion on a sensitive issue.

My parents gave my sister and I a substantial deposit to buy a flat a few years ago. Since that time I have lived in the flat and my sister has lived elsewhere in rented accommodation and now she lives abroad - she had the option to live in the flat too but chose not to. In that time I have taken care of the flat and obviously I (and later on my husband) have paid all the bills and the mortgage etc. We agreed at the outset that my sister and I should split the proceeds 50-50 when it came time to sell.

Now that is time to sell and looking at the figures I realise that our mortgage has come down £30,000 which obviously I have paid since I have been living here. And when we split the money left over after repaying it my sister will get half which seems fair enough because that is what we agreed. However I realise that to bring down our mortgage by £30,000 I have paid in over 50,000 because of the interest. So now it occurs to me that if we split everything 50-50 my sister will get back 15 K, which is half of the money repaid on the mortgage but I will also get in 15 K having paid in 50. This strikes me as unfair. She hasn’t paid anything at all into the flat, which was the agreement and that’s fine, but it seems to me that she should receive a proportion of the increase in value on the property but I am unsure why after I have paid over 50 K into the mortgage to bring it down 30k that she should get 15,000 of it having paid nothing and I should get in 15,000 of it having paid in 50,000. Does that make sense?

Interestingly, my parents do not agree. One of them thinks my sister should get half as agreed and the other one thinks that the point about the interest is a relevant one. I would dearly like to have some opinions from people who are unbiased because I honestly don’t think it’s possible for any of us to be completely impartial on this. I suggested to my sister that she should indeed receive her half of the increase in value but not the repayments, bearing in mind she has never put a cent, and if we split it with her we will she will get more out of the money we paid in than we will.

One issue seems to be one of “changing the goalposts” and my sister has accused me of going back on our agreement to get more money. But the problem is that I was very clueless going into this and I am certain that we had known the considerations at the outset we would have made a different agreement.

Am I being unreasonable?

It either needs to be 50/50 or your sister gets half the deposit, half the increase in value and half of whatever the rental income would have been for the past however many years, as that's what she's lost out in by you living there. I suspect that will work out around the same.

Thanks all for your comments. To those who think that my sister should get a share of the rental income, after mortgage payments, rental tax and managements fees there would be a negligible amount. It suited us all more to keep it within the family.

My DH and hers are keeping out of it.

If my parents had given us the deposits separately neither of us could have bought alone. My sister has benefited from my buying the place and being able to invest her money in it without no work or responsibility.

And to the person who said my turn of phrase indicated I knew I was in the wrong, I’m afraid that is a misinterpretation. It’s because I don’t want to be categorical because I don’t want to claim the moral high ground and I am unsure that there is an objective right in this situation. My gut feeling is that my sister shouldn’t get the mortgage repayments we have made without beating the cost of the interest. But as I say I am unsure.

Someone made a good point to me. If you buy a company with a silent partner who does nothing at all but invest half, while you run it and do all the work, should you split it 50/50? I think not, but then it depends on the original agreement as many people have commented.

It suited you more. Your sister would be in the same position as she is now.

Well, no, she has made almost 50k in increase value of property.

But she would have bean in the same position as you would have been. You have got more out of the current deal.

Or give her half of the deposit that was put down on her behalf?

Im afraid a silent partner who has invested would own a number of shares of the company and if given 50 % of the shares would receive the split 50/50. They receive an income as well as profit - the silent partner analogy IMO falls squarely on the side of your sister

In dragons den they always invest for a certain amount of the shares as agreed - they never do anything but invest but still own however much was agreed

Without your sister willing to put her deposit down and be on the mortgage you would not have had a place. She would not be able to get a mortgage of her own

What was the original plan when you did it - she never moved in so there must have been one

If you didn't live in the flat it would have been rented out. She would have received 50% of the rent and used it to pay her share of the mortgage. Therefore she would have been due 50% of the profits. So, yes she is due all that cash and YABVU not giving it to her.

My brother and I were in a very similar situation (we bought a flat together, which DH and I then lived in). The way we resolved it was that my brother and I each paid our portion of the mortgage. Then, to account for the fact that I had lived there, I paid rent to us both. My brother's portion of the rental income effectively covered his mortgage repayment so we netted it off and he didn't actually pay anything.

So, for example (not the actual figures as we don't own 50/50 but rounded for ease):

Monthly mortgage payment = £2000 (£1000 each)
Market rent on the property = £1600 (£800 of which would go to my brother)

Therefore in this example, he'd owe £200 per month towards the mortgage.

We found that separating our roles as landlord (shared between us) and tenant (just me), we could come to a fair arrangement.

All that aside, you did have an agreement with her, and it's hard to go back on it now.

If I were you I'd work out exactly how much money you'd be gaining/forfeiting, and then think about whether that amount is worth potentially falling out with your sister. Money can be so damaging to relationships.

Thanks all for your comments. To those who think that my sister should get a share of the rental income, after mortgage payments, rental tax and managements fees there would be a negligible amount

Just to confirm, that's half of the market rent, minus half of the mortgage. Tax is not to be included (she sorts that with HMRC separately) , nor can "management fees", unless someone was instructed as a manager. (I have a BTL , and typically it's 6% of the first years rent, so pretty much peanuts in a long term tenancy anyway)

You are quite desperate to rip your sister off. Why should you benefit from free rent for all these years and then expect a bigger cut of the profit. If I was your sister (or in fact your parent) I'd be cutting you off for this. Total CF. Stop trying to rip your sister off. 50:50 is what was agreed, and it's a far fairer way of splitting than anything you've suggested.

I agree YABU, I also think your parents sound kind, generous and financially savvy. I would take their opinion on fairness with more weight than yours. They care about both their DDs, they had saved enough money to help you and intended it to help you both equally. It is cruel for you to throw this back in their faces. If you turn this into a family rift, they will regret ever helping you, you will have turned a nice thing into a greedy, sad thing.

while you run it and do all the work, should you split it 50/50? I think not, but then it depends on the original agreement as many people have commented

But you are stubbornly - and very unfairly - refusing to see that you got a huge benefit as well - you didn't pay rent for the period of living in the flat. So you did the 'running of the flat & all the work' instead.

You really need to understand this basic business/accounting principle: by you choosing to live there, your sister was unable to take any rental income from the property.

You are being very stubborn and unfair in your attitude. What comes across is that you don't much like or respect your sister.

And you're making moral judgements about her behaviour. Is that why she didn't share the flat with you?

mrsms43 is right you arent getting it

Thanks all for your comments. To those who think that my sister should get a share of the rental income, after mortgage payments, rental tax and managements fees there would be a negligible amount

This is the whole point - you actually think there would be some leftover so in many ways letting you stay there costed her financially. The fact is her mortgage payments would come out of the rental income. Your stated that she would have had money leftover means that she is worse off from you living there and everything should be split

If your sister hadn’t agreed to let her share of the deposit to be used to purchase the flat neither of you would have been able to afford to buy - you would have been paying rent for all those years and be in a worse position than you are now - you have had years of your own home / security / the share in property prices rising and now you are complaining that it’s not fair??

I think 50 / 50 is fair - any other way is you trying to punish your sistier for allowing you to get on the property ladder years sooner than you would have

What rent would you have had to pay over the years if you didn't own the place? Working it out that way your sister woukd be entitked to half that amount plus half the increase in value plus half your parent's original investment. You don't seem to be taking that into consideration at all!

OP, did you both originally plan to live in the flat and then she changed her mind?
Did you choose the flat together with the entire of both living in it?

I think the accounting term is something like 'income foregone.'

I think if you found out what the market rent for a flat equivalent to yours is, then calculated what income your sister has foregone, by you choosing to live there, you'll see what people are talking about.

But instead you're making moral judgements about your sister's actions.

A reverse of this could easily be written:

My sister and I bought a flat together with a deposit given us by our parents. We each contributed 50% of the deposit. We couldn't have got mortgages separately so it helped us both get a foot on the property ladder. My sister decided she wanted to live in the flat. I was hoping to use it as an investment, as my half of the market rent would have paid my half of the mortgage, and the associated management costs. But my sister was adamant she wanted to live in the flat. When she got married, she assumed that she & her husband would continue to live there. Of course, with my Brother in law living there now, there was no way I could have lived in the flat. I didn't ask my sister for my half of the rental income - after all, she & her husband were doing all the management etc, so we saved agent's fees and our insurance was cheaper.

But now my sister wants to sell the flat, and is threatening to renege on our agreement of 50/50 split of any profit after the bank and all selling costs are repaid. She says it was my choice not to live in the flat (although she made it a bit difficult for me to live there once she got married!) and that she's done all the work on looking after the flat. She doesn't accept that I've foregone my half of the rental income so she could live in the flat. AIBU?

However you may feel now you made an agreement. You should not unilaterally tear that up as it doesn't suit you now, that's just not on.

Your analogy to sleeping partner in a business is an incorrect interpretation- other than "it depends on the agreement". Sleeping partners usually take shares in the business (equivalent to what they put in start up costs/investment costs in most cases). They will get income as a share holder. If the company is sold they get whatever there share is- unless the agreement is different. So if the silent partner contributes 50% of start up costs for example, they may well take 50% of shares. If that business is later sold the sleeping partner will get 50% of the profit from the sale, unless their agreement stated otherwise. Even though the "silent partner" have not done the work in growing the business, that business may not have started at all without their initial investment- and conversely if the business went bust they would get nothing. They risk their capital in order to obtain profit.

I actually think YABU in any case. You had use of the property and she did not. If you had rented it out, she would have paid 50% of the costs (interest payments included) but would also have got 50% of any profit.

Just to be clear, I of course recognise that I got a huge benefit. pawsomeougfancier my parents do not agree. One of them agrees with me and the other my sister. And I didn’t live rent free. I pay slightly less than what a tenant would pay. I am unclear why many people seem to think I have got free board...? Anyway I came for a spread of views and I certainly got that so thanks for your input. I had already told my sister I would not press the issue because she didn’t agree with me. I just wanted to see what people thought as it doesn’t sit well with me or my dad, or anyone I have asked, but I guess it’s different when you know the people involved and all the particulars. It’s useful to have unbiased opinions. I wanted some unemotional reactions, although some here seem pretty emotional...

You don't get it. Did you pay your sister rent, half the market rate for the flat (as the other half belonged to you)? Rent she would have used to pay her half of the mortgage?

Why didn't your sister pay half the mortgage?

Regardless of where either if you lived surely the commitment was to pay half each?

And...........would you have been happy if she had rented out her room to cover her half or would you have chosen to pay her half so you could have the flat to yourself?

OP, I'm sorry, but you and your dad are technically incorrect. What should have happened was your sister should have paid her half of the mortgage and you should have paid her rent for her half. If you want, figure out what that would have looked like and go from there.

Consult a solicitor, OP. They’ll tell you that you don’t have a leg to stand on. If you can’t let it go, not only will you lose the share of the flat you perceive to be yours, but also your relationship with your sister. Don’t risk your family’s presumably good relationship for something you should have agreed at the time if you’d wanted to change the original agreement.

I agree you don’t get it either. You keep saying you didn’t live there rent free. I agree you didn’t - you paid a mortgage in lieu of rent.

You were effectively a tenant in your sisters 50% share. She didn’t get any rent payments from you in the expectation that she’d get 50% on selling.

Now you’re saying you should pay her less than 50% as you paid mortgage interest. But paying mortgage interest is in lieu of paying your sister rent.

If you want to knock off the interest payments now, you should also give your sister all that money she should have got from you in rent.

Legally a dispute like this would be dealt with under the Trusts of Land and Appointment of Trustees Act 1996. Based on what you have said so far I think the Court would find in your sister's favour.

1. There is a agreement between you that your sister has not agreed to vary.
2. Even if there was such an agreement, as many pps have said, you had the benefit of living in the property. Your payment of her half of the mortgage cancels out the money you owe to her by way of occupation rent.