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?

Why didn't the sister arrange for her room to be rented out to pay her half of the mortgage? Surely not paying the mortgage shouldn't entitle full profits?

Original agreement wasn't fair or reviewed. Always take advice on financial matters.

Well I guess you've benefited from living in the flat though and not having to pay rent like your sister, so I think you should stick to your original agreement. Regardless of anything else I think going back on that agreement now isn't reasonable.

Jenny17

No, shouldn't, but if that was the agreement, the OP doesn't have a leg to stand on. You can't get years down the line and say, actually, I was a bit of a chump to agree to that, wasn't I? Right, I'm changing it. If the DS' name is on the mortgage as an equal buyer, half of the flat belongs to her, and the OP, by virtue of choosing to live in the flat rather than vacate it and rent it out, has been covering the costs. Unfair, yes, but that was the agreement.

The original agreement is fair. The flat is 50% hers but you used it 100% so she should get 50% back since you didn't pay "rent" to her. Your mortgage is the equivalent of her rent and £50k in payments only bringing down the mortgage £20k is just how mortgages work.

If you paid for improvements like new kitchens which added value to the flat then I understand why you'd want to profit 100% from the added value to selling price but it would have been easier to have her contribute 50% to those things at the time or you end up arguing on the details of how much a £8k kitchen bought 5 years ago affects price now etc

I personally can't see it's worth falling our over. You've been paying a mortgage yes, but otherwise to us have been paying rent somewhere anyway. The difference can't be that huge?

The ideal would have been for your sister to rent out her room, or if you didn’t want to live with someone then for you to pay that rental figure towards the mortgage, the pay any surplus (most likely) over to her, or her pay any deficit.

As it is, I think you’ve had a pretty good deal. The flat belongs to both of you but you have used it. Unless you live somewhere that rent is really cheap and you have a pretty bad mortgage deal, you have probably done well out of this.

Stick to agreement. You lived there rent free. The rent you owe her for using her half of the flat is effectively her half of the mortgage. She owns half. SPlit it 50/50.

(Or do the calculation - rental owed for X years on half the property + compound interest etc - and you will see)

Jenny17- the parents paid a deposit on the flat so depending on the percentage they paid they could have lowered the mortgage payments for OP considerably. For example if the OP was in a flat which had been 50% paid off by the parents, she could be paying a much smaller mortgage than market rent would "earn"

So you got a joint mortgage.
You agreed to pay all the mortgage.
You paying her half was your rent for having the place to yourself. You could have sublet the spare room
So you still split 50/50.
It's not unfair. You haven't been done out of any money. Apologise and move on.

I think this whole situation was a little poorly thought out. You should have either both lived in the flat, or you should have rented it out. I think it's best to stick to your original agreement.

YABU. Yes, she could have lived there but equally you could have not lived there and the property could have been rented out. Your sister owns half this property and yet you haven't paid her any rent which would probably be the same as half the mortgage.

If you want to quibble and split hairs you could calculate what half the rent should have been (looking at market rates) and then give her that plus her deposit and any appreciation in value. It probably wouldn't be much different though and considering that it wasn't your agreement I think that you have got a nerve to try and backtrack.

I’d definitely stick to the agreement. Your point about the massive interest is an unfortunate thing about banks and mortgage structure. It isn’t anything to do with your sister and her half ownership. Shes paid rent elsewhere despite owning the property. She is entitled to half the increase in value.

The mortgage is irrelevant here, whether you've paid off all of it or none of it. You should be giving back half the deposit and have any extra that it sells for - the profit.

You say she had the chance option to live in the flat but chose not to - would there have been space for you, her and your do to all live there comfortably, or was it her vs you? Was the location feasible for her job?

If she lived elsewhere for no reason at all, I see your point. If it wasn't a good option to both live in the flat, then you should factor in that you have both been paying, her on rent and you towards the mortgage. Unless the mortgage is higher than local rents, it's not fair that you should get more advantage just because your money went towards mortgage and her money went towards rent, it could easily have been the other way round.

I would say work out how much you paid on the mortgage and divide by half (money your sister owes you as a 50% owner who should have paid half the cost of buying the flat) then work out how much you could have rented the property for (less expected costs) and divide it by half (money you owe your sister as she would have got half the rent if the property had been rented to a stranger).

At that point you will have a better idea of who owes who and will be able to argue your case better. I certainly don’t think you can argue that you are entitled to more just because you paid the mortgage since by living there and not paying her rent for her half you have deprived her of significant income (which I accept may well be cancelled out by the mortgage payments). She may well have been willing to not charge rent in the short term in order to benefit by way of a capital sum at the end in which case, I am afraid I do think you are moving the goalposts.

At the very least, you will be able to argue your case for a bigger sum with proper facts and figures.

*dp

You benefited from living in a flat with lower mortgage payments than renting would have cost you. It’s not fair on your sister that you stayed there and prevented it from being rented out, which would have brought down the mortgage.

If your sister had lived with you, you’d have split the mortgage 50/50. As she didn’t, you have effectively paid rent to her which covers her 50% of the mortgage.

Therefore the only fair thing now is the split the proceeds 50/50. You quibbling over the fact that you’ve paid interest completely misses the fact that, if you’d chosen not to live there, the flat would have been rented out and the rent would have covered the interest.

You’ve had the benefit of living in one home, and even being able to move your DP in, whilst your sister has rented elsewhere. You can’t now go and change the terms and squabble over the interest payments - they would have been covered by rent but your sister couldn’t rent out the flat because you were living there.

I don't even see your point.

1. She had to pay rent elsewhere and was unable to rent out the property, so you've had a huge benefit. Split it 50/50 and apologise to your sister for causing unnecessary arguments.
2. Even if the £15k was fair (if she'd been living there but not contributing to the mortgage), it wasn't the agreement so you still don't get to have it.
3. It's never worth falling out with your sister over an issue where she has a genuine point and in this case is just £15k.

I think it depends on whether you have over-paid the mortgage or simply paid the mortgage and whether the agreement was for a proportion of the sale proceeds full stop or a proportion of the equity. 50% of the proceeds is everything after expenses are taken out. 50% of the equity is different. If you and your sister each own 50% of the equity between you - then if the house cost 100k with a 50k deposit and 50k mortgage you each own a quarter of the house (25k). If the house is now worth 200k then one quarter is 50k each.

There is an argument to say that you and DH have benefitted from the use of the whole property so should have paid your DS rent for the duration.

So, not straightforward. I’d also say that no amount of money is worth family stress and quarrels. You’ve enjoyed living in the house and having sole use, rather than having to share with your DS, you have gained from the generosity of your parents. Split it 50:50 and keep your relationship with your DS.

Hmm, tricky one. Would the property have been big enough for you, your sister and dh to live in comfortably or has she effectively done you a favour by living elsewhere and letting you and your dh have sole occupancy of the flat?

I think you were lucky to be given the deposit and then really lucky that your sister chose not to live in the property with you, meaning it was just you and your new dh (I wouldn’t have wanted to live with dbro when I was newly married). I’m on the fence about the money. How much was the deposit you were given?

Why didn't she live in the flat when she was in the same country? That may be relevant?

Stick to agreement. You lived there rent free. The rent you owe her for using her half of the flat is effectively her half of the mortgage. She owns half. SPlit it 50/50

This. YABU.

I wish I had this 'problem'.

Have to admit that I didn’t think about the rent thing as others have pointed out but it’s a very valid point. It should be half.

If you had been paying your sister 50% of market rate rental for her half of the flat, from which she had paid 50% of the mortgage while you paid the other 50% of the mortgage, then she would be walking away with more than half the proceeds and that would have been actually fair. I think you should go along with the 50:50 split and keep your mouth shut about making it more complicated as you will lose out if someone does the calculations properly.