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?

Yabu. You lived there. If it had been dented to a 3rd party she would have benefited from that.

Perhaps you should pay her what her half of the profit would have been if she rented it out. Plus what you have both made in equity and the mortgage being paid.

It is tricky, but unless you paid her rent while she was elsewhere, then 50 50 is fair

The way I see it, all those years ago, you didn't have enough of a deposit to buy a flat of your own. Therefore would have had to rent. 100% of the money until you were in a position to buy alone/with your husband would have gone down the drain.

Instead, you were in the fortunate position to be able to buy half a flat. This would have been of no use to you without your sister's financial help/agreement and you would still have been stuck renting. (All your money down the drain.)

Because your sister chose to invest her money (which presumably she could have invested elsewhere long before now) in the flat you both own (regardless of who lives there), you've not had to rent. Therefore you only had 50% "down the drain" (into your sister's pocket rather than a stranger's). And 50% is yours.

You've still benefited enormously because without your sister, like I say, you'd have had nothing but your original half a deposit. Now you're in the position to buy somewhere that is all yours. And you've had the comfort and security of living in your flat for all this time. Win-win.

As for your sister, if I were her, I'd be absolutely gutted that you were being such a CF, both for the reasons above and also because if I was your sister, we had an agreement and now you're trying to back out. I don't think that's right or fair and that's my impartial view.

Good luck sorting it out.

I think it matters what the rental value of the whole flat during that time. You should have been paying all of that since you had some use of the flat and 'deprived' your sister of the income. However anything above that I do think you should get back in full, especially as you've been paying back the capital and not just the interest.

YABU. The flat (if rented out as an investment) would have generated a monthly return for both of you. You chose to live in it, benefitting from cheaper mortgage vs rental prices elsewhere.

She didn't benefit from this, you did. She paid (presumably) higher or equivalent rental prices elsewhere which can be equated to your payments because you were living in the flat, she wasn't. How you think she shouldn't be compensated for this, I don't know. It smacks of greed!

Don't forget that your sister will be liable for capital gains tax on her half share of the gain as the property has never been her main residence. Once you take the tax into account she will be left with a much smaller share of the proceeds but she has never benefited from any rental income. This would seem to me to be another argument for a 50/50 split.

She had to pay rent herself, probably the equivalent of your mortgage.

If she had known in advance your new stance, she may have insisted on renting it out so she could have made a profit.

Yabu.

Also this from your OP could be completely turned around: 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.

Do you think it would have been reasonable to agree that your sister forgoes any rental income for all the years you’ve lived there AND receives less than 50% of the property at the time it was sold? That is the agreement that want, which is very unfair on her.

I’m sure your parents didn’t intend you to come out of this with a much higher benefit than your sister when they provided the deposit, which is what you are proposing.

Good point from poshfrock- letting you live there will have cost her her PPR and if her profit is £30k (I’ve lost track) and she’s a higher rate tax payer that’s over £5k she’ll have to pay that you don’t.

If you deduct your housing costs, you need to also allow her to deduct hers. You can’t effectively live for free and not compensate her, her living costs.

She should get back half of the deposit that your parents originally gave you both to buy the flat .
What was the original ageememt if there was going to be a profit / loss on the flat you were both buying ?

How did this even happen?

Your parents offered to give you the deposit on a joint flat. But you didn't want to live together and didn't want to rent it out. It makes no sense. Why didn't they just give you each half the deposit money and let you spend it as you wanted.

50/50.

Partly because that's what you agreed, and you should stick to it, but partly because you haven't had to pay rent, and she has.

If you'd been paying rent all this time, you'd quite conceivably have spent more on rent than you've paid in mortgage payments, and would have no equity to use as a deposit. You're probably still be better off than you otherwise would have been.

You've been paying the equivalent of rent by living there. Your sister hasn't had that income.

If you split in the way that you want to, you'd effectively have been living cost-free (rent) for the time you've lived there & she hasn't.

We all have to pay rent costs.

YABU she's had to pay rent the whole time because you and your husband lived in the shared flat, if neither of you lived there and you rented it out (which would've been the fairest thing to do), you wouldn't have benefited from paying less as mortgages are invariably cheaper than rent, so you have already benefitted from it more than her over the years. Also if you'd had a tenant the same amount would've been paid off the mortgage

This.

If I were your sister, I'd be really pissed off.

I think the additional interest and mortgage you paid was essentially rent to your sister, which went direct to mortgage company. Assuming she didn’t charge you to live there then she should get 50%. No different to any other landlord on a mortgages property.

How much per month did you pay on the mortgage? If it was similar to rent, then you're being unfair.

Well if you think it shouldn't be split 50/50, you should have been paying her rent for her share of the flat then...

I agree 50/50 is fair.

Hmm - don’t know

Other posters have said it much better than I could regarding the rent vs mortgage issue.

With this in mind YABU. Stick to the original agreement, as if you go through the finances properly you'll probably find yourself actually owing her more money due to the rent you have saved by living in what is essentially half her property.

She should get half of the original deposit and half the increase in value.

Example-
Purchase - £100k
Deposit -20k
Original Mortgage - 80k
Remaining Mortgage- 30k
Sold Price - £120k

She gets £20k.

Is she proposing she gets £45k (half the equity)?

You are correct she has never put in a cent but neither has she ever received a cent. If you hadnt of lived there she would have received rent (probably on top of paying the mortgage off) so has missed out on money (for example it could have been rented at 500 when the mortgage is 400)

This is your sister - stick to the original agreement.

And get your head around the fact that you pay huge amounts in interest on mortgages regardless of whether your sister was there or not. If you had both paid the mortgage you still would have paid the £20000 interest. If you were divorcing the interest payments would be ignored

The only cause for thinking it should not be 50-50 is if you have made big o repayments.
Or paid for major items like new kitchen or bathroom or boiler.
Those sort of things should be taken into account.

The legal answer is the original agreement stands. The moral answer is also that you have benefitted financially from the agreement considerably more than your sister.