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?

*eaToSki

If the property had lost value and was worth less than the mortgage, would your sister be helping to pay off the mortgage 50:50 if you had to sell it?*

I dont think so, she would say the mortgage deficit was on you.

Eh? Of course she’d be liable to pay off half the mortgage if it’s in both of their names.

What planet do some people live on? All this “don’t think so”, “take what you can get love”. Classy.

thebluedot You would also need to factor in half of the mortgage payments in this senario.

Sorry but I think you sound greedy. You should stick to the original agreement. Such a shame how money so often drives a wedge between family.

I have read the thread, including your response and I still think the original way is more or less fair, because if you hadn't been living in the flat you would have had to pay rent somewhere else. I say "more or less" because it's not likely to work out exactly evens, what with different rental values etc, but you can't go back through all the details and change things after the fact.

You should have a written legal agreement about who gets what when the flat is sold, including the share of the "reversion" from the mortgage. Stick to the legal agreement, whatever it is.

Buying a flat together was possibly a mistake, certainly you should have worked out in advance the financial implications of her living elsewhere and you living in the flat, and agreed shares accordingly, and either written them into the legal agreement or asked her for the money as expenses arose. It was foolish to make overpayments on the mortgage that your sister didn't match when you had no legal right to an extra share. I think you can reasonably ask for your mortgage overpayments back (ask, not demand, I am not a lawyer but legally you might have no right at all). But the rest, nope, it's too late and you can't really even ask. Sorry!

OP has not just paid mortgage though- she's overpaid the mortgage (50k with 30k left indicated she's paid more than her 'half' so technically owns her half outright) and covered maintenance. Legally, yes it's a 50:50 split but parents should step in here to mediate as clearly OP should get more than half the equity.

@Cornberry
To my mind this is a simple calculation that you need to work out or get an accountant to work out.
Your sister should receive back her 50% share of the house deposit in full.
She should as an investment receive 50% of any +/- equity variation on the whole property sale value - dependant on what the market has been doing during period of ownership.
The repayment of the mortgage to tune of £30k is wholly attributable to you....she should receive no benefit from that since this was always dependant upon yours and your DH ability to pay and not hers. Her benefit should be treated as if interest only and NOT equity was paid.
She should pay 50% of the costs of sale of the house.
I'd get a conveyancing solicitor to layout the calculation very clearly for your sister to see. It might cost you a few hundred pounds for this service but will spare you a lot of heartache and bad feeling.

I would add up everything you have paid in mortgage payments, maintenance etc and compare to the rental value. If you've massively paid more than you would have got in rent then show them the figures and see whether you can come to an agreement. If there's not much difference then maybe just write it off for the sake of family harmony. If you were going to be really cynical then worth bearing in mind that your parents could make 'amends' for any injustice in their will. Now that really would be awful!

Tinkobell that would be a very unusual way of doing the calculation though as the sister would have no credit for not having used the flat and the OP no cost for living there.

I’m a solicitor and spend so much time arguing about co ownership disputes and I wouldn’t put my name on a calculation done like that. If you were just representing OP and trying it on (and the client knew they were probably on a hiding to nothing) then fine but you seem to be suggesting that would be a definitive answer which it really wouldn’t be.

Making an overpayment was very, very ill advised, but not too difficult to take out of the equation.

But there is interest in mortgages...she hadn't overpaid, she paid 50k off the mortgage which probably equates to 20k of interest if there's only an extra 30k of equity in the property now. If she's overpaid the mortgage then yes, she and her sister need to sit down and work out what extra she has put in above the payments that needed to be made.

Sarah yes, in scenario 2 you’d ask factor in that the cost of the mortgage payments are split 50/50 (in addition to essential maintance and insurances).

I think it should be 50/50.

You overpaying the mortgage is entirely your decision, and a bad one without agreeing a difference in terms in advance.

The alternative, that she pay half of the mortgage while not living there and also paying rent would lead to you benefiting massively over her, by actually having the use of the property.

Makes sense for you to pay the full mortgage instead of her paying half the mortgage plus you paying her rent for the use of her half of the property. It doesn't make sense for you to overpay, but that was your choice.

Tinkobell is correct I think. You would have had to have a buy to let mortgage as well which is more expensive. Yields from buy to let after mortgage payments and costs are around 5% so not exactly huge either.

I think you have to take on board that as far as your family see it the flat was a joint investment bought to benefit you and your sister. The benefits to you have been that you had the opportunity to live there at potentially less than it would have cost to rent. The benefit to your sister was that she had effector a buy to let investment, tenanted permanently by people she trusted. So for all intents and purposes you have been paying her rent at half the mortgage costs and she has been making equivalent mortgage contributions. In other words if the mortgage is £1000 pcm then you pay her £500 in rent and she pays £500 to the mortgage. That is your agreement. You both had a joint responsibility to agree changes to the mortgage payments and what that meant for you. If you both didn’t do this then you both accepted it might not be fair to one of you. If one of you made unilateral changes to the mortgage payments, or by moving in a partner, then you had a responsibility to bring this to other’s attention. Btw, your husband is not on the mortgage and didn’t pay the deposit, so he has no interest in this matter. To all intents and purposes he rented from your and your sister and got a good deal on cheap rent.

Over the course of the time you have had ample opportunity to challenge or change the arrangement. The bottom line is you have had years to get out of the agreement. You didn’t so you have to live with the original agreement.

I personally don’t think you have lost out. Given that you had no capital and this was gifted you have been able to accrue further capital instead of paying rent. The alternative for you could have been years of renting at a higher cost with frequent moves that would have cost more. That’s effort and paperwork. This presumably is what your sister went through.

To be honest you are being more than petty you are being ungrateful and grabby. Because your husband got a lot out of this as well. Cheap living costs and a leg up the property ladder. If I expect this will cause a rift because of your attitude which is self serving.

So accept that you only ever owned half the property and rented the other half from your sister. You will probably have regularly paid less than it would have cost to rent, even with overpayments.

Oh sorry Madeline I thought she said she had made an actual over payment. Which would have been pretty silly.

chocolatecovereraisons I made the point about her living th my parents because most people seem to think the relevant point is the rent she’s paid elsewhere.

shineonharvestmoon I have made these exact points to my family. I don’t feel ashamed that these considerations have given me pause. I am not very finically savvy and in the absence of certainty I think it is logical to raise these questions.

Tinkobell is correct I think. You would have had to have a buy to let mortgage as well which is more expensive. Yields from buy to let after mortgage payments and costs are around 5% so not exactly huge either

Tinkobell’s calculation has no provision for the investment having any income element in either direction

Yabu. Your sister had to pay rent and did not receive the rental income she would have had if you were not living there. If you go against what you agreed your relationship with your sister will probably never be the same again. Is it really worth that?

I made the point about her living th my parents because most people seem to think the relevant point is the rent she’s paid elsewhere

Not at all. That’s between your parents and her. The point is she didn’t live in OR take any rental income from her investment in the property. Not where she lived while she wasn’t.

Is your sister on the mortgage, or is it just in your name?

This is a difficult one fact is you have paid off the mortgage but if she wanted to live there you wouldn't have been able to live there with your husband and she is entitled to some level of rent from you. Ultimately though you made an agreement at the beginning and you need to stick with it. That was the basis on which she agreed to let you live in the flat and you can't back track now

ourkidmolly

The OP's sister and her DP lived rent free for one year, I can't imagine for a second that the OP would have been happy for them to move in to the flat that they both owned.

And even if the sister were single could you imagine the issues when the OP moved in her DH?

IMO the OP has done really well out of this.

The fact that you and your partner both lived there when it could have been rented out to a third party, and that rent applied to the mortgage, needs to be taken into account. When you compare those figures how do they stack up? If the deal was that you pay the mortgage then take back the excess you’ve paid.

That your sister lived rent-free with your parents is their separate arrangement and not related to your agreement with your sister.

She is your sister and nothing, especially money IMO, is worth falling out over.
I can see where you are coming from and perhaps you were a little naïve but she is family and don’t family help each other out. If she was disabled would you resent doing the leg work to help her out?
If she hadn’t put her half of the deposit into the house, you wouldn’t have had such a good mortgage rate and had the ability to pay as much off the mortgage.
I may see this differently though as my sister is dead.

I think you separate the mortgage from the equation.

Flat purchased for £120k
Deposit £50k so you each get £25k of this
Mortgage taken out for £70k by you and paid by you
Mortgage now owing is £30k

Flat now worth £200k so the increase is

200-50-70 = 80

Your sister is entitled to half of this and half the deposit so £65k
You're entitled to £65k plus what you have paid off the mortgage, so another £40k

Is it worth permanently damaging your relationship with your sister for 15k especially as you’ve decided this without prior agreement? It would different if you’d agreed this at the start and given her the opportunity to pay in to protect her investment but you didn’t so you don’t get to move to goalposts now.
Look at it as sunk costs that you would have had to pay if you were sole owner anyway.
You’ve been very lucky to get a deposit for a house given to you and you’ll be making money on the sale either way.