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?

Sister abandoned flat did not make mortgage payments and want half lol. Sister has the responsibility of paying half and finding someone to pay rent not OP. Paying rent elsewhere is totally irrelevant. Sister has defaulted on the contract. The only issue is that the newer arrangement was never finalised.

50% profit was for paying 50% of mortgage that's why they are both on mortgage application. Talk to your sister clearly it's not fair for her to profit like this.

Your sister moved in with your parents rather than into her own house so she didn't disturb you. You've had the benefit of sole use of a house that you wouldn't have been able to afford without her and your parents. You're very lucky. I think you've been a bit selfish over the years and still are.

YABVVU as you haven’t factored in the rent you should have paid your sister. I think you should be able to deduct your overpayment and any significant sums you have paid on improvements - how much is that?

Another way to think of it is that your sister made an investment of 50% of the deposit and should be entitled to that back plus half of the capital growth plus a return equivalent to interest which in this case would equate to rent.

As pp said, if you’d paid off the full mortgage surely she wouldn’t expect to own half of the flat! So why should she own half of it now?! She should receive half of her original deposit plus half of the increase in value. Eg £50k deposit on £150k flat now worth £200k. She gets half the deposit (£25k) plus half the increase in value (£25k). So you get £50k each, the mortgage gets paid off, and the rest is yours because it’s what you’ve paid off the mortgage.

People saying the sister missed out on rental income while OP lived in the flat - fair enough. But presumably OP has paid for all maintenance on the flat over the years and is paying all the costs of moving eg estate agent, solicitor and stamp duty. So it all works out even.

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

Jenny abandon the flat? And do you genuinely believe OP would have been happy about the sister finding a tenant to rent the sisters half to?

I very much doubt it - OP is lucky that the sister didn’t want to live with her (I can see why from her petty comment about sister living rent free with parents) and that she was able to move her husband in.

This is a mess.
You either split the money from the sale, or give her half the deposit back, plus a proportion of the amount the house has increased in value and then work out what you should have paid her in rent for her proprtion of the house for however long you lived there.

I'm putting myself in your sisters shoes.
Our parents give us a deposit for a flat of £50k
We get a joint mortgage of £100k
I never live in the flat or pay any of the mortgage.
Some years down the line, I want my share.
I would expect half of the deposit, plus half of the equity. I didn't pay any of the mortgage so I'm not entitled to any of it.
Flat bought for £150k and sold for £200k so it has £100k equity. Original mortgage was £100k Outstanding mortgage is £30k
I expect to receive £50k
You would get the same plus the £70k equity from the mortgage.
From our profit, we pay the cost of selling the property plus mortgage fees equally.

There is a problem with ignoring the OP's overpayments on the mortgage, it means the amount going to her sister is a somewhat arbitrary consequence of how much of the mortgage she chose to pay off. She could have chosen to pay of nothing (interest-only mortgage) or (if she had a windfall) she might have paid off the whole mortgage. In the context of overpayments, it makes no sense to say the sister should get half of any overpayment.

A more complicated calculation based on rental value is needed.

Sputnik if the flat was fully paid off in 20 years time before being sold, the same principle applies.

The OP has been paying the mortgage in lieu of paying rent to her sister. So she would either have to pay her sister 50% of the market rental rates for ALL the years OP lived in the house OR split 50/50 on sale.

I don’t understand why people think the OP deserves more than 50% at sale if she has paid NO rent her sister.

The maintenance and overpayment are irrelevant - that would likely have been covered by rent payments if the property had been rented out on the open market. As OP said, they were gifted a substantial deposit and I assume the rental income would have exceeded the mortgage amount.

I expect to receive £50k
You would get the same plus the £70k equity from the mortgage.

What's missing from you calculation is that the sister is not getting her share of income from the investment. She is getting her original stake back, plus the capital gain on it, but the "interest" (value of accommodation provided) has gone 100% to the OP. The sister needs compensation for that.

Soontobe if you’re in the sisters shoes, why have you ignored that fact you could have rented out the property and got an income (half the rent) if you hadn’t said ok to your sister living there instead?

You would be happy, as the sister, to write off the half of the £70k that compensates you for the fact you’ve had no income from a flat your parents gave 50% of to you?

If you want to do this fairly you need to work out what the mortgage (principal + interest) would be divided by two.

Then work out what market rent would be divided by two.

You sister should have contributed her share of the mortgage but received her share of the rent. If it's around the same $ amount then I would just leave it and call it even.

She also should have contributed to half the costs of maintaining the property regardless of who lived there. As she didn't, you should deduct her share of what the maintenance costs and legal fees should have been from the money received from the sale and then split what is left. If she has paid rent elsewhere then presumably the landlord of this property has been paying the maintenance, not her.

If you have paid more into the mortgage than what was required and you currently have a redraw amount, you should also get this back before splitting profits.

Dear me Jenny 17 sounds like a nightmare sister.

Sister died need compensation for lost rental income but it should be proportional to how much of the house her deposit buys her.

You have been living there rent free whilst she has had to pay rent elsewhere. Your mortgage payments have been instead of rent. You took some possession of the house your parents had given to both of you, with your sister's agreement. If you do not split everything down the middle now you will be cheating her out of a lot. It would be very unfair particularly as those were the conditions under which she let you have full advantage of the house. She would have been renting elsewhere under the belief that whilst it wasn't as good as paying off a mortgage she was still having money paid into the mortgage for the house the pair of you owned together. I am shocked you believe you can do this to her

thebluedot sister should've insisted or OP agrees to still give full 50/50. We don't know what the OP would've agreed to so that is not relevant what is relevant is the sister abondoned monrtgage payments.

Re rent. What rent? Where is the agreement for that? This isnt a shared housing scenario.

For simplicity of figures say

You each put in 25000
Borrowed between you 100000
You sell at 200000
You've paid 30000 of mortgage so equity is 130000
So you get 65000 if you don't take into your mortgage payments.
If you want to take into account mortgage payments, you get 80000 and she gets 50000 but you will have to pay her 50 percent of what it would have cost to rent the flat in the time you've lived in it, otherwise she has been subsidising you from her lost rental income

You have had years of benefit from the flat, your sister hasn't

Your paying the full mortgage payment each month compensates her for not receiving her share of rental income

You made an agreement which you should honour

Very thankful that my siblings are scupulously fair, and wouldn't dream of reneging on a personal agreenent, let alone a legal one

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?

Work out if your sister would have got more than £15,000 in total net rent (after expenses including mortgage and tax) over the years, if the flat had been rented out the whole time and she'd get half the income. If she would have, then you are lucky to get away with only paying her £15,000.

The sister could argue that the op owes her money.

Depending on the rental value the sister could have lost a lot of money by allowing the op to just pay the mortgage.
If the mortgage was eg £500 and had they rented it out and say got £700 after letting agent fees/maintenance etc then the ops sister has lost £100 rental income per month for all those years. So it could be argued depending on the actual figures of course, that the op owes her sister quite a lot over the years.

Be careful this doesn't bite you on the bum op.
Just split 50/50

You should have had an interest only mortgage, but then neither of you would benefit except for capital gain, you could have paid that, money down the drain like rent

What did your parents envisage when they made the gift of the deposit? Their view THEN (not now) is important as they seem to have initiated the arrangement to which you both agreed.

It looks to me as though you and your husband have become comfortable in the flat and forgotten that you only part owned it. Why would you overpay the mortgage for example, without consulting your sister on the financial consequences for her?

Have you looked into what happens with normal shared ownership properties? There are lots of schemes around. It might be useful to follow that model. It would mean calculating what you would have paid her in rent for her half, and deducting that from your mortgage repayments.

You have two choices, it seems to me. A simple 50/50 split, as originally agreed.

Or, much more complicated, a shared ownership split taking into account what you would have paid her in rent for her half, (ie 50% of the market rate for the full house) and what she has gained in equity from your overpayment the mortgage, but only on her half, not yours.

Good luck.

Not sure how everyone is saying you owe your sister her half of the 'rent'? In that case the sister I also responsible for paying half of the mortgage and her half of all costs associated with the maintenance of the property.

The OP has covered both halves of the mortgage as well as both halves of all expenses, rates, insurances, bills that the landlord would usually cover etc...………

I see why the original agreement needs to be upheld but the OP doesn't owe any rent to her sister as the agreement that the 'rent cost' in this case was whatever the mortgage repayments are plus maintenance/running expenses of the property.