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?

"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."

Presumably, you were both adults and you went into an agreement. You can't really use the excuse you didn't understand. Is there any agreement you had seen by a solicitor or anything?

YABU.

Your sister didn't ask you for money while you enjoyed the full benefit of the property (yes and that involves costs and some work too but this is why rent is usually more than mortgage), and now you expect to again benefit more.

I would be quite upset in your sister's shoes. It's really not worth creating problems by insisting on this,

Oliversmumsarmy

"That meant all the mortgage council tax maintenance and all the other expenses were on the ops shoulders whilst her dsis didn't have any responsibilities."

That is a very good point, maintenance, I think that should have been shared even if your sister was not living there. Presumably she did not contribute to any costs etc.

I think your parents should have set things up better really, I think you may like to see if you can get a session on mediation of some sort (you will need to pay) because the choice not to move in and not to contribute to maintenance was your sisters so I'd like to change my answer to not quite 50/50 because of the 'maintenance issue'.

Good luck, OP.

You're feeling aggrieved because you're focusing on what she benefitted thanks to you and ignoring the fact that you too benefitted thanks to her.

You benefitted by being able to make it your home and yours only, no struggle with space, no conflict with overcrowding, no arguments about decoration etc... You benefited because you get to move and not have to pay extra taxes.. You benefitted because without her, you wouldn't have been able to afford to get another mortgage.

So you've both benefited from each other one way or another and it is fair to stick to the agreement.

I think you should split. However, if you've repaired and renovated and refurbished (ie new bathroom or something), the amount split should be less that which would go to you both.

So say 30k balance with 7k you have spent on bettering the property. 23/2=11.500k each plus 7k to you.

YABU.

You paid a mortgage and she paid rent.

It's a 50:50 arrangement, simple.

Your parents did something really generous and they deserve more than this.

If neither of you had lived in the property and rented it out, you would have experienced periods in between tenants with no rental income. Your rental income would've also been subject to tax.

You gained. She gained.

You lost out. She lost out.

The losses offset the gains for both cases.

Life's too short to fall out with your sister over this.

I think yabu OP. Your subsequent post changes things a bit but only in the sense that you should have thought of those details before and it's too late now.

Split the sale, keep the relationship with your sister and be grateful you're in such a strong position for your future move.

The whole could and should have been set up better than how it is described on here. That it wasn't is a joint responsibility for them all. Nobody needs to shoulder the blame and certainly not the parents who have done a good thing.

The replies pretty much conclude that there are swings and roundabouts for all parties. This was a family investment that they have all benefited from. The investment was possible because of the parents' generosity and they have clarified that it was their intention for the benefit to be equal.

The OP's sister could have rented out her share to chain of random flatmates for the OP to endure. The OPs husband could have bought out the sister and taken on the mortgage. There's a list of could haves here that didn't happen. Chalk that up to experience

OP don't push this, your take on this far from clear cut or fair. Its certainly not likely to be legally enforced and all you will do is cause a family rift. You are already back-tracking into the realms of petty. Start looking at all you have gained not what it has cost:

• an affordable and secure home
• freedom to decorate to your taste
• half of the deposit and a good share of equity
• a good leg up the property ladder

A friend of the family did a similar sort of thing with his two children, let’s call them A and B.
He legally gifted them the money for the deposit. A and B got a joint mortgage.
B wanted to rent out the flat whereas A wanted to live there.
It was set up through the family solicitors that A would stay there but pay half of the market rent to B. This is because A had sole use of a co-owned property. With this money, B would pay her share of the mortgage and any maintenance costs. Any works on the property, overpayment of the mortgage was to be discussed between A and B and costs split 50:50.
At sale, both A and B received 50:50.

Bearing this in mind, for sole use of their jointly owned property, the OP should’ve been paying market rent to her sister for her sister’s share of the flat.
The sister could have then used the rent to cover her half of the mortgage and the property running costs.
Any alterations to the property or overpayment of the mortgage should have been discussed between the OP and her sister. For example, a documented agreement that the OP overpays £8k off the mortgage which would mean that at sale, the OP would receive £8k then 50:50 of the remainder.
It appears that the OP was paying the full monthly mortgage and daily running costs in lieu of paying her sister the rent for the sister’s share of the flat but there doesn’t seem to be any form of legally binding agreement on any of this hence the muddle!
The OP was using the property as her own, making decisions without consulting the property’s other owner - her sister. If the OP wanted sole use of the property she should’ve bought her sister out. Plus she got married and moved her husband in - would 50% of the flat go into the pot of marital assets in case of a divorce? If the husband has been contributing to the flat, does he now have a legal claim on the flat?

I find it hard to believe that in this day and age, all of this wasn’t dealt with legally. The entire family have been incredibly naive. Yes, solictors’ fees cost a bit but there wouldn’t be all this arguing now.
The only way forward is to stand by the 50:50, balancing out the OP’s lack of rental payments to the sister with the sister not directly paying the mortgage. As for the overpayment - if it was a decision made without the knowledge and go-ahead of the sister and without some kind of ‘on-sale’ agreement then who knows how it would stand legally?

Another thing.... As the original money was ‘gifted’ to the daughters, I hope the parents followed the correct channels otherwise it could be a HMRC nightmare - with the HMRC being the winner...!

I see your point but you should stick to the original agreement... And learn your lesson for the next time. I wouldn't create a rift in the family because of this

I think of it like this.

The flat belongs to both of you. If you had a seperate joint account I would see the transaction as follows ;

You pay rent into joint flat account which is then shared between you and your sister.

Money in rent 1000

Money out 500 each.

Because there is a mortgage to be paid that also comes out of the flat account and you are both liable. So the transaction is

Money in both 500

Money out mortgage 1000.

So your sister has not been getting her money out of renting the flat, nor has she been paying the mortgage so nil balance.

You have just cut out the middle, unnecessary transaction of paying to and from yourself. By paying straight to the mortgage.

I think 50 50 is the fairest way to split the whole lot. The money you have lost is the money you would have been paying in rent for yourself had you rented the flat out to a 3rd party.

I think what is most unfair is this.

Your sister chose not to live in the flat therefore not taking on the mortgage maintenance and all other bills.
Over the years this has amounted to £50,000 in mortgage repayments, and probably another £10,000 in council tax water rates etc over the last say 3 years.

Sorry stupid fat finger

3- 5 years.

That means op could have spent £20k per year maintaining a house her sister wants to now take all the profit. Remember half of this £60,000 was supposed to be paid by the sister who could have only spent £500 per month in rent so £18000 over 3 years instead of the £30,000 which was her share of the expenses on owning a house.

The difference in mortgage payments £50000 and the paying down of the mortgage is £20,000.

Which would be similar to what sister was paying in rent.

You have put in unequal amounts. You £55k and sister £25k. After the mortgage that should be paid back first then the rest split 50/50

Remember whilst op might not have been paying rent she has spent £20k + extra money on other bills etc that would have been a damn site more than if she had twiddled her thumbs living in a small rented flat.

You need to seek legal advice. However, how it would normally work is she would get half minus her share of the mortgage (and possibly council tax). So for example if the profit was 35k but you covered 15k of her share of the mortgage then her share would be 50 percent of 20k.

She chose not to live with you. Her choice. She shouldn’t benefit from that stupid choice by you effectively subsidising it.

But she could have rented it out to someone else and made money. That argument doesn’t wash.

YABU, you are changing the goal posts and going back on what’s agreed. Surely you’ll have known that you would also be paying interest on the mortgage? Your sister would also have been paying rent, plus you have lived in the house without a lodger. If you ds had lived with you and shared half the mortgage you wouldn’t have had the luxury of living alone.

Cherries101

She chose not to live with the OP and then the OP chose to move her DH in.

I don't think the OP is changing the goal posts.

The sister chose not to live in the house in the first place and the OP has paid £20,000 in rent and paid £30,000 off her half of the mortgage. If the sister had paid into the mortgage then she too would have more equity in the house.

Oliversmumsarmy
I don't think the OP is changing the goal posts.

The OP is changing the goalposts as she chose to agree to the deal knowing that she would have the flat to herself and she would be paying the mortgage.

Oh dear what a mess. I'm afraid this might permanently ruin your relationship with both your sister and parents. Be very careful, not everything is about money.

The sister chose not to live in the house in the first place and the OP has paid £20,000 in rent and paid £30,000 off her half of the mortgage. If the sister had paid into the mortgage then she too would have more equity in the house.

How could the sister be expected to pay into the mortgage and pay rent on top of that?

I feel sorry for the OP’s parents - they did a wonderful and generous thing for their children and the OP has now turned it into a stressful and horrible situation for everyone. OP it’s not all about the money, surely - think of your mum and dad and how they must be feeling about all this, not to mention your sister. Do the right thing and stick to the original deal you had, for the sake of your family.

She chose not to live with you. Her choice. She shouldn’t benefit from that stupid choice by you effectively subsidising it

You could reverse this and say that the OP chose to live in the flat, and her sister subsidised that by forgoing her half of a market-rate rent. So the OP's sister has subsidised her.

The OP is changing the goalposts as she chose to agree to the deal knowing that she would have the flat to herself and she would be paying the mortgage

Did she know this.

Ultimately the house was there for both op and her sister. The sister chose not to live in the home she owned and insisted on paying rent to a 3 rd party. Effectively leaving the op with a mortgage and other bills that when the place was bought the op would have thought were going to be shared.

I wonder what would have happened if op had done what her sister has done.

Refused to move in. Not pay any mortgage or upkeep and then expect her share a few years later.

Then the flat would have been rented out and both sisters would have received rent which would have been used by each to pay the mortgage and upkeep.