Very difficult situation DP v DBro. AIBU for DBro to charge DP rent?

[Jetsetterf]

I'm buying a flat in joint names with DBro. DBro is putting money into the flat as an investment but the flat is being bought for me to live in.

The flat is in a different city to where DP currently lives. I've previously said to DP if he moves in I wouldn't charge him rent. DP has applied for a job in the city where the flat is.

I wouldn't charge DP rent on my share but would DBro be unreasonable to charge DP a reduced rate of rent on his share?

DP is now angry at me because I didn't tell him he may have to pay rent on DBro's share and he said he wouldn't have applied for the job in the city the flat is in if he had known. I said I wouldn't charge him rent, but I have no control over DBro's share and surely he is being unreasonable to expect DBro to let him live there rent free?

Think people need to stop jumping to conclusions about the brother here as I don’t think it’s entirely clear how the arrangement works. Yes it’s complex and that increases the risk of one party being disadvantaged but it isn’t clear that it benefits the brother over the op based on what I can see.

Firstly, the fact that the deposit is so high thanks to parents loans means that the mortgage is well below market rent. Therefore if they both paid half the mortgage and the op lived there rent free, they would be getting a much better deal than their brother.

So the fact that the brother is letting her pay the full mortgage for the first two years which is significantly below half the mortgage plus half the rent (obviously complicated by the fact that renting would incur additional fees, general up keep costs etc) is definitely a deal which is weighted in favour of the op (remember, she has only put in £4K herself and is getting to live somewhere for what is ultimately well below market cost), the brother meanwhile is presumably paying rent on a place of his own.

It gets murkier after the two years are up as I’m not entirely clear on what the op has agreed to pay as rent after this point. Theoretically there is a bit of wiggle room between paying the full mortgage and paying half the mortgage and half the rental cost of the property.

Having a partner move in complicated things further but I don’t think the brother is being unreasonable to stop giving such a great deal as you are getting for the first two years in this scenario. Exactly what would constitute reasonable in this scenario is difficult to say without a detailed spreadsheet.

Ultimately based on what I’ve read it doesn’t feel like a horrendous deal that the op and her brother have got, but it should definitely be formalised, these things can get complicated if you wish to buy out your brothers share/one of you needs to sell.

Also, as a guaranteed tenant, your brother has it very cushty. Many landlords would have to take responsibility for finding and looking after tenants. It's certainly not easy to find good tenants.

*Sorry everyone, I'm confusing myself here too. DBro and I are paying the loans back equally.

On the rental market, the flat would get £700 pcm. So DBro would make £350 pcm if it was rented out. Hence, it's been provisionally decided I shall pay the £260 mortgage in its entirety for the amount of time I live in the property and £350 as the share of the rent DBro would earn*

You will literally will be paying the mortgage plus MORE THAN THE MORTGAGE to pay your brother as rent for the privilege of living in a property per month THAT YOU OWN.

They say doctors make the worst patients, OP I think solicitors must be terrible clients!

Who has provisionally decided this btw?

I echo a PP when saying can you not pay back your DB the 1K (it would take you just under 8 months at 130).

Your DP and his head in the clouds are the least of your worries if these are the sums.

It’s a condition of the first-time buyers’ loan that they can’t let for two years. So OP will live there for 2 years. The brother wants her to compensate him for the fact that he can’t charge market rent for two years because of the conditions of the loan, which they have chosen because it has a much lower interest rate than a standard mortgage or a buy-to-let mortgage.

In the immortal words of Sister Michael, he’ll go far, but he won’t be well-liked.

Hang on, the mortgage is just in your name? I had assumed it was a joint mortgage. So why are you only going to pay it while you are living there? Who's going to pay it afterwards? It gets muddier by the moment

Oh OP everyone is taking advantage of you here, your DB and your DP.

If there's any way this can work and I have my doubts on that you need to build a giant 50% wall in your mind about this flat and mentally treat your half and your DBs half totally separately.

SO. Either way, you live there so all the bills are yours, except normal maintenance( anything that would normally be paid for by a landlord, not taken out of a tenants damage deposit) which should be 50:50 with your DB.

You either pay only your DBs share of the mortgage, which would be generous of him, or you pay him half the market rent of the flat and he, like any other landlord, would pay his mortgage out of that rent.

With regards to your DP, what you decide re bills and rent for your half is up to you. What your DB decides for his half is totally up to him. But either way, your DBs monthly income from the flat cannot reasonably be more than 50% of a market rent for the flat.

BearsDont is spot on. If you weren't living there, then you could think of the flat as a business. Ignoring the loans because you are paying those 50/50, the business would have income of £700 pm according to your market assessment, and a cost of paying the mortgage of £260 pm (albeit some of that is increasing the equity in the flat but again you share that 50/50). So your DB's monthly "profit" would be (700-260)/2 = £220. (Assuming he's then willing to contribute 50/50 to other costs that arise, eg for maintenance).

Now, as it happens, you are the tenant. From your DB's point of view this should make no difference financially and he should be receiving £220pm. So you pay the mortgage £260pm and pay your DB £220pm. It's costing you £480pm so it's a good deal for you. DB should be pleased because it's not some stranger in his flat so he can hopefully trust you to take good care of it.

Wait. Did you just say the house is in your name?

Tiesto
Firstly, the fact that the deposit is so high thanks to parents loans means that the mortgage is well below market rent. Therefore if they both paid half the mortgage and the op lived there rent free, they would be getting a much better deal than their brother.

The mortgage might be low, but that is thanks to the PARENTS not the brother, which the OP has stated they are both paying towards the loans (I am assuming equally). There is nothing to suggest that the brother couldn't live in the property, just that he chooses not to. Additionally, as he is buying with his sister, there is no way he could rent out the entire flat for market value, it would likely be either a lodger or tenant with live-in landlord, which has less rights, and therefore less value. With the setup of having one of two owners living there, they should not be basing rental costs on renting out the entire flat (because it won't be).

It's not complex, at all - what he has done is buy a share in a property. He should morally be assuming his responsibilities for his share (unless she's already signed her rights away). He still needs to pay for his own living costs obviously, whether this is buying another place to live in or rent another place.

Yes, I do at least get the brother's point about the DP. DBro is willing to let his sister have a good deal for two years but doesn't see why the freeloading DP should benefit from that. (So would expect £220pm from the DP, which is still very cheap).

That would have the benefit of giving DBro an income from which to pay his half of maintenance costs.

I find something a little uncomfortable about DBro getting involved in how his Dsis chooses to make use of her flat but, there is a difference between overnight guests and a second person living there.

As for the DP - do you intend to live apart until you buy somewhere together? Bad idea unless you're morally opposed, which clearly not. How does he rationalise that?

@HeddaGarbled I see, so after the two years, DB wants to have his cake, eat it and then make trifle from it too?

Surely if he wants to charge his sister rent and claim the income from such then he becomes a landlord and assumes all the responsibilities and has to pay everything associated with it? Then they would surely have to be joint landlords and would have to make a decision on the DP living there as a suitable tenant that they agreed on...

This just sounds like a headache

When you say the house is in your name, do you mean it's not in your DP's but is in your and your DB's? Or do you mean your DB's name isn't on it? That makes no sense. Why would your DB pay money towards it and get a rent payment from you when he doesn't own the property?
As PPs have said, you shouldn't be paying the mortgage and rent to your DB. Even if a property rents for £700pcm you need to deduct insurance, maintenance, factor's fees, agent's fees, etc.
All the men in your life seem to be treating you like an idiot.

This is nicely summarised by @Iflyaway

I'd see his attitude as a red flag...

Who the hell expects to live rent-free?

It doesn't matter what you said to him. A normal responsible adult would not expect to live off their partner who has to pay a mortgage - whether that is 50% of a mortgage or 100% of a mortgage.

It's disgraceful an adult would expect that and not be offering to contribute.

He wants to live off his dick.

Nice.

Ooohkay, given what Hedda's said about the mortgage, your DBro isn't being kind by 'letting' you pay only mortgage for the first two years, he cannot legally charge ANYONE rent during that time.

If he thinks £200 a month is unreasonable tell him to stay living with mummy and daddy and you will look for a grown up boyfriend.

He has only applied for the job - advise him to withdraw his application.

God this is like watching footage of the Titanic setting sail from Southampton.

I get it you and your brother have bought a buy to let and instead of a random tenant you rent it off yourself . for example if you were charging £500 rent to a tenant
minus £260 mortgage
leaves £240 thats £120 each for your brother so thats why he want a token rent

if DP was paying rent it should be to you not your brother

I think KTara has it. You should pay your brother half the market rent (350) out of which HE pays his half of the mortgage (130). So he is making a monthly profit of 220 (wish I knew of a scheme which would generate that amount of profit on a 5k investment!) and you are paying out 480 (350+ 130) in total.
Secondly, I feel the DP may be getting a slightly bad press. He has tactlessly said that he doesn’t want to pay towards someone else’s mortgage, but in point of fact, who would if they had a reasonable alternative? Living rent free at home while saving for a deposit is not uncommon, and is a way for parents who want to help their offspring get a foothold on the property ladder but don’t have large capital sums to lend them for the deposit. And it’s laughable how MN throws scorn on this type of arrangement but then foams at the mouth at uncaring baby boomers who won’t help their children.
Thirdly, OP you need to think about your future. If the plan is truly that you are married in a few years, then surely you should both be saving towards a deposit for your own home together (not that I’m advising this for a minute!) - not him saving for his own home while you are embroiled in quite a complicated arrangement with your brother.

No, crucially, it's not a buy to let - and cannot be let out at all in the first two years. See Hedda's post.

If I were your boyfriend I’d run a mile from this financial clusterfuck!

“Soft loan” - WTF?

You have 3 “people” loaning you money that you need to pay back. One of those is a mortgage lender. Who will presumably expect the other two to sign legal paperwork to confirm that the £51K is a gifted deposit.

Did you buy your LPC online from an uncertified Midwest “university”?!

Cos you know, of all the professions you don’t want to be involved in when planning mortgage fraud, I’d say legal is up there in the top 3.

@LifeofClimb

I agree with what you say, but the complexity comes into what a fair balance between paying the full mortgage and half the mortgage plus half the rent is.

Paying the full mortgage and nothing else is obviously a better arrangement for the op than it is for the brother. He could choose to live there yes, but we don’t know what his situation is, eg is he living in a different city and unable to do so? So as it is he doesn’t get to benefit to the same extent as his sister from their parents loan.

Likewise paying half the mortgage plus half the market rent (or some similar equivalent) to the brother is probably marginally in his favour (massively in his favour if it is the full mortgage and half the rent which one post from the op (contradicted by another) seemed to suggest) as there are a lot of costs that come with renting out a property that he won’t have to pay as it is his sister in the house.

Finding a fair and equitable balance between those two positions is complicated imo but not impossible.

Also just wondering if DBro is currently living rent free at home?

And why would you be paying your brother half the market rent?

That’s not what he’d realise from actually letting out the property.

Tax, wear and tear, compulsory gas inspections / certifications...

83k mortgage - who’s name is this in and who will be paying? In my name. I'll be paying while I'm living there

Again. Does this mean the house is in your name only???
If yes than that's even more complicated!