WWYD? We're landlords

[Woahthehorsey]

To stop the derailing of another thread, I thought I would post separately.

DH and his brother inherited a house a few years ago. The plan was to sell it, split the funds and go separate ways. SIL was living in the house (she had been relatives carer, had inherited savings from relative and planned to buy so was staying whilst she bought).

BIL dragged his feet during the sale until it turned out that he'd got a secured loan on the property which he was now defaulting on and the house was going to be repossessed. The sale couldn't go through until the loan was repaid - because it wasn't a mortgage, it couldn't be repaid following the sale, and had to be repaid prior.

During this time SIL was diagnosed with cancer, which was terminal and she was unable to buy her house. To prevent DSIL needing to move out on her death bed, DH and I secured a mortgage and repaid BILs loan. BIL retained 50% ownership due to the legalities. It was a residential mortgage with permission to let because a family member was living in it. We were really really lucky to get the mortgage as the house is "non-standard construction".

DSIL died and we prepared to sell the house. Because the house is no standard, it's virtually unmortgagable (not completely so, but so much so it's really difficult) so is worth about half a brick built house it. Because of this, BIL realised he wouldn't get any money from the sale, as it wouldn't fully repay the mortgage so has refused to allow the sale. We're currently seeking legal advice, covid delayed it.

To repay the mortgage we got tenants in. BIL has legal rights to some of the rent, which he takes. The rent doesn't cover the mortgage and we also pay tax on it. We lose about £200 per month, which has been manageable so far.

Due to the mortgage situation and the construction we can't remortgage and the initial rate has expired and we are on a variable rate. This has now increased due to inflation/ all that shit and we're now losing between £300-400 per month. This is unsustainable. It's putting us financially in a really difficult place. We have a good income but high housing costs plus 2 kids in childcare. Much more and we're going to start getting in debt.

On the other thread I've been called some awful names for considering putting the rent up, but I don't see another option. Currently the rent is low for the area and rents generally have recently gone up in the area. We've not put the rent up in the 2.5years they've been there.

Options as we see it:

1. put rent up more inline with local rents. Tenant keeps tenancy, we don't go further in to debt. Continue the legal route with BIL.
2. evict tenants, pay full mortgage ourselves for a bit and hope loss of income encourages DBIL to sell.
3. increase mortgage on our house, buy BIL out at half current value, evict tenant, sell ASAP. We've tried to do this before but couldn't raise enough, we've had payrises since though.
4. default on mortgage, let property be repossessed, let bank kick tenants out.
5. (Poster on other threads preferred option) continue to lose money on the house but keep the rent low, risk getting in to very very significant debt, risk our own house/ security of our children.

Final option is evict tenants, get self build mortgage, raze property, build new house, sell. BIL wants to do this but we can't afford it and BIL is unable to get a mortgage. So it's a none starter.

So which option would you do?

That must be so stressful for you.

Speak to the tenants and explain to them that you will be looking to increase the rent to be in line with other rents in the area.
Also tell the tenants that you will understand if they wish to look for another rental house and you are happy to provide a reference.

Take it from there.

3, but I’m not sure wether you’d be up or down financially if you did this? Do you know how much you could sell for?

I would discuss it with the tenants. They might be okay with paying market rent (with lots of notice) or they might prefer to move.

Either way continue with the legal route of forcing the sale in the mean time.

Increase rent. Anything else is madness

1. I would talk to the tenants and explain you need to increase the rent in line with market rate and why.

In order of preference 3, 1. Or even a combo of both. It's unsustainable to keep going as you are, and your BIL has you over a barrel. I'd love to know how he sleeps at night.

Increase rent to cover costs and don’t feel one bit badly about it. I take it you have no relationship with your BIL at all?

And there is no issue with raising the rent to market rates. You are not personally responsible to provide a welfare safety net to tenants. If they are vulnerable the state is there to provide. If it does not that is not your personal responsibility (obvs unless there are children who would
Be out on the streets etc)

That's really tough. Especially when the house was meant to be a benefit to your family, and then you did absolutely the right thing by SIL.

If it were me, I would do as the first PP suggests. Then if the tenants choose to leave, hand the keys back to the bank. This is a mess of BIL's making and non standard construction gives such limited options. The inheritance was well meant, but isn't worth the debt and mental strain it's now causing. Cut it loose.

Most of all you are not bad for wanting to increase the rent to market rates. That's normal and it's not as if you're doing it to line your own pockets.

Missing the point but your BIL is an arsehole and how the hell fid he manage to get a loan secured on it without your knowledge??

Do you already take the mortgage cost and any other costs from the rent before giving bil his share?
If not that would be my first step.

E.g if the rent is £400 and mortgage is 300 he should only get £50.

I don't understand why you haven't pursued the legal route and forced sale, get that moving now.

So option 1.

How does BIL receive rent when it sounds like he still owes you for the original loan (now mortgage)? Shouldn't his share be repaying that, not going to him, then you wouldn't have a issue.

Did you take legal advice at the time of repaying his loan and get a watertight contract with him? How did he even get a loan against a property he doesn't fully own are you sure he didn't commit some sort of fraud?

I'd go option 1 or 3. 1 because legal costs will be high getting rid of BIL maybe not the most economical but 3 maybe the most sensible. You say BIL is entitled to rent but you paid his loan/charge to free the property have you/are you deducting this loan from his "share" of the rent? If not I would look at that.

Have I got this right that the mortgage was taken out to repay bil loan? Why on earth isnt he repaying it?

Sounds incredibly odd. Why wouldn't you get bil to sign his writes to house over when you paid off the loan

To answer a few questions:

Relationship with BIL has always been rocky but since this it's non-existent, all correspondence is through solicitors, though we've been advised (off the record) he has an unpaid bill with them so we're struggling even with that.

We're keeping on with legal route regardless. But it's expensive.

Option 3 might not be an option. Depends how much we can raise. We'd still be down - we'd have paid BiL the half that's his, so we'd own it all. The value of the house would not cover the mortgage on it plus what we pay BIL.

And for the purpose of clarity, I say 'we' but only DH owns the rented house with BIL and the mortgage is in his name alone. It impacts family finances though.

Until recently the £200 whilst not something we want to throw away, it's also only been a loss of savings potential for us. The more it increases, the more it comes out of household budget and impacts on our ability to pay bills.

Don't default, the damage is not worth it.

Raise the rent, continue legal action, look into PP for knocking down and rebuilding houses to sell with planning.

You need to seek legal advice. I'd be telling bil that you cant afford the mortage and your at risk of defaulting and see what he says

Can you rent your own house out and move into the other house? Don't pay rent, your BIL can fuck off. Or else "pay rent" but deduct it from what he owes you, but the mortgage is being paid by your other house? To get you out he would have to take YOU to court and given the money he owes you that is highly unlikely to be successful.

What do your solicitors advise on the situation?

Would exploring getting planning permission to demolish and build something new with a view to selling as a building plot be financially viable? Plots go for crazy money round here, obviously I’ve no idea what your local market is.

If that’s a non starter I’d definitely increase the tenants rent whilst finding about a remortgage to buy BIL out. I’d increase the rent regardless of what you plan to do tbh!

@Hankunamatata

Sounds incredibly odd. Why wouldn't you get bil to sign his writes to house over when you paid off the loan

Because he refused. Which he was legally allowed to do. We tried. But because he thought the house was worth more, he refused.

It IS incredibly odd. BIL is incredibly odd. And difficult.

He isn't repaying it because he won't. He didn't repay the loan and wracked up £££ in non payment fines and extra interest etc.

Mommybear legally he's half the rent. We can ask for the money to pay back the loan, but legally it's separate to the rent he is paid. We are also pursuing him for that and to allow us to take what he owes out of the rent he gets, but haven't been able to yet.

BIL pays no repairs, no upkeep, he doesn't pay towards the gas Safe check or the EPC or anything. We don't know if he declares his income but have raised this with HMRC.

Wow your BIL is a piece of shit.
How is he taking profit if you are taking loss?
Surely any profit should be split between you after all cost have been taken? In which case he should get nothing? Or he liable for some cost too…

What does your solicitor advise?
I would be inclined to talk to your tenants and explain, they maybe ok to pay a higher rent, equally they may prefer to leave. At least once you know that you can factor that into your plans.