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?

Stop paying him the rent and let him sue you for it, and when he does, counterclaim for the loan owed to be paid of against rent monies.

I can’t believe you’re still transferring him the rent money. Just start treating him like he treats you and let him go through legal routes for his rent money- which would give you the opportunity to seek a legal order in respect of the loan.

I'd go with option 1. It's not unreasonable to put rent up in line with the local rates. If the tenants decide to leave then you can switch to the option of paying the mortgage, hoping that the lack of rent will persuade BIL to sell.

I might be wrong here but if you defaulted on the mortgage wouldn't it affect your ability to remortgage/move to a different property?

Even assuming you could get enough money to buy out BIL, it is unlikely he would agree to a realistic amount of money.

The worst option of all would be to go down the self build route. BIL clearly has a very unrealistic view of the property's value and has the morals of a ferret so you could be dragged into even more protracted problems.

I agree with the posters who suggest you need a solicitor who is experienced in this sort of situation. At some point no solicitor will act for your BIL when it becomes clear they won't be paid. What do the mortgage company say?

@GrettaGreen

Can you stop all monies in rent to him and spend it instead on getting your solicitor to stall and string everything out for the next while? The double whammy on his pocket from no rent and an escalating bill from his solicitor could put him over a barrel where he has to sell because he won't be able to afford to continue defending his ridiculous position with solicitors with a hefty bill that he can't pay. Even if you should technically be paying that rent, it'll cost him money he doesn't have to fight it.

Completely agree with this. There’s literally no benefit to paying the rent money before you have an actual legal order to do so. Normally you would do it to maintain a good relationship and avoid litigation but sounds like that ship has long sailed.

If I read this correctly, your DH is the Landlord on the tenancy agreement... ?

If I have understood this correctly, then change the bank details for where the rent is paid to, so it all comes to DH's separate new account. House outgoings also come from this account.

Transparency.

That will force BIL's hand very quickly to initiate the matter in Court or grant settlement.

Having said all that, I'm at a loss if your BIL undertook some sort of fraud to obtain funds using the house as security, why you/DH have bailed him out.

This occurred in our family too, and it was a matter for the correct dept of the police force to handle the problem as well as legal action against the bank who gave family member the loan in the first instance, on the basis the bank did not undertake due diligence before giving family members the funds. I can assure you the Bank put the heavies on, and some of it went public, before they signed off on a confidential agreement and settled the matter with other family members who had been indirectly involved...

The family member may yet still serve time as they left for o/s.

Obviously put the rent up. I’m a landlord too and would always be advised by my letting agent as to the going rate for rent and stick to it. It’s a business.

Get a better lawyer?
This really shows that no good deed goes unpunished.

Increase the rent, you're not a charity and it's financially crippling you.

I’m a ll. i keep my long term tenants under market rent. But I would put the rent up in this situation. It is self-preservation.

Have you asked the mortgage company if they will allow you to change to interest only? If they refuse, you could try asking for a 3 month payment holiday although that’s not ideal as the interest will continue to rack up.

I agree with others that you need a specialist solicitor. Someone, who can advise you on how to pursue your bil for the money, help you figure out if you can keep the rent and force a sale. You’ll also need advice from another solicitor to pursue your bil and the company for the fraudulent loan. It doesn’t matter that it folded as you say it’s been taken over by another company. If you contact a large law firm in your area, they should be able to help and sign post you.

As others have said, why are you paying him any rent when you are losing money every month?

Until op gets proper legal advice and representation, as it stands today legally her dh has to give his brother 50% of the income. Until the fraudulently obtained loan situation is addressed, the mortgage is op’s dh’s debt and issue. Albeit not factual but from a legal standpoint, he profited from receiving the mortgage money and it is his responsibility to pay that out of the rent and the remaining portion by other means.

I know people have commented to the contrary. However are they sure of the legalities and qualified to know that would stand in court? This is why people are urging op to find specialist representation. These type of lawyers will have the answers and if they don’t, they will not waste their client’s time and money and will draft in a barrister for a couple of hours to provide them.

Why did you rent it out below market rate, out of interest? Just wondering if there is a factor that makes it less desirable to tenants, hence the lower rent.

I would stop paying bIL half the rent. If he wants to pursue you for it he will have to pay his solicitors bill for starters.

I would raise the rent. You are far from the stereotypical bad landlord, raising the rent just because and enjoying yet another foreign holiday. You literally can't sell at the moment and can't afford not to raise the rent. Whilst I have sympathy for your tenants, I wouldn't get into debt for them, for a situation not of your making.

As a landlord you also need to have savings to fund any repairs in a timely manner. If the boiler goes you need to be able to afford to get it fixed quickly. It doesn't work if you are losing money every month.

A consideration is whether your tenants can afford it. if they can't how quickly can they move out and you find new tenants. Can you stretch to afford a brief empty period between tenants and any essential redecorating and repairs required in between?

For this reason I would increase the rent sooner rather than later, as if your current tenants can't afford an increase you may have some expenditure before you can get new higher paying tenants in. Don't wait until your finances are in crisis to do this.

Good grief. Whatever you do don’t sink any more money into this. Yes put the rent up and for goodness sake get your BIL to start paying you back with his “share” either by threatening something like an attachment of earnings order or getting him declared bankrupt (obviously take legal advice on this but you can do the majority of the work yourself). No way would I be handing rent over to him in this situation.

I know people have commented to the contrary. However are they sure of the legalities and qualified to know that would stand in court?

If he's not paying expenses it damn well would.

Can you do 3 - buy BIL out, then look at getting planning permission for something and sell as a building / development opportunity?

I would put the rent up while trying to force sale.
Can you keep BIL part of the rent , let him chase you for it ? He owes you so reverse it and you owe him .

@RedToothBrush

I know people have commented to the contrary. However are they sure of the legalities and qualified to know that would stand in court?

If he's not paying expenses it damn well would.

True. He should only have ever been given the income minus all expenses : repairs, gas and electric safety checks, installations of smoke and co2 monitors, referencing fees, cleaning and so forth. That’s normal.

As he hasn’t paid expenses, op’s dh should and could immediately retrospectively charge him for his 50% share for the duration of the current tenancy as a minimum - possibly more difficult for when sil was alive. That would give them a lot of breathing space for now and free up some cash to fight him to a) get their money back and b) force a sale.

As your BIL has an interest in the property, surely he must also be party to the mortgage you've taken on?

BIL may be legally entitled to 50% of the rent payments but only after expenses have been accounted for.

Why is BIL getting any income in rent, if the rent does not cover the mortgage? Surely he should only be getting a share of profits, if there is one.

I think you need to do 1, as a first step, so you aren't losing further money.

1. Buy out BIL and then you decide what option works best for you regarding the house. That might be putting up the rent, or getting new tenants, or knocking it down, or selling. Whatever, at least you are back in control. Good luck.

@FacebookPhotos

Tbh I just can’t believe you’re renting out a property which doesn’t meet standard building regulations. Do the tenants know that?

Standard construction (using ordinary building regulations) exists to keep the occupiers of the property safe. Are you insured against the “non standard construction” causing injury to the tenants or their guests?

If I were you I’d issue an eviction notice to the tenants and apply to the court to force a sale. And check you’re properly insured.

Do some fucking research before you spout yer shite. Non standard construction includes timber framed houses and prefabs.

I think all the suggestions to stop paying half the rent to the BIL are unhelpful. He owns half the property, he's entitled to half the rent and he's entitled to half the profit when the property is sold.

He took out a loan on the property which has since been paid off by the OP taking out a mortgage. Does the OP have a contract with the BIL to say that he agrees to repay that money or have it deducted from the value of his share? If not, that's the end of the matter, the BIL owns half the house and the OP is liable for the mortgage they took out.

@hibbledibble

Why is BIL getting any income in rent, if the rent does not cover the mortgage? Surely he should only be getting a share of profits, if there is one.

I think you need to do 1, as a first step, so you aren't losing further money.

There's this. Its a joint property, if he's had a loan he has taken from joint asset. If you have then taken a mortgage on said joint asset even if hes not named, its an expense of the joint asset. He may not be named but if you default he loses his asset. So to keep the asset, i do think you could argue that the management of the finances of the joint asset requires expenses are taken out, which includes repayment of mortgage. You can't get rent from a property you no longer own because you have defaulted on the mortgage for.

He either contributes to the mess he created or he settles up his expenses and debt to you. Thats by agreeing to the sale.

I really think bad legal advice has been given here and I really think you have helped to make this situation much worse than it should be.

Apply for planning permission to demolish the house and have plans approved for a new dwelling(s).
Sell it as a plot with planning approval to maximise you gains.
Fund the planning application yourself and deduct this from the sale price with your loan repayment for BIL before splitting the remaining money 50/50.

1. Put rent up.
2. put a charge against property equal to the BILs original fraudulent loan that was teaken out
3. keep all the rent - if the mortgage is paying his loan, he either needs to cover that from his ''share' of the rent - and I mean ALL of it. Keep track of how much has been paid off, because thats what needs to be deducted from final 'share' of house

1. Once house is sold, dont forget to take off the mortgage from his 50%. If that leaves him with nothing, then so be it - he has already had his share when the loan came out PLUS he got to live there rent free with SIL
2. carry on with legal route to force a sale.

or alternatively offer to cover the mortgage to pay him the equity (50% of current value, less the mortgage still owing)

dont forget to account for the amount of mortgage that YOU have paid off too - he still owes you that.

Do not give him another penny of rent.

Buy him out and build your dream home on it - or apply for planning and sell it afterwards.