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?

When we took out the mortgage we got a solicitor to write up that BIL would only get half of any profit after the mortgage, fees etc had been settled.
This doesn't make sense, this suggests your DH took the liability for half his brother's loan from the outset. A solicitor should have advised you getting say 80% of the property ownership to "pay back" that loan from the liability as it stood at the time, or for a sale to pay half the house value to your DH, BIL share to pay the mortgage with your DH only liable if half the house value is less than the mortgage. Or another option that replys the loan. I understand you may not want to divulge other things to keep some privacy, but it makes things really confused because it's impossible that a solicitor can have advised you in the way you say they did.

I don't understand why BIL doesn't pay his share of boiler expenses etc. If he is entitled to half the rent, then he should surely pay half the expenses? In the Letting Agent I work for where I deal with the client account, we would deduct all expenses , so commission, repairs etc, then send what's left 50/50 to the Landlords (or whatever their share is).

@PigeonLittle

In your shoes I would honestly offer BIL the whole house. Cut your losses, hand it over to him, walk away.

He will feel like he's won, but you know it will inevitably sink him.

Anything else will be ugly, protracted and costly. Get rid of it

We wouldn't be able to pay back the mortgage unfortunately.

Obvs there's a lot to this, but I would tell BIL you're about to lose everything, and from now on all the rent goes on the mortgage until it's paid. The whole situation is untenable. At least you've raised the rent now.

@MRex Legally none of it makes sense. Either OP is withholding information or just unbelievably stupid decisions all round.

[quote bluedodecagon]@MRex Legally none of it makes sense. Either OP is withholding information or just unbelievably stupid decisions all round.[/quote]
Well, quite.

1. the brother's loan couldn't have been called in
2. the sister could have used her share to buy the house she was living in, and where did get money go?
3. any solicitor would have reduced brother's legal share to take account of the debt
4. even if they own half shares, you can't take out a mortgage in one name only for a jointly owned house, so the mortgage can't be just in DH name unless it's on his own house with the other having been bought in cash, which would be a ludicrous decision
5. there is no legal requirement to distribute rent before expenses, it isn't profit until expenses are paid
6. the brother doesn't live there, so he can have a go at challenging market value with alternative values, but he can't prevent a sale once a judge orders it
7. confusion thrown in with a tenant randomly getting charged below market rent when they aren't even linked to the family, nor why OP can sign agreements about changes in rent on a property she doesn't own.

I suspect the OP is withholding various details, thinking it will add privacy, but actually it just creates a lot more confusion.

Thank god @MRex. I thought I was going crazy. This isn’t my practice area but 3,4 and 5 especially seemed obvious.

I have a horrible feeling they had a handshake agreement with the brother as he committed fraud to get the loan and they didn't want him to get in trouble. Once they got the mortgage he dumped on them from a great height. He gets all the benefit, they get all the debt and responsibility

Increase the rent and force the sale of the house through the courts

I think moving forward, I would increase the rent to market rent, take BIL share from the rent and start repayment on his loan on his behalf. Alternatively, move into the house so no income from the house, then rent your house at market rent and no one else has a share of the rent and use that to pay off the mortgage.

How big of a jump is the market rent increase?
If your talking £500 or £50?
Rental market is mad at the moment as so little is now being rented. So you probably could raise it hugely, however that’s not necessarily how you want to treat good tenants. There’s probably a happy medium somewhere.

Long term I know your trying but brother In Law needs to fuck off. Is he being difficult so you just sign it over to him or something?

Apply for a charging order on BIL's equitable interest in the house. That gives you the right to apply for an order for sale of the property.

Quote "EddieLizzardthe mortgage is in DHs name, therefore is DHs expense. We can't legally take DHs expenses out of BIL rent. The rent that is paid to DH and BIL (to a letting agent) is separate to any expenses. So let's say we pay to fix the boiler, we can bill BIL for half, but have to take him to court for none payment and a court order to take it out of rent owned to him."

You are tying yourself up in uneccessary knots. Your brother in law is breaking the law (taking loans out secured against joint property) and screwing you over while you seem absolutely determined to do everything by the book and completely above board. Your solicitor can't give you any advice that is not strictly "legal" as they open themselves up to damages

..but you are asking what other people would do. What they would do is receive the rent. Deduct all tenant related expenses - gas checks/repairs etc. Divide the remaining rent by two. Deduct the mortgage repayment (that paid BILs loan) from his share. If there is anything left pay it to BIL. If BILs share does not cover it add the negative to his balance sheet. Keep detailed records.

You seem adamant that BIL is entitled to rent without deductions. I'd like to see NIL take you to court and argue to the judge that he is entitled to his rent without deductions. He will have to tell the judge what loss he has suffered to sue you. I doubt the judge would have much time for his not wanting to pay his half of a legally mandated gas check! Let him try!

@HappySM1

Apply for a charging order on BIL's equitable interest in the house. That gives you the right to apply for an order for sale of the property.

I think you might find you need a CCJ before applying for a charging order and as the husband already has a legal interest in the property he has the right to make an application for an order for sale already. I very much hope you don't attempt to give advice too often.

Obviously the OP is not quite telling us all the details. No solicitor would go along with this nonsense, I guess that your DH doesnt want to fall out with his brother.........................

@Lineofconcepcion

Bit nasty there.

I didn't list out the steps to get a charging order, which would include getting a judgment. Where did I say my post was a comprehensive, step by step piece of legal advice?

Have you seen the title document? Reviewed the restrictions on titled? Do you know the DH can sell without consent of BIL, the other legal owner?

Wind your bloody neck in.

I would stop paying the mortgage and hand the house back to the bank. I'd consider the fallout to be a very small price to pay to sleep at night knowing I didn't need to interact with my BIL and I wasn't subsidising him either.