DH wants to sell house significantly below market value

[MrsLyndi]

My DH and I are 59 and 61 respectively. We have one child, she is 29.
My DHs parents passed away 10 or so years ago. About 10 years before this they gifted us their 5 bedroom house in a lovely part of London. They wanted to move back to where they had grown up having inherited his mother’s aunts home, but weren’t ready to see the house go as they raised DH and his late sister there.
DH has been renting the house out ever since, it’s been a nice earner for us as it is mortgage free. We live in rurally a few hours from London and had no intention of moving back so it made the most sense.

About 8/9 years ago we took a risk and allowed some fresh uni grads to move in. They made an impression at the time and we haven’t regretted it. They were lovely tenants. They slowly started moving out and now it’s one of the originals and his fiancé.
They are 27/30, incredibly good tenants (the house is gorgeous, we’ve allowed them to decorate as they wish. They are never late with rent, and just lovely people.
DH goes down to London once a month, he likes to sort the garden out himself and enjoys seeing the couple. He has gotten to know them. They are both from the north, one of them had a rough childhood, was in the care system etc. They are now both very successful, make good money etc.
DH was down at the weekend to do a last clear of the garden before winter. As per he got chatting to the couple, they gave an invite for their wedding next year. They also mentioned that they are starting to look at buying somewhere, joked they wish they could afford the house but it would be way out of budget etc. (We’ve been charging below market rate rent for a while now as we don’t need the income, and they are hassle free tenants who let DH potter in the garden).
They told DH they wouldn’t be looking at more than 1mil or so.
The house is probably worth about 1.5mil now potentially a little more(5 bedrooms, good sized garden, drive way, well decorated, in the catchment area for a fantastic primary, near one of Londons big parks and good transport links!).
DH has been thinking of selling the house for a few years and decided when they eventually moved out that he would sell it. He wants to give our daughter a gift that will pay off her mortgage (less than £500,000). Then use the rest of the money to enjoy our retirement. We have good pensions so that is not a concern.
Now DH has a crazy idea … he wants to sell them the house for what they can afford, around the £950,000-1mil mark, so significantly less than what it is worth!!!

His reasonings are

• The girl reminds him of his mother, he’s always said this. Very cheery, fun person
• One of them has overcome all sorts to get to where they are
• He knows they will look after the house, they are planning to have a family etc.
• “It feels like the right thing to do”

In DHs mind, we don’t need the money, even selling for significantly less, we can take care of our daughter and have a nice retirement.

I’m more on the fence. While they seem like lovely people, what if in 5 years they sell and run off with the £500,000+ profit. How does this work with a mortgage and such? We don’t know them all that well but would be essentially giving them half a million pounds!!!!
DH is a very kind and loving man but often too kind!
AIBU to think this is a crazy idea and wonder how it’s even possible?!

Your husband is insane. He’s basically talking about giving strangers half a million pounds! If I was your daughter I’d be furious. In fact I’d be getting police and solicitor involved, saying my elderly parents have been extorted by these people, and conned into selling their property well below market value.

Has you husband not realised this is a life changing amount of money for your daughter and grandchildren? You need to put a stop to this immediately.

I’m not sure that’s actually true Margot? Spouses don’t have any legal power to stop each other spending money. Even on divorce, inherited assets are often excluded from the pot especially if there is no financial hardship without them. Yes ok if you can prove dementia and have a POA then you could stop it but an unwise whim is not a sign of dementia.

Bit of a tangent but just saying actually the OP may not actually have much power here if her DH is determined.

It's quite possible that if he chooses to sell at less than market value, he would have to pay CGT on what should have been the market value! There's an online calculator on HMRC's website. I just put in the following:

• value when sold £1.5m
• value at inheritance £500k
• Cost of improvements and legal fees etc £53k

CGT to pay - £263,453!

I appreciate his sentiment, he really is very sweet, but as you rightly say in your OP - he's basically giving them £500k!

I have seen a commercial property sale where a clause was put in the contract that if it was re-sold within a certain period post completion, the original landlord would be entitled to a percentage of the increase. This was because the commercial property is in an area ripe for residential development, so the value if sold to a developer would be much more. If he really, really wanted to sell it for less than it was worth, he could see whether any such clause was allowed.

This should be a lesson for him OP. It’s not sell in 5 years- it could be way sooner than that!

The moment you marry you are no longer considered an independent financial entity in the eyes of the law.

You are. That’s what all financial legislation since the Married Women’s Property Act has decreed. Divorce and allocation of assets is the only circumstance under which a married couple is regarded as a single financial unit.

To echo your own thoughts and the points made by pp, this has disaster written all over it.

It sounds like your husband has built up a picture of the couple in his head and is seeing them through rose-tinted specs. I understand renting out the house at lower than market value in return for peace of mind and the feel good factor, but selling at such a significant discount would be setting himself up for a huge blow when they no longer allow him to visit, they divorce or simply sell on for a huge profit. He’d be putting unrealistic and unfair expectations on them which would surely breed resentment.

A combination of his privilege, contentment, desire for a simple life and good character have worked well for both parties up until now but I think selling at such a substantial discount is a step too far and could also end up tainting his memories of his childhood home.

If you’re unable to convince him OP, I hope he’ll at least consider some kind of watertight clawback or shared ownership provision.

As the house was gifted to them over 20 years ago and it's reasonable to assume that the rental income has been used by the family as a whole I think it would most likely be considered a marital asset. It might be different if it had been a short marriage.

The starting point is that all assets are split 50:50 unless there is a good reason for that not to be the case. A pre-nup, whilst not legally binding, might be considered a good reason, but there is nothing to suggest that the OP and her husband have a pre-nup.

The OP has quite a lot of power in this situation. It's easier to stop your husband from selling a house below market value than it is to stop him from frittering away the contents of the joint account, for example.

So a fairly major circumstance then.

Yes. And a one off in some marriages. Not every marriage ends in divorce.

No, but the point is that it doesn't really matter who owns what as long as you are happily married.

But if you are unhappy about, for example, your husband proposing to give half a million quid to a virtual stranger the same age as your daughter because he likes the way she wrinkles her nose when she laughs or some insane shit like that, you can put a stop to it by filing for divorce and getting your share of the money and assets out of his irresponsible hands.

So you aren't actually separate in the eyes of the law for as long as you are married.

So you aren't actually separate in the eyes of the law for as long as you are married.

You are and every piece of financial legislation fought for by generations of women says that.

Margot as I said before, inherited assets are often excluded from the marital pot on divorce.

my uncle got divorced and major inherited assets were 100% split down the middle in the settlement.

Yes it depends on the facts, when the assets were inherited and whether there will be enough money without the inherited assets. The point is that divorce doesn’t always mean inherited assets like this house get shared.

The principle with inherited assets in divorce seems to be how the couple treats them during the marriage. If you use an inheritance to pay down a joint mortgage it counts as a joint asset. If, however, you keep it in a separate account in the heir’s name only it’s likely to be disregarded.

Yep Blossomtoes that’s one of the factors and I don’t think we know which is the case here

Anyway it’s all a bit of a tangent as I’m sure OP doesn’t want to get divorced just to stop her DH being daft!

Although there may well be a strong correlation between the OPs likelihood of divorcing her husband and the husband giving away half a million quid to a woman who looks a bit like his mum..

I'll buy it for £1.1m? I'm quite nice and have a family (don't necessarily have £1.1m though, but reckon I could flip it pretty quickly)

Sorry if someone else has already mentioned this but he needs to factor in capital gains tax which will take a chunk, particularly if it's in just his name and not yours too because he'd only get his capital gains tax allowance which is minimal. So he'd walk away with a lot less than he's banking on.

Yes good idea

I think if it were a discount of say 50k - or even a bit more than that - I could understand it. But 500k is absolute madness. Especially when that could make such a big difference to your own daughter.

Is it? Are they multimillionaires to be giving away such a sum to charity, all because of some misdirected crush? Why don't you give up your own inheritance, why don't we all?!

Would this not potentially fall foul of the reservation of benefit rules for IHT if there was an element of gift?

I think most people would agree that a 50K reduction or slightly more, considering these people have been good tenants would be fair.

Most conveyancing solicitors I know would have sharp intake of breath at a 500K reduction, not only because their overall fee would be reduced!